How community-based 'money clubs' empower the common man

Bijoy Mojumdar hoped to 'win the lottery' this month because his wife was pregnant and her delivery was due in a week. But fortune favoured his colleague Mahmud. Mahmud won Tk120,000. It was a lottery he won, yet, this money was essentially his own income. 

Bijoy and Mahmud work in a hotel in Gulshan, Dhaka. One day some of their colleagues discussed how despite working 12 months and getting paid, they don't have any savings at the year-end. Saving in the bank is the easiest option but everyone agreed they couldn't save money in banks despite its benefits – for no apparent reason. They would shrug and say 'We just don't get to go to the bank.' 

Then one of the colleagues proposed to save money together and distribute it among themselves every month; 12 colleagues liked his idea. They decided that every month when their salary is paid, each of them would deposit Tk5,000 to a bank account. And then when they get paid service charges by their employer, another Tk5,000 would be deposited into the same bank account. 

On a given date every month, the colleagues sit together. They play a lottery with their names written on paper. Whoever of these 12 colleagues gets his name drawn wins the money. 

Now is it possible for one person to win it twice? No, because it is a simple saving scheme. For example, once Mahmud's name is drawn, he gets the money, and his name will not be drawn until a cycle of 12 draws is completed. Mahmud, however, will continue depositing his monthly due (Tk10,000) for the rest of the months. 

"This works as a pressure mechanism to save which perhaps we wouldn't voluntarily deposit in our bank accounts," said Ashik, one of their colleagues. What do you call this system? "Lottery," he replied. 

We have traced many such money clubs in Dhaka and across the country where people make savings this way. It has many names – some call it 'Lottery,' some call it 'Game' – and more popularly it is called 'Taan Samiti.' The model of this money club, however, is more or less the same. 

This community-based saving model benefits people in various ways. 

For example, when luck favoured Mahmud (winning the lottery among 12 participants), Bijoy (another participant) described his predicament: his pregnant wife's imminent baby delivery charge. The winner immediately decided to give the money to Bijoy. In effect, Bijoy was able to seamlessly face one of his more serious life challenges. It is not easy to have such an amount together in urgent times. 

From observing scores of successful taan samiti, one thing becomes clear: why do so many opt for this model? It is the transparent and flexible mechanism in place based on trust among participants in a group coupled with the peer pressure of saving each month (or week or even days) for the system to work for all participants is almost a foolproof guarantee of success. 

While dozens of such money clubs in professional, village or family settings can be easily traced, we found that women are key beneficiaries of this savings scheme. 

In the capital's Agargaon, homemaker Rashida Begum participates in one such scheme. In this scheme, they have 10 memberships (each Tk5,000 a month) where one person could take more than one membership. Rashida had three, which means she saved Tk15,000 a month.  

A few months after the saving cycle began, Rashida informed the group that her son would go to Malaysia for higher studies. She requested the group that instead of playing the lottery on 'game' day she needed to draw all her projected savings (Tk50,000 for each membership) in the following three consecutive months. 

The members of this money club empathized with her emergency. Rashida was awarded Tk150,000 in the following three months, which contributed to facilitating her sons' higher studies in Malaysia. 

Another woman in the same club is a widow and a mother of two daughters. She is a tailor. The family depends on her income. Before joining the money club, she informed the group of a condition. She would take the first draw because this would help her purchase clothes with which she would make dresses and sell them in the market and deposit the rest of the monthly savings amount at ease. 

From observing scores of successful taan samiti, one thing becomes clear: it is the transparent and flexible mechanism in place based on trust among participants (be it hotel employees, small-time traders, etc) which makes it work. Photo: Mehedi Hasan

Depending on the group members' mentalities, such requests for urgent draws are usually accepted by the members. She got the first draw as asked, invested the money in her tailoring business and deposited his monthly share duly for the rest of the cycle. 

"Everyone in the group has benefited from the chunk of money we received together," said one of the group members requesting anonymity. "I needed a fund for travelling abroad, and I won the lottery just a month before my travel. It eased my expenses by a great deal." 

"You may say why you don't deposit the money in the bank instead, honestly it simply doesn't happen," she added, "This club of apas and bhabis are a comfort zone where we don't only save money but also share ideas how to better manage our finances with our personal and family experiences." 

The money clubs are spread across the villages as well. 

In Rajbari's Dadshee Bazar, Rasel has a grocery stall. Back in the days when Rasel worked as a garment worker, he was introduced to 'Taan Samiti' by his colleagues in the garment sector. They used to save some money every day and distribute it among the members every week. 

In Dadshee Bazar, he convinced fellow grocers and traders to emulate this idea of how saving money this way could help them invest more in their business. More than 20 men signed up for the Taan Samiti. 

"We deposit Tk100 every day and money is drawn every week when the fund reaches Tk10,000. This amount, when a grocer gets all at once, helps him invest in the shop and better his business," Rasel said. 

Taan Samiti has impacted Dadshee traders positively. When the current cycle ends – which means all 20 men get Tk10,000 each of their savings over 20 weeks – they will launch a new cycle. 

"This time, we have decided to save Tk300 every day. This means Tk30,000 can be drawn each week. Tk300 a day is not a big deal for businesses but it will increase our savings by many fold," Rasel added. 

In the capital's Khilgaon area, Taan Samiti is vibrant with local grocers. 

"We deposit Tk500 per day," said Roni, a grocer near Goran. "We sit in each other's house for the game every month. Every draw is Tk200,000 for each of us."  

We shared the community money club stories with economist Akhtar Mahmood. 

He said that if these were saved alone in their banks, they would get the same amount some months later. However, there is a peculiar human behaviour at play centred on many people lacking the patience or willingness to upkeep a bank account. 

"But if they stay in this group, they have to save the money in peer pressure, and they are saving money as a group," he said. "However, where I will spend the money—whether this decision gets better and more informed if I stay in the group is also a question," he added.

He explained that since people in a group are assumed to have more information (though a group can give both good and bad advice) chances are more that good advice will come.