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Solidarity and conviviality in local development finance 26 October 2009

Posted by cooperatoby in social economy.
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Definition of 'tontine', Ironbridge, Shropshire, UK

On Sunday I went with Simon and Brigitte to a very convivial meeting of the SILO – Soutien aux Initiatives Locales – at the Tchop-Tchop restaurant in Ixelles. SILO was set up 18 months ago and supports local development initiatives in central Africa – Cameroon, Congo, and Rwanda – and its principles are refreshingly different.

– First of all, it only supports associations that already exist and are stable – it doesn’t try to set up new structures. (Research at ULB finds that such associations are relatively stable – around 60% are still in existence after 10 years.)

– It then tries to help these associations on their own terms – it doesn’t propose its own ideas. (So it might support pigs in one village, more land in another, or a health mutual in a third.)

– It doesn’t insist on formality – in a society with high illiteracy, written statutes are an irrelevance. Instead it looks for evidence of a strong social life – it likes to help associations that spend some of their effort just having a meal together.

One particularly interesting type of financial association is the tontine. In a tontine, a group of people each put a fixed amount into the kitty each month. The first month it is all lent to member A, the second month all to member B… and so on until all members have received a loan. This enables each of them to accomplish some major task. European tontines usually pay out to the last surviving member, leading Africans to brag that their tontines are for the living, not the dead.

The strange feature for me is that the clubs are dissolved each year, and this seems a limitation. It would seem to me to be more sustainable to set up permanent structures – credit unions – which could collect savings more broadly and finance investment over several years. But maybe that is over-ambitious and there is a vital place for these small-scale informal financial organisations.

Another initially shocking feature is the sky-high rates of interest that can result – as much as 20% a month. However this is not as usurious as it sounds as it is repaid to members when the ‘caisse ‘is ‘cassée’.

SILO, c/o Michel Romainville – mromainv@ulb.ac.be
Using tontines to run the economy by Alain Henri at http://ecole.org/seminaires/FS3/SEM105/VC190603-ENG.pdf

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