Rotating Savings and Credit Associations (ROSCAs) are arrangements that allow friends to save together and withdraw lump sums from the scheme.
ROSCAs are unregulated, relying on trust. The Money Advice Service says “those who use [ROSCAs] say they encourage savings and allow people without bank accounts access to credit.”
They have different names around the world, including tanda in South America, hui in China, susu in West Africa, and pardner (also known as partnerhand, partner or pardna) in the Caribbean. Chits in India are quite similar.
In her book “The Unbanking of America”, Lisa Servon described tandas in New York as “borrowing and saving under the radar“. This BBC article looks at tandas: The ‘banker ladies’ saving friends from debt.
In Britain, some people in West Indian communities use pardners.
Jo and Leisa are twins from Jamaica. Both trained teachers, they now live in Birmingham with their teenage children. They blog at joleisa.com, where they share frugal living tips to help readers make their money stretch as far as it can and they have appeared in three series of Channel 5’s “Shop Smart Save Money”.
I asked them to write this article as they have used pardners. Over to Jo and Leisa!
What is a pardner?
A pardna, as it is pronounced in Jamaica where we are from, is an interesting way to be able to afford to pay for goods and services that you would otherwise have no way of being able to pay for. The whole system is based on trust.
In simple terms, a pardner is where a group of people pool their money together by handing over a set amount each week or month. The set amount is called a hand and the person who organises the pardner and collects the money is called the banker. The banker hands over all the contributions in a week or month, called the draw, to the person whose turn it is to get paid.
Everyone usually joins at the start for a set period. How long the pardner runs for depends on how many persons have a hand in the pardner. If ten of us are in a pardner, and we each pay £100 per month, the draw is £1000 and there is one draw per month for ten months.
From as early as we can remember, our mother has been involved in different pardnas to pay for different things.
If she needed a new sofa, she would ask around amongst her friends if they knew of any new pardners coming up. Before agreeing to join, she would first ask the banker if she is able to get her draw by a certain date – before the date that she wants to buy her sofa. If the answer is yes, then she may join, but if the banker says they already have requests for those dates, then she knows this pardner is not for her.
Of course there are lots of variations, potential problems and so on, but like I say, it is run on a basis of trust.
How does a pardner work in practice
A pardner can be set up by anyone who has the trust of others. Most persons in the pardner tend to know each other but it would not be strange for there to be one or two outside of the friendship group.
For example, my friend who knows that her mother’s friend is starting a pardner may invite me to join in, even though I don’t know her mother’s friend. In this case, I give my money each week to my friend who passes it on. When it’s my turn to get a draw, I collect it from my friend.
It is not unusual to see students in High School operating a pardner scheme to pay for things like trips, shoes, handbags etc. In fact, it was the norm for high school age students to pay for part of a school trip or at least have their own spending money without depending on parents. This is where being involved in a pardner would come in.
Some variations: If two of us can only afford £50 per month, we each have ‘half a hand’ and so when it’s time for our draw, we get £500 each. Some people may decide to have one and a half hand in, which means they get one draw one month and then half a draw at another time. If you have two hands in the partner, you may request to have your draw in consecutive months. This money has come in handy for many families to pay for a child’s university fees, a deposit on a house or car, furniture, or even the airfare for trips overseas.
Does the “banker” get paid?
You may be wondering if the person running it gets paid at all. This is a tricky one.
For all the years we’ve known our mother being involved in pardners, she has not been requested to pay the banker. The banker does it to help her friends and herself – as she may have something she needs to pay for too, and may even want the first draw.
Of course the person getting the draw may freely decide to give the banker a gift. The gift could be anything from flowers or something decorative for the home, like a set of handmade crocheted doilies.
Well since we have come to this country, we have heard of one person who was determined to have a set amount that should be paid to her by each person when it was time to get their draw! This has sparked some controversy and lively debates. Many see this as too ‘selfish and profiteering’ and, well, like the oppressors in our colonial past!
I’m sure you can think through the issues of this one, both the pros and the cons. Needless to say, we won’t join in with that one or any such.
Now in a way, that banker has a valid point, because she was saying she had to bear all the liability in case anything happened with the money or with someone being unable to pay for whatever reason. Personally, I do not know of any pardner where this problem occurred but I am sure it has happened.
If someone has already gotten their draw, and then refuses, or is unable to continue to pay, then the banker is stuck and most times doesn’t inform the others in the group as for sure they are going to say that she should only have admitted credible people into the pardner.
Anything can happen including death, long term illness or unscrupulous people who decide to leave the scene once they get paid. That is why such an established ‘institution’ is built on friendship and trust.
How we have used pardnas
My family members and I have been in many pardners throughout my life and have encouraged others to be involved too. I usually get involved in one when I have something I would like to purchase but for which I do not have the available cash.
The biggest one I was involved in was a real blessing as it allowed me to use my draw to make a deposit on my first house. Others have been even more ingenious and for example have asked to have 2 hands then they take each draw consecutively which allows them to have a larger sum of money. This allows them to achieve many financial goals without having to repay a loan with interest to a bank or other financial institution.
In countries where parents have to pay for the education of their children, being involved in a pardner or similar scheme has, without doubt helped tremendously. Others have used it for health care where there is no system like the NHS and they have to fund medical treatment for themselves or family members.
As life stages progress, people make plans for their draw from the pardners they are involved in. For example, at the start of a school year, some arrange for their draw to come in handy to purchase back to school supplies or indeed to pay school fees. Others may use their draw to make an extension to their house.
Some have had to ask the banker for an emergency draw if they have to pay for the funeral of a loved one which was unplanned. This then has to be negotiated with the person who should have received the draw. Of course, people are usually understanding and kindly oblige.
Paying on time
It is vital that you keep a diary or some way of checking off each time that you pay your pardner. Our mom used to have a paper calendar on the wall in her room and on it she would write the date the pardner started, how much the draw is, when her draw is expected, and sometimes, what she planned to use the money for.
Our mom was a real hustler and it was not uncommon to see her calendar list more than one pardner that she was involved in at the same time!
We were sometimes cheeky and asked her for money for a trip or other activity and when she replied that she didn’t have any, we would point out that we saw it on her calendar that she just got her pardner draw from Miss Phyliss! This would lead to a money lesson as she would explain what and what she had used the money for and how she really had to be conscientious about being able to afford stuff for us.
Even in families people join pardners and even the kids can get involved by joining their pocket money together to make one hand or even half a hand. It’s a good way to teach money management.
We are in favour of pardners!
Now, in more modern times, although it is easier to get a bank account, many still do pardners because you get a lump sum to use all at once and you repay over time without any interest. I don’t see pardners ending anytime soon.
We are 100% in favour of pardners. Here are some personal examples of how partners have helped us even as children back in Jamaica
- Our exam fees for Caribbean Council Exams, similar to GCSE, were paid for with a pardner draw.
- Having twins graduate at the same time was very expensive. Our mom planned for this by arranging to have her pardner draw in time for this.
- We both saved up the deposit for our first homes by being involved in pardners and arranging to get the draws around the time to pay the deposit.
- When Jo lived and worked in the Turks and Caicos Islands for 4 years, she also participated in pardners too. There it was called ASUE.
- Our airfare to England – a whole lot of money – was paid for through a pardner draw. Even on a teacher’s salary, it was hard to come up with the airfare from Jamaica to England!
My grandmother and all my aunts were also involved in pardners and I can vouch that they are generally very well set up and run.
The biggest thing contributing to its success is trust and wanting good for each other. This is a part of our history that we are very proud of as black Caribbean people. We know that it works and we would encourage anyone to try it amongst their group of friends.
Frogman says
Growing up in Africa, my Mum used this a lot and I think it really worked well for her and her friends. It was called “ajo”. It’s totally reliant on trust. The trust level where I grew up was extremely high (Maybe still is) so you wouldn’t normally hear of people defaulting on monthly/weekly contributions. Moral standard was also very high. This system of savings might be tricky in modern Britain I think. Withdrawal dates for members was basically done by balloting at the start so for example, if you are the first to withdraw in a 12 member-monthly ajo of £100, You get £1200 at the first contribution but still have to pay the other 11. If you are the last, you get your £1200 at month-12
Sara (Debt Camel) says
Different ROSCAs have different means of determining who gets the early draws. Sometimes it is the longest established members of the group. Sometimes it is by ballot. Often the banker gets the first draw.
People with an early draw have effectively got an interest free loan. People with a later draw benefit from a savings mechanism where they can’t be tempted to spend the money on something rather than save it up.
Frogman says
Friends within the group also exchange dates if they need need bulk money urgently
Richard Munro says
In a similar way, credit unions operate on trust. Members within a ‘common bond’ save together and from the pool of savings other members can receive loans at affordable rates. On the plus side, your savings are protected by the Financial Services Compensation Scheme. Many credit unions also provide death benefit at no extra cost and pay a dividend on savings.
Julia says
I think it’s important to be aware of the risks of any financial product.
https://www.moneyadviceservice.org.uk/en/articles/rotating-savings-and-credit-associations offers more information, but the main risk to be aware of is that these schemes have no legal standing and are completely reliant on the trustworthiness of the person looking after the money. Money saved is not protected by the Financial Services Compensation Scheme (FSCS) in the same way as it is if held in your name in a bank, building society or credit union. There are stories of people who’ve lost out when the banker ran off with all the money, but it’s hard to pin down if they’re real cases or cautionary tales.
Regardless, you should always do your research and never feel pressured into joining if you’re not 100% comfortable.
Sara (Debt Camel) says
yes, I did include a link to the MAS article
Gwen Webster says
I’m interested but I’m finding it difficult to find someone who is trustworthy.
Richard Munro says
You may want to consider joining your local credit union. Members save together and from the pool of savings members can apply for affordable loans. A big advantage is that your savings will be safe and covered by the Financial Services Compensation Scheme.
Joleisa says
You could also consider being the banker yourself. So you can set up the partner and invite people you consider to be trustworthy to join in. It would be good to start a small one with family members first so that you can a feel for it and see how it works.
Yvonne says
Yes Gwen, set one up yourself. That’s what I’ve done. I found a group of people I trust we’re doing it. We wanted to help and support each other, plus I wanted to keep an old Caribbean tradition going.
Richard says
Have you considered joining your local credit union? Members from the same community save together and can take a loan from this pool of savings. Your savings are protected by the Financial Services Compensation Scheme so the risk of loosing your savings is removed. Let someone else do the admin and worrying! You may even get a return on your savings too.
Sara (Debt Camel) says
all true… but CU loan interest rates are often not cheap at all.
Richard says
Although credit union loan interest rates are capped by regulation at 3% a month on the reducing balance, many charge significantly less than this. Some as low as 6% APR with no early payment fees and many carrying a death benefit it’s certainly worth consideration.
Simon says
Hi I’m very interested in this and I have two frends that interested to I would like for some one to get back to to me and let me no how it works and how much to put down
EmpressBlack says
The issue around death should be addressed as I am currently paying of a pardna debt of a family member due to the death of the original member.
I requested a hand when the person passed away but was told due to them having their hand last which was incidentally late. I could not. I was told I could take their place but declined the offer. What I am paying back is in effect my weekly savings. So I’ll continue with this in the future when I finish making the payments.
Richard Munro says
As I’ve mentioned in a post above, many credit unions carry an inclusive death benefit/insurance which means family are not required to pay back what the deceased owes. There can also be a pay out to a beneficiary. The credit union I belong to clears any outstanding loan with the credit union and pays a minimum of £500 up to £5,000 depending on levels of savings held. In these days of increasing funeral poverty that’ definately something worth thinking about.
Sara (Debt Camel) says
Family are not required to pay back what the deceased owes in any loan…
Richard Munro says
EmpressBlack appears to be! Clumsy wording – claim on the estate of the deceased.
Ruth says
Hi, I have a niece who has used a pardner scheme to save the money for her deposit on her first house purchase – BUT the bank is declining to recognise this as a legitimate component of the deposit telling her that having a big deposit like that arrive in her bank account is seen as money laundering. What can she do to prove that this is legitimate?
Alison says
My mum worked as a domestic cleaner in a London hospital. When the large 5 bed house got too much for her she sold up and used money from the pardoners she had been in over the many years, to buy her flat cash. An eye surgeon at the hospital was chatting with her one day and he learned this information and was in awe of her.
She used to take her hand, bank it repeatedly and never touched a penny – I miss her so much R.I.E.P
Molicia Dabreo says
If you started a hand let’s say 9 of us throwing $50 per week and am the second hand, is it every 3 months you get your hand?
Sara (Debt Camel) says
It depends how the Pardener is set up. If you all pay weekly, often the draw is paid out every week. In that case with 9 people it lasts 9 weeks, so about two months. Or it could be paid out once a month, but then you only get a draw once every 9 months.
Yvonne says
My pardna starts again in November. It’s 100.00 per hand every 2 weeks, so that’s 200. 00 per month. Banker’s fee is 50.00 instead of the usual 100. Currently we’re at $2000.00 per draw. Please let me know if you are interested and trustworthy.
Starting a new round is always up to the participants.
Sara (Debt Camel) says
I am sorry but I won’t be publishing people’s names and contact details here.
Kirst says
Hi there,
Do you have any advise regarding collecting the funds in?
I am currently collecting through the bank and my account has now been frozen.
I am yet to get the Pardner money back and see exactly why the account has been frozen, but I am guessing it is due to money in from various people.
Going back to cash collecting will be long and time consuming?
Any advise re: law / taxes if any / specific bank accounts would be appreciated.
Thank you.
Sara (Debt Camel) says
I am sorry, I don’t.
Kirst says
Thank you,
Since the issue with Natwest where they were closing down accounts, I found out it wasn’t anything related to the Pardner.
I received the Pardner money back and the account was closed. This is an on-going issue with many people/businesses it appears.
Do not use Natwest !!!!!
I have since opened an account with another high street branch and it is an official business account where we are allowed an annual turnover of a certain amount. Payments have been running smooth for nearly a year now with no issues.
My Pardner has been running for over 15 years now. We have terms and conditions in place for any eventualities.
Mich says
Hi Kirst, How did you go about creating your terms and conditions and also have you ever had to apply it?
Kirst says
Hi Mich,
We have had terms and conditions for over 5 years now and everyone has agreed to them by whatsapp acknowledgement and replying that they agree within the group.
We turn over 1k a week with no issues and flexibility that I can manage if someone can’t pay on time.
Most pay by standing order, so only a handful of manual payers.
I have only used our t/Cs once when someone dropped out at week 2.
The person was/is a good friend but couldn’t manage the commitment.
How many are in your Pardner?
Kirst
Mich says
Thanks for the kind reply. I have roughly 30 persons in my pardner, have been running for about 15 to 20 years no issues.
I want to switch from manual payments to a bank account. With the business account do you have to pay for each transaction through the account and are there any tax implications given a business account is set up?
Linda carpenter says
Hii found this article to be very informative. I am about to talk to a friend of a friend about joining a pardner and then starting my own with a friend