Cestas Populares - Peer Lending Circles

A recent study by Social Compact revealed that 44% of households in the Mission District do not have credit histories. Without credit scores, low-income families are locked out of the low-cost credit market and forced to turn to high-cost fringe establishments for their financial needs.

MAF is addressing this bleak reality through Cestas Populares, a program that helps low-income immigrants build their credit scores and increase their ability to access low-cost credit. Essentially, Cestas Populares formalizes peer lending circles (PLCs) that are common in immigrant communities. Known in Latino communities as ‘cestas’ or ‘tandas’ or ‘cundinas’, PLCs function as rotating interest- and fee-free credit associations. Cestas are formed by participants who agree to make regular contributions to a fund that is then distributed in whole or in part to each contributor in rotation. Once a member has received the fund, the cycle continues until all members receive a distribution.

MAF’s innovation is based on the principle that PLC activity represents bona fide financial transactions that should be included in credit histories. Through Cestas Populares, participant activity is formalized and recorded by FICO, which results in building or establishing individual credit scores.

During the first year of the program, MAF made 87 Cesta loans, totaling $105,200, to 79 participants. A majority of Cesta participants would not have been able to access credit card or bank loans and would have been forced to go without credit or turn to predatory lenders. The Cesta program serves as a bridge to the financial mainstream for low-income and immigrant Mission residents, helps participants move forward on the path to financial security and strengthens the community by building trusting, collaborative, and personal relationships.