Over one and a half billion unbanked globally, most of them poor, undocumented, minority and innocent. That last adjective is important, because the exclusionary nature of our existing financial system is no accident. It is a direct consequence of a system built on a presumption of guilt.
This presumption of guilt is a minor nuisance for the affluent, but an existential threat to the underprivileged. It’s one reason why poor neighbourhoods feature more pseudo-financial services like check cashers than bank branches, even in rich countries. Laws and regulations make it too hard or expensive for banks to serve these communities. Money that’s issued by a government must play by its rules, however overbearing or unfair they might be.
A book club I am in recently read Kitchen Confidential. The memoir is a lot of fun if you liked the tone of Anthony Bourdain’s shows, but there are also a bunch of passages that are sort of cringe (though to be fair he is pretty self-aware of and acknowledges most of these moments). One such acknowledged moment involves him carrying around a katana in college. But one unacknowledged moment is the following passage:
Many of the Spanish- speaking members of the crew took part in an unusual ‘banking’ scheme where each week all the members of a large group would sign over all their paychecks to one guy. The recipient was selected on a rotating basis, and the way it worked, I gathered, was that for about two months or so everybody squeaked by, doing their best to make do without a check, spending little . . . until the day it was their turn, at which point they came into thousands of dollars and could spend like drunken sailors. This practice made no sense to me. It also required an extraordinary amount of trust in one’s fellow cooks. I did not share my comrades’ confidence that Luis, for instance, wouldn’t skip town on a drunk after getting his big payday, and leave the others in the lurch. I held on to my meager paycheck. I had no time to spend it anyway.Anthony Bourdain’s Kitchen Confidential
When I read this, his interpretation struck me as likely underinformed but I could not quite say why.
After reading this interview about “chamas” in Kenya I now see why! The above is a form of mutual credit, a concept I didn’t know much about.
[Chamas are] groups that started in the 80s, when Kenya was really in a cash crunch. They started off as women’s savings groups, but now they’re open to men as well. There are social bonds – family, church, work. They already know and trust each other. They meet up, and they have something called the ‘merry-go-round’ system. They all pay into a fund, and each time, one of the members takes the whole fund. So it’s a micro saving and micro lending scheme.
Wikipedia says that “Some sources have estimated that one in three Kenyans is a chama member.”
The interviewee explains what is really being provided here: “Yes – we’re just liquidity providers. We just come in and say ‘here – trade!’” (my emphasis). “Just” is doing a disservice in that sentence. Creating formal financial liquidity out of informal communal trust is pretty cool, Bourdain’s mistrust of his crew aside!
This all reminded me of a quote I liked from a recent Interfluidity post on Liberalism and class:
The right to live as, where, and among communities one chooses is only valuable to the degree that it is practical and ethical for a person to exercise that right. Among the affluent, the costs of uprooting oneself from where one happens to start to some other community of ones own choosing are tolerable, both to the uprooter and the community left behind, because affluent people rely upon portable financial capital and impersonal markets for most of their requirements. In less affluent communities, people’s wealth and insurance against adversity are bound up in very personal relationships, which get destroyed rather than transported when a person “abandons” her roots. Professional class Americans follow their careers around the country, relocating between liberal cities and college town with remarkable ease, paying expensively for new child care in each. Working class Americans are much more likely to rely on family to render child-rearing manageable and consistent with their jobs. Among the affluent, elderly parents can be left “on their own”, because deliveries can be paid for, rides can be hired, if necessary more intensive, personal help can be paid for. The downscale elderly rely much more upon unremunerated help from children and church, upon the goodwill of particular human beings. When people upon whom they rely leave, they simply become poorer. For the person who might choose to leave, this cost they might impose pits liberal “rights” against very visceral obligations. A person who has faced that dilemma, and chooses to stay, might understandably view the kind of people who make the opposite choice as selfish.
This points towards a weird tension in attempts to bridge between formal and informal finance. As mutual credit networks formally capitalize social capital that previously wasn’t legible to markets, they simultaneously reduce some “liberal” values like the right to exit (that is geographically move) when one wants, something that people comfortably situated in the formal sector take for granted. Once you are on the community credit merry-go-round, it is hard to get off.
Chamas and community credit seem cool. Some of the above links indicate this stuff works and it also has a certain “farm-to-table locally sourced” appeal. But I wonder if the downside of only being able to receive certain financial services by coordinating with your community comes at a cost. And does that suggest a need for different approaches to financial inclusion.
The transformation of informal social relations into formal financial liquidity creates easily measured monetary value. But how do you measure the cost of being reliant on and responsible to your neighbors for financial services that are normally provided by boring impersonal financial services companies?
Obviously there is a certain charm to a community banking itself. But there is also a certain charm to being able to pick up and leave a place if you want. I genuinely am not sure which of those points of view is more charming. And I don’t think a spreadsheet could ever shoot out the answer to this political question.
So of course Bourdain wouldn’t join his crew’s unusual ‘banking’ scheme. He sat squarely in the formal financial system and would not want the social obligations that come with being part of a chama.
The appeal of community credit is understandable but formal, impersonal financial relationships that can be easily settled can be nice too (see Graeber, Debt, and The Venmo Generation).
Maybe in addition to mutual credit networks that formalize social capital, we need institutions that allow people to separate that capital from social relationships and onramp into the formal sector.
And to be fair, maybe we could use some institutions that help people comfortably in the formal sector deformalize parts of their financial lives. I suspect there are plenty of people who might be interested in finding ways to partially organize their financial lives in a more communal manner. A bit less financial efficiency in exchange for a more locally, communally oriented financial product might be a welcomed trade.
Maybe someday one in three Americans will be involved in a chama. Maybe someday someone like Bourdain would jump at the opportunity to get into the community’s unusual ‘banking’ scheme.
Note 1: On a less “they used AI to recreate his voice!” note, while watching the trailer for the new doc, I liked the ending audio/visual montage with Brian Eno’s “The Big Ship.” Looks like Bourdain was a big Brian Eno fan: https://people.com/food/anthony-bourdain-girlfriend-asia-argento-instagram-photo/
Neville, who won an Academy Award for “20 Feet from Stardom,” his 2013 documentary about backup singers, says it was also Bourdain’s “punk rock attitude about everything” that drew him to explore his life.
“He had the best taste in movies, in books and music,” Neville said. So as the director combed through footage to use in his film, he jotted down every time Bourdain mentioned a song and created a 19-hour playlist.
“It’s all of Tony’s music,” he added. “And it’s Brian Eno and Iggy Pop and Johnny Thunders — it’s all these songs from his whole life, and I gave that to everybody that worked on the film to listen to and the songs on the film come out of that playlist. So the music was another way of getting inside his head.”https://norwalkreflector.com/news/326096/anthony-bourdain-documentary-roadrunner-covers-extreme-highs-and-lows-of-chef-and-tv-host-who-was-addicted-to-everything/
Note 2: Just putting it here as a reminder for when it happens… Chamas for Robinhood seems like it could be rocket fuel for meme finance / WSB investing. Your turn to spend the merry-go-round fund, @TheRoaringKitty.