NATASHA BOYE
Many variations

Some minority and ethnic groups have their own way of saving money toward a down payment, a new car or a college education. While most banks do not know these alternative types of savings exist, immigrants in the United States who are untrusting of the Americanized style of banking often bring their own, unique savings plans to the Bay State.

The Sou-Sou method of banking, which originated in Africa, is a savings plan among a group of people, usually low-wage earners and housewives, where each participant puts in the same amount of money and receives the entire lump sum at a particular time at no interest. It starts and ends with one-year period. If there is no prior agreement, lots are drawn to determine when someone gets their “hand.”

The Sou-Sou method is based upon trust, so the group of contributors is usually made up of family members, close friends or an extended community group.

The group appoints a leader and gathers about 10 to 15 members. A set amount of money to be raised is decided upon and each person in the group contributes the same amount of money on a monthly basis. At the end of the month, one person in the group is given the pool of money.

For example, if there are 10 people in a group wanting to raise $2,000 monthly, each person contributes $200 for the month, and each month a different member would get the $2,000 pool of cash and the contributions begin again the next month.

“When each member gets their share of the total amount, the pool starts all over again,” said Natasha Boye, a mortgage advisor at Loansnap.com’s Walpole office who has worked with Sou-Sou members wanting to use their money for a down payment on a mortgage. “It affords people the chance of coming up with money they don’t have. Each member is contributing a large sum of money.”

A common form of saving among Africans, Haitians, Tahitians, Ghanaians, Asian and Latino communities, Sou-Sou has evolved over the years but the basic principals of the method have remained the same.

“The concept originated from Africa, but there are different variations … some are more sophisticated, but it was originally very informal,” said Boye, a native of Ghana. “A lot of banks do not accept this form of financing so now there is a paper-trail. The manager of the Sou-Sou group notarizes that the borrower is part of group and contributed X amount and is drawing from the pool of money to pay for down payment. Then, we just submit the money with the application. Most banks do not even know this [method of securing a down payment] exists.”

While this type of savings is legal and widely practiced, many bankers are unaware of it, and until recently, national organizations like Fannie Mae and Freddie Mac did not formally recognize this type of cash-on-hand as legitimate way of investing in large purchases.

“This is a [method] that is very common. I’ve been in this business since 1986 and I did loans with immigrant communities that used [Sou-Sou],” said Sushil Tuli, chairman and chief executive officer of Leader Bank and Leader Mortgage in Arlington.

Tuli said he first came across Sou-Sou in Massachusetts with a Haitian client wanted to use his Sou-Sou amount for a down payment on a mortgage. According to Tuli, the difficult part was helping financial lender Fannie Mae learn about this method of savings.

“It was difficult to get Fannie Mae to understand, but we eventually got an exception in our contracts that said we can do ‘cash-on-hand’ transactions and if we could prove that this cash was legal and the people pooled it, we could use it for down payments,” said Tuli. “Fannie Mae has said that for cultures where it is customary that they don’t use banking systems, Fannie Mae has made it part of their underwriting guidelines [to accept ‘cash-on-hand’] and they call it a ‘community savings fund.’ As long as it’s proven and documented, we can use the cash.”

A Matter of Trust

Madelline Vega, CRA and sales manager for Sovereign Bank’s Roxbury Mortgage Center, said the main thing that has changed among the Sou-Sou method is the paper trail and documentation that is now needed for banks to recognize pools of money generated through Sou-Sou plans as a legitimate source for a down payment.

“The Sou-Sou organizer gives up a notebook which shows who paid and how much and when they have collected the money,” explained Vega. “Before the paper trail was necessary, it was more about family members gathering together and, based on the need of what you wanted the money for, an amount owed from each person was established. Over time, banks were able to take the paper trail [to legitimize the use of] larger amounts.”

Vega, a Latino woman who has worked with many Sou-Sou groups in her decade-long banking career, said there are no restrictions to the amount of money saved or what the money is used for. But, Vega said she believes this method of savings is a good habit to get into.

“I’ve seen Sou-Sou’s as big as $10,000 where every week there is a payment and you keep on paying until everyone in the group gets their share. It teaches you how to save and it also teaches good credit habits,” because once you get your share, you still have to pay it back to the other members in the group, said Vega.

“Some people use it for repairs, vacations or buying a house. I’ve never seen anyone run away with the money, because it has to be among people you trust,” said Vega.

The main component of the Sou-Sou method is trust. Because many minority and ethnic groups are unfamiliar with, or untrusting of, the American banking system, Sou-Sou groups were formed under strict trust guidelines.

“[Sou-Sou] is really done on a trust level and because of the trust issue, you don’t question where the money is or who keeps it,” said Boye. “There are no strict rules, except that you are expected to make your payment. If you miss your payment, you work it out with the person who is going to get the sum of money at the end of the month. If you can’t pay it, and you are a repeat offender, they will kick you out of the group, hold your money, and your reputation is at stake. People really do take it seriously. I’ve heard people say, ‘I can’t pay the rent because I have to pay my Sou-Sou.'”

Still, this method of savings is unknown to most banks and, according to Tuli, the smaller community banks are really the only banks that cater to this type of cultural difference.

“It’s not an American way of saving money and it’s more common in immigrant communities. People who participate in this have good savings skills and belong to the older generation. But, a lot of lenders still don’t know about it,” said Tuli. “The big institutions cannot cater to their needs and understand their way of living. Smaller companies can take the time to understand and help them [minorities] out.”

However, Vega said that regardless of how educated banks are on Sou-Sou, it is still a very popular way of saving money.

“This method was introduced to banks to show how low-income minority people are saving big chunks of money and it’s still a very popular way of savings. If you want $10,000 from a bank … some people don’t qualify for the loans and then you have to pay interest,” said Vega. “Sou-Sou makes people very happy when they get that amount of money from saving. In other countries, you are taught that huge amounts have to be deposited into a bank and left there. Whatever is in the bank is there forever. In a Sou-Sou, the money is more liquid. It’s quick money. Sou-Sou is a way of thinking, and of saving.”