Can Canada’s Mutual Help Financial Organizations for Disenfranchised Blacks Serve as a Model for the Un and Underbanked in the US?

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A 2015 survey by the FDIC found that roughly 7% of American households were unbanked. The National Urban Institute estimated that an additional 20% were underbanked, meaning that even though they had a checking or savings account, they nevertheless also use high cost “alternative” financial services such as check cashing services and payday loans.

The article below focuses on a different issue, namely, how black Canadians are excluded from banking services, and it also points out how the usual pet remedy, credit unions, aren’t much help. It discusses how various forms of mutual help financial organizations have been serving the needs of minority and disadvantaged groups. Americans might consider giving some of these approaches a road test.

By Caroline Shenaz Hossein, Associate Professor of Business & Society, York University, Canada. Originally published at The Conversation; cross posted from Alternet

Black Canadians are twice as likely as those in the overall Canadian population to have low incomes, get shot, be unemployed and to encounter systemic bias that interferes with equal access to goods and services.The financial world is no exception.

Black people have a hard time getting access to money to borrow, or are completely shut out. They often encounter horrid service when they do go into a bank. Remember Frantz St. Fleur,a Haitian-Canadian, whose Toronto bank called the police while he was trying to deposit a $9,000 cheque? He was profiled by bankers who called the police, who promptly arrested him. Both assumed his cheque was fraudulent. It wasn’t.

More recently, a Nigerian-Canadian entrepreneur reached out to me to share her story. Her bank account was frozen because the bankers thought she had too much activity going in and out of her account. She’s a businesswoman. It should be no surprise to her bank that she makes a lot of transactions. It’s no wonder Black people want to redo the way banking works.

My current research examines business exclusion for racialized Canadiansand how they co-opt resources to create vibrant local economies.

Progressive non-profits such as ACORNdon’t get it. They speak of financial alternatives but they do not give any solutions. Sure, they speak about credit unions, but credit unions are too scarce to be a reasonable choice and aren’t often located in poor neighbourhoods. Like commercial banks, they also deal with their own cultural diversity issues.

A look at the Meridian credit union or the Alterna credit union in Toronto’s posh east end says a lot. They are situated in areas that are convenient for white people, and the general reputation of credit unions in Canada seems to be an old white man’s bank. They do not look like they are working to attract racialized clients.

An alternative financial service institution is one that provides outside help and one that promises to do things differently from formal banks. Up to now, the fixation by progressives has been on the big bad guys like Cash for Money, Money Mart and payday lenders.

But we also need to be looking at banking alternatives that actually help people. For example, Montreal has a group called Montreal Community Loan Fund (ACEM). It’s a community bank that started back in the 1980s to democratize finance and to create an inclusive business environment.

Today, ACEM is an organization supporting thousands of small business people, especially immigrant-owned businesses that cannot access credit, even from the guichet Desjardins, the supposed good guys. This was a credit union that started informally to help the French-speaking Catholic minority in rural Quebec in the 1900s. This original intent to put banking within reach of the excluded is important for Canada. Somehow, the modern-day credit unions have turned their back on racialized minorities who feel cut off from formal conventional banks.

‘Banker Ladies’

There Is Another Real Alternative (TIARA) in the form of mutual aid groups and co-operatives. Hundreds if not thousands of hyphenated Canadians engage in mutual aid groups or peer-to-peer banking institutions, officially known in academic circles as rotating savings and credit associations (ROSCAs).

ROSCAs are mutual aid groups. They’re informal institutions where members self-organize, decide on the rules and make regular fixed contributions to a fund that is given in whole or in part to each member in turn.

ROSCAs are an important way of organizing people and resources locally — and co-operatively. Although ROSCAs is an academic term, it is the official name for these systems that are very much localized.

ROSCAs are known worldwide in various cultural vernaculars like “Susu” in Ghana, St. Vincent, Trinidad and Tobago, Grenada; “Esusu” in Nigeria; “Ayuuto” and “Hagbad” in Somalia; “Equub” in Ethiopia and Eritrea; “Box-hand” in Guyana and Antigua; “Partner” in Jamaica; “Restourne” in DR Congo and “Sol” in Haiti. These many names depict the same phenomenon — people sharing money through co-operation. It is also about self-help and love — neighbours helping each other.

Black Canadians have contributed enormously to what we know about Canada’s social economy because of their innovation in these ROSCAs. Racialized Canadian women come together to organize ROSCAs in a voluntary manner in an effort to meet their own social and economic needs and the needs of others when they move to big cities like New York City, Miami, Toronto and Montreal.

These women are known as the “Banker Ladies.”This short history of Black women creating banking alternatives is revealing in that Black people in the Americas contribute profoundly to co-operative money traditions.

The co-operative tradition has been active in Canada for a very long time, yet it’s often associated with old white men and not Black communities. However, many people of colour who move here have a strong understanding of co-operative economics from their homelands. We need to change this “old white man” perception because the growth of co-operatives will depend on racialized Canadians in the future.

Economic Self-Help

In Canada the women who organize ROSCAs are stirring things up. The Harriet Tubman Institute for Research on Africa and its Diaspora at York Universityis carrying out a federally funded project, “African Origins in the Social Economy,” and a provincially supported project called “Social Innovations” focused on collecting empirical data from Canadian-based financial and business innovationsin order to understand social enterprises, mutual aid and economic co-operation among people of colour, especially women.

So far the study explains that ROSCAs are the preferred institution where these women bank because of the business of exclusionin commercial banks. Sure these women have bank accounts at TD, CIBC and BMO, but they don’t use them much except to get a salary deposit. This is what University of Winnipeg’s Jerry Buckland refers to as the under-banked. ROSCAs are a place to do business and to form friendships and bonds.

Formal commercial banks and credit unions to some extent have not been kind to Black people. So in Canada’s financial centres, women are banking in their own way to make sure their money is shared by others who cannot get any help at a regular bank.

This is not a new practice, but an ancient and well-respected one coming from Africa as a way for people to pool money and then rotate it among each others, usually interest-free. ROSCAs build businesses and send children to school. Almost equally important, they are helping women entrepreneurs form lasting bonds.

Canada’s Banker Ladies are a perfect example of self-help, economic co-operation, love and the sharing economy because what they do is ensure the betterment of society. Bankers should know more about this special kind of mutual aid led by Black women — and learn a thing or two about humanity.

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  1. The Rev Kev

    Looking at the the alternate methods of finance that have evolved to meet unmet needs – and quite ingenious ones too – I am going to modify a line from a movie and say-

    “Money will find a way!”


    From what I understand, ROSCA’s (or something similar to them) are quite commonplace in the Chinese immigrant community in NYC. It’s how a lot of them gets loans and are able to buy property that they normally wouldn’t have been to get through traditional banking services.

  3. Ook

    1. Frantz St. Fleur did indeed sue ScotiaBank for his arrest, four years ago. I’ve searched and the case seems to have disappeared from view.
    2. An anonymous Nigerian-Canadian who had a bank account frozen for operating an unspecified business that involved an unspecified number of transactions at an unspecified bank in an unspecified year. People have accounts frozen all the time. We need more information.
    3. In Canada it is common to see Credit Unions in iffy parts of town that serve a vibrant Chinese community, and I’m sure they would be surprised to find themselves characterized as “old white men”.
    4. Underbanking was not a problem in 1980. What has changed has been the government’s approach to regulating banks (and credit unions), so perhaps we should be thinking about re-regulating banks to serve people instead of glorifying peer-to-peer banking and lending (ie ROSCAs).
    5. 3.5% of Canadians are black, and according to ACORN, 18% are underbanked. So it is doubtful this is solely, or even primarily, a black issue.

  4. Louis Fyne

    i never understand why the B-M Gates Foundation or someone just didn’t provide seed money for a pilot co-op, non-profit urban bank.

    i’d like to be non-cynical and think that it’s an oversight versus being dissuaded by their banker trustees

    1. IguanaBowtie

      I’ve kind of assumed it was for the same reason the banks avoid urban neighborhoods – poor people aren’t just low profit clients, they’re negative profit ones. Without lucrative investment and lending products subsidizing basic bank services, providing these services (even at zero profit) would require punitive fees. (creating the appearance of gouging the poor)

      That said, the ability of community banking to meet people’s needs belies this argument. However, I still worry that we’re just talking about loansharking with a race-freindly veneer.

    2. Altandmain

      I believe that the Gates Foundation is not a legitimate charity trying to better the world.

      They have pushing charter schools and some other neoliberal ideas for some time.

  5. Rojo

    Put me down for a Post Office Bank. I don’t know a lot about ROSCA’s, but I’m somewhat skeptical that they can scale up to the needs of the underbanked without becoming targets of fraudsters and schemers.

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