Cestas Populares are viable alternatives to high cost, predatory loans

On October 2008, MAF set out to prove the viability of leveraging cultural assets in creating programs that could realistically and quickly move immigrants into the financial mainstream.

And we are doing it with Cestas Populares - a program that helps participants establish or improve their credit scores simply by recognizing, recording and reporting financial activity that occurs in peer lending circles commonly practiced by immigrant communities. Indeed, by formalizing these financial activities, MAF is helping immigrants improve their credit history by valuing their cultural assets; their actual participation in peer lending circles with their family, friends and co-workers.

And in just 12 months, MAF made 87 cesta loans to 79 participants, totaling $105,200 with an average loan amount of $1,209.

To put these numbers in perspective, consider this: if participants did not have access to cesta loans and instead used a credit card or personal bank loan to get the same amount, they would have paid $21,623 or more in interests and fees. In fact, this figure is very conservative since most participants would not have been able to access credit card or bank loans. In reality, most participants would have been forced to either go without credit or turn to predatory lenders like payday lenders or loan sharks and pay outrageously high fees.

Cesta loans are great alternatives to either of these two bad options.

Jessica, a cesta participant, exemplifies how this is so. She joined MAF's IDA program last year to save for her housekeeping business. While attending MAF’s financial management training classes, she and three of her classmates decided to form a cesta together. Jessica enjoyed it so much that she decided to join a second cesta group and even got her sister and best friend to join as well. Through her participation in two cesta groups, she can now access $2,800 in interest- and fee-free loans, capital that she is using to invest in her business to expand marketing efforts and buy cleaning equipment. And she did not stop there; she also opened a secured credit card to further enhanced her credit report. In a very short time, she made significant strides towards improving her financial situation.

MAF's Cestas Populares is serving as a bridge to the financial mainstream for low-income and immigrant Mission residents; we are helping participants move forward on their path to financial security; and, more importantly, we are strengthening community by building trusting, collaborative, and personal relationships that - at the end of the day - is what makes a community function.