A Circular Economy

Between 1942 and 1964, migrant Mexican farm and railroad workers labored for low and often delayed pay under the U.S. Government’s Bracero Program. According to the 2023 paper “The Bracero Program and the Exploitability of Migrant Workers,” this program “operated by instilling fear and uncertainty among these people,” using threats of deportation and wage retention to control and exploit the laborers.

To alleviate the financial instability they faced, immigrants in Southern California instigated the first known use of the tanda in the United States, “the Mexican variation of lending circles, [which] are an informal financial practice used among Mexican-American communities,” according to an article in the journal Springer Nature.

As the eMoneyPool Blog states, the Mexican-American community in Southern California continues to rely on this practice “as an essential social support system.” Mexican culture researcher Carlos Vélez-Ibáñez has also tracked tandas in American states like Arizona and Washington, according to a 2020 blog by Patrick Long.

“The tanda exists at the intersection of culture and resource management and at the center of families’ financial lives,” points out the Springer article.

Participants in this system put a specified amount of money into a pool at regular intervals—for example, each week or month. The fund is then given to a different group member during each new cycle.

According to Vélez-Ibáñez, tandas typically comprise 10 to 12 participants. It is common for each group member to contribute about $100 to the pool weekly or monthly, creating an average fund of $1,000 to $1,200 that goes to one participant.

While similar rotating savings and credit associations (ROSCAs) can be found in regions like Africa, Asia, the Caribbean, and India, the paper “The Tanda: A Rotating Credit Association in Mexico” states that tandas tend to have comparatively short cycles and smaller funds.

In 2018, Medium reported that 31 percent of Mexico’s population uses this system. Vélez-Ibáñez, who has documented tandas in Mexican states like Baja California, Sonora, and Sinaloa, told Refinery29 in April 2023, “Any time you have more than one Mexican, you’ll probably find a tanda.”

The tanda is believed to have originated in Puebla, Mexico. According to the study “Tandas and Cundinas: Mexican-American and Latino-American Rotating Credit Associations in Southern California,” Chinese contract workers living in Mexico after 1899 may have helped inspire this approach through the use of the hui, a ROSCA system used by Chinese communities in East and Southeast Asia.

The same study notes that this practice has survived in the U.S. because Mexican immigrants in the United States have “continued to be of the working class” and have “relied on the tanda as a form of money saving.”

Pooling Resources

Data from the National Equity Atlas shows that Latinos in the U.S. “earn the lowest median wages of any major racial group.” Sixty percent of Latino professionals aged 18 to 34 who participated in a 2021 LinkedIn survey said they had been “overlooked or intentionally passed over for career advancement opportunities… because of their race,” and 73 percent of them said they “believe that a person’s skin tone impacts their career progression.”

Many Latinos in America also lack access to banking and traditional loans. The American Banking Association, while referring to a Fed survey, stated that 11 percent of Latino adults in the U.S. were unbanked in 2023, in contrast to 4 percent each for white and Asian adults. A survey published in 2022 found that 20 percent of Latinos in America had no credit history. Meanwhile, data from 2018 and 2019 show that Los Angeles County-based Latinos with good credit were denied mortgages at twice the rate as white applicants with comparable credit scores.

For individuals who face these hurdles, tandas can serve as interest-free loans, helping pay for essentials like eyeglasses, household appliances, weddings, and medical care. As Santa Clara County deputy district attorney Hugo Meza told the Washington Post, “Let’s say a family has a child soccer superstar and gets invited to the soccer tournament in Dallas but doesn’t have the funds to go,” he said. “They can start a tanda.”

Carmine Aranada is one of 10 sisters and cousins in Santa Ana, California, who formed a tanda to support their businesses of making jewelry, blankets, and hats. “Even if we could get loans from traditional banks, we could not afford to pay the interest,” she told eMoneyPool Blog in 2014. “Our businesses are only profitable because we are the labor. The tanda is perfect for us. We contribute a little of our cash every week and get the lump sum we need to buy materials exactly when we need it.”

Single mother Alma Diaz has used tandas to support her children and sustain her small jewelry business. “The tandas certainly help me to avoid owing money to anyone,” she explained to the bilingual community news project Boyle Heights Beat in 2015. “It gives me a great deal of pleasure to be able to maintain my household by myself and that my children don’t want for anything.”

Mutual Trust

Another frequently cited benefit of tandas is the trust they cultivate between group members. The wealth management app Cowrywise states, “The penalty of not paying to the tanda is letting down your friends or family, and to most Latin Americans, that’s worse than whatever the bank can do to you for not paying back a loan. They have a culture that is deeply rooted in and reliant on loyalty.”

Vélez-Ibáñez has estimated the odds of tanda participants getting scammed at 0.005 percent. “If you [take the money and run], you’re rupturing those relationships,” he said to Refinery29. “Therefore, you’re out alone and not trusted after that. And because you’re not trusted, you’re no longer part of those networks of support.”

The mutual trust required to build a successful tanda helps strengthen community and personal relationships. The 2023 Springer study “The Tanda: An Informal Financial Practice at the Intersection of Culture and Financial Management for Mexican American Families” contrasts this with “impersonal banking in which trust is based in legal contracts that are often written in English and may not be linguistically accessible. In other words, unlike racial capitalism, tandas resist dehumanization, the denigration of racial and ethnic identity, and a devaluing of human relationships in favor of the accumulation of capital.”

The study adds, “Continuing to uplift these culturally specific, inclusive practices has important implications for decentering whiteness as the standard in financial systems that perpetually marginalize others.”

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