Financial literacy, meaning one’s grasp of best practices in employing financial skills and tools to maintain healthy and stable personal finances, still elicits a feeling that financial savviness for some is inherently foreign.
There is a generations-old lending circle practice across the Black Diaspora that many have known about from a young age. We hear about it from mothers and aunties, and we may witness the savings practice when the groups come together at our houses. Eventually, many join circles outside their families or create their own lending circles.
Through witnessing and participating in these long-standing lending circle traditions, perhaps you know more than you think about the ingrained sense of responsibility and discipline with money.
Referred to as susu (or sou-sou) across various West African countries, Ayuuto or Hagbad in the Somali language, or “Padna Draw” in Jamaica—to name just a few translations—they all refer to an interest-free community lending structure that is practiced across many African, Caribbean, Asian and South American diasporas.
Lending circles can be composed of any number of people, usually between five and 10, though it can be more or less. The group establishes a set amount of money each individual will contribute, and the frequency is determined—normally bi-weekly or monthly.
When it’s time for each group member to contribute their share, the funds are distributed to one individual through someone in the group who is designated as the group’s organizer and primary point of contact.
The order of who gets the funds and when is determined before the lending circle starts, sometimes determined by a random drawing of names, or the order can be based on the urgency of need. The recipient order can also be shaped by previous experience going through a lending circle, a small measure to ensure that newbies don’t run off after they get their share on month one and refuse to stay until they too have made all of their contributions.
Essentially, the money you get from the lending circle is what you put in, so if the group is composed of 10 people and the contribution is monthly, each person will, at some point in the 10-month duration of the circle, receive $9,000 ($10,000 if you count your own ‘hand’). There is no getting more than what you put in.
As a business advisor for Lake Street Council and community engagement leader, Yusra Mohamud has personal experience participating in Ayuutos and the perspective that they can be a beneficial tool for those seeking to reach significant goals soon. “Regardless of how our economy grows, this is something within our community that will be around for a very long time.”
She learned about lending circles from her mother, who introduced her to the concept. Mohamud joined her first Ayuuto in her early 20s.
“As younger individuals,” she said, “we [may] make poor financial decisions, and our parents know that, so this is a way for them to help us and also have ourselves involved so we still have independence while incorporating our culture and the support and trust of our families.”
Though “susu” is one of the more common translations of the lending circle concept throughout West Africa, several translations unique to ethnic groups also exist. “We call it Ajo,” Zainab Adesanya, Nigerian Minnesotan and Yoruba, stated.
“When we buy things out of impulse, we tend to overspend; however, when we plan, we have a better chance of achieving that without feeling like we’ve stretched ourselves too thin.”
Adesanya finds that Ajos helps foster discipline and patience. She is actively passing these values on to her children by teaching her young twin girls how to save and spend their allowance money.
Asked what she thinks the utilization of Ajos might indicate about the economic state of the Twin Cities for Black Minnesotans, she replied, “I don’t think it says anything about where you are currently residing per se. I think it says a lot about you as an individual—that you are using this [savings model] to achieve a goal, committed to this payment system for some time, and make wise decisions once you get what you’ve saved.”
Fartun Elmi, a current psychology graduate student of Somali origin, noted an essential interfaith aspect of lending circles. “For people whose faith practice discourages long-term debt and the use of interest in personal finances, this saving model could work for them because it’s a way to pay something off without [incurring] interest,” she said.
One of the appreciations that Elmi has for lending circles is that “It teaches you delayed gratification. For our previous generations, they used this structure for short-term and long-term goals.”
Asked what advice an elder from her family would give those interested in joining an Ayuuto, Elmi guessed they would remark, “Don’t go into it with just anyone. You have to have a deep relationship with at least a few group members who can vouch for the [reliability] of other participants.”
In the same vein, though she generally encourages utilizing Ayuutos to save money, Mohamud also said, “If you are deciding to join a lending circle, look for red flags and exercise caution. Don’t join via social media or with people you don’t know well. Be careful using links, online money services, and people asking you to participate virtually.”
This lending circle is a savings system that enables one to strive to achieve significant milestones, such as paying for higher education a semester or two ahead, getting out of debt, or starting a business. The susu, the Ayuuto, or Ajo could be a rewarding strategy to add to the quality of your personal finance landscape. But remember that this is not financial advice; it is a consideration for your financial literacy toolbox.
Happy saving!
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