Author Alan Stokes
Posted Feb 28, 2023
Tandas, also known as a rotating savings and credit association (ROSCA), is a great way to save money and form a larger goal. Have you ever wanted to make a major purchase, but don't have the funds? A tanda may be the perfect solution.
A tanda is an interest-free loan between members of a group. Members agree on an amount they will contribute each period, and each member takes their turn receiving the entire agreed-upon amount in each cycle of the tanda. This allows for members to save for larger goals by contributing smaller amounts over time with no interest added.
Anyone who wants to save money or make a large purchase can benefit from forming or joining a tanda. By utilizing these common principles, you can achieve your financial goals faster than if you were to save alone. So how do tandas work? Read on to find out more!
Unraveling the Mystery of Tandas - How Do They Work?
Tandas, also known as a word tanda, is a money-pooling group that has been used by both developing and developed countries. It involves a set number of family members or 10 friends who contribute an agreed-upon amount for an agreed upon amount of time, usually 10 months. As part of this practice, each member takes a turn receiving the total pooled money in succession.
Tandas are popular in many parts of the world including cundina from northern Mexico, hui from Vietnam, paluwagan from the Philippines, asusu from Benin, esusu from Liberia and susu in Tobago. In some regions they are referred to by alternate names such as “chit fund” in India.
The purpose of tanda is to provide access to credit and savings opportunities for populations who may not have access to traditional banking services. Through tanda’s money pooling system, participants can enjoy more flexibility in their finances while still having the benefit of saving funds and paying out members at regular intervals.
What is a Village Saving and Loan Association or VSLA?
A Village Saving and Loan Association (VSLA) is a type of community savings model that helps low-income communities grow. This system relies on small groups of people to save money together over a specific length of time. It has some key differences from traditional banking services, but ultimately the goal is the same: creating financial stability.
These associations are made up of members who contribute a predetermined amount into the group fund on a regular basis. The main features of this model include regular contributions, monthly meetings, and collective decision making about how funds should be distributed. During these meetings each member can access their own saved funds with no interest rate added.
The main advantage of VSLAs over traditional banking services is that they can provide financial support to those who have otherwise been excluded from access to these types of services. They also offer additional benefits such as access to loans, which can help further economic growth within the community. It’s an effective way to bring people together, help them build financial security, and foster economic development in areas where other options are limited.
1. Members save by buying shares
Tandas are a unique savings and investment tool that enable members to save money by purchasing shares in a rosca. Unlike period VSLAs, roscas require its members to purchase one of five shares at the start of the cycle. The share price is determined by the entire cycle's savings goal and can change as more members join or leave the tanda.
The money saved through these shares is put into a steady stream of income that allows members to reach their savings goals, without having to worry about investing large sums at once. By investing in tandas, members can save money and use their investments as a source of steady income over time.
2. Small loans are available upon request
Tandas are a great way to access small loans when needed. VSLAs (Village Savings and Loan Associations) don’t disperse money but rather pool savings from their members who save periodically. At the end of a Vsla cycle, each member can take out a lump sum as a small loan, which is repaid with an approved payback plan and a small interest rate. This is especially useful for those with an inconsistent income such as freelancers, performing artists, or contract workers.
In addition to the standard Vsla model, there are Rosca Vslas which involve treasurers helping to organize share purchases with equal contributions. They also manage loans between members, allowing people to access small loans upon request without relying on external lenders.
What are Rotating Savings and Credit Associations or ROSCAs?
Rotating Savings and Credit Associations (ROSCAs) are an age-old way of people helping people by pooling money together. Emerging from ancient times, ROSCAs are powerful examples of how communities agree to come together and contribute equal amounts of money into one pot. As our world advances, these traditional concepts are evolving to suit us better, so how do tandas work?
Tandas are ROSCAs that usually involve a group of 10 members who each contribute an equal amount of money into a bank account for 12 months. At the end of the year, one member receives the lump sum as part of the rotation order which the groups decide upon beforehand. This order is usually determined by drawing lots or taking turns in sequence. Each member experiences this payment once during the 12 months cycle, after which the pot replenishes itself and starts againfrom the beginning.
ROSCAs aren't just about making money but also about building lasting relationships with people in your community who help each other out financially when needed. By joining a tanda you will be able to access funds without any interest or credit checks, while at the same time having peace of mind knowing that you have support from your peers should life throw you a curve ball.
Frequently Asked Questions
What is a small loan in a savings group?
A small loan in a savings group is a type of microfinance credit access, where individuals collectively save and borrow for their financial needs. This type of group loan can be an affordable, accessible way to bridge the gap between saving and important expenses.
What is a tanda credit union?
A tanda credit union is an innovative financial institution that helps individuals pool their resources to save and access loans with more flexible and affordable terms. It's a great way to save money and make smart investments!
What is a community savings group?
A community savings group is an informal, grassroots financial system that enables members to save and borrow money on their own terms. It is a powerful tool for building economic security and resilience in communities around the world.
What is a Tanda in Latin America?
Tanda is a social payment system used in Latin America that allows individuals or groups to collect and save money together. It's an easy, secure, and reliable way to manage finances among friends or family. Learn more about this innovative system today!
Who are the members of a tanda?
A tanda is a group of 4-5 friends who rotate dancing together in Argentine tango. Each member of a tanda takes turns leading or following the dance. Interested in joining a tanda? Read more about it here!