When Aissatou Ndao moved to the U.S. from Senegal in 1986, she struggled to make ends meet. She landed a part-time job at a food stamp office in New York City, but couldn’t manage to pay her rent on time.
“Any time I put my money in my bank account, I’m going to buy merchandise,” said Ndao, 54, the former head of the women’s division of the Senegalese Association of America in Harlem’s Little Senegal neighborhood. “But if I want to build something, I put it in a tontine. It’s savings I cannot [immediately] get back.”
Ndao ran a tontine — an informal group that uses social pressure to motivate people to save money — out of her home in Harlem for about seven years. The word “tontine” is French, but the savings practice it represents can go by many names, depending on location and ethnic group. Tontines and similar money pooling systems are popular internationally, especially among Indian, Latin American, Caribbean and African (including Senegalese) communities.
In its simplest form, a tontine works like this: a small group of people, usually 10 to 20, deposit money in a pool managed by the group’s leader. Deposits are made on a fixed schedule, and at the end of a designated rotation, anywhere from a week to several months, one person in the pool receives all the accumulated money. Deposits continue until the next rotation, when another saver gets the entire pool. The process repeats until everyone in the group has received the pool money once.
It’s up to the tontine group to determine the rotation order. “We put names in a plastic bag,” said Ndao. No interest is earned, so no one makes more money than they put in. But participants say they end up saving more than they likely would on their own. Ndao says some are also motivated by a desire to help each other.
“Some of them use this money for business. Some use it for the rent, some use it to go back to their country,” said Ndao. For undocumented immigrants who may have difficulty accessing formal bank accounts, the groups offer an alternative to save money, since they operate outside government regulation.
The lack of government scrutiny is largely because tontines are so small, compared with banks that are subject to U.S. regulation, said Geoffrey Parsons Miller, a professor of banking law and regulation at New York University.
“You could say they’re engaged in lending activities, and that they should be regulated,” said
Miller. “If they’re used to transfer money to terrorists, then the government has a strong incentive to regulate.” But for the most part, he said, tontines respond to a real need.
“At one time people in these groups had trouble accessing credit,” Miller said. “So they got credit for their own people.”
That’s still a motivation for some. But so is the discipline that tontines impose on savers. When Katy Sy started saving money in June of this year, she wanted a method that would help her stay committed.
“I cannot save on an everyday basis,” said Sy, a 22-year-old Senegalese immigrant who lives on Staten Island and studies economics at CUNY College of Staten Island. “If you go to the bank you can get your money right away. Here, you have to wait.”
Sy is scheduled to receive her first pool of cash — about $3,000 — in October. Though tontines are often associated with immigrant groups in the U.S., she says her group is diverse.
“There are also some Americans that are part of it,” Sy said. “It’s not just Senegalese anymore.”
Other anomalies exist: Mamadou Mbaye, CEO of Puzzle, a Senegalese marketing company, says he participates in his aunt’s Harlem-based tontine remotely from Paris and Dakar — not out of financial need, but rather to assist the community.
“She told me, ‘I have two spots left, I need someone to participate, and I’d like you to fill the spots,’” said Mbaye. “People are proud to be helping each other from the same community.”
Tontines operate the principle of trust. “If everybody is honest, it’s very simple,” said Ndao. Once, a cab driver who participated in Ndao’s tontine ran off with his money and stopped contributing.
It can happen, but it’s rare, said Mbaye, the CEO of the Senegalese marketing company. “In the community, dignity is so important,” he said. “Our word is important in our culture. When you give your word, you do your best to respect it.”