Leveraging the Capital of the Community (Innovations Case Narrative: eMoneyPool)

Abstract

world for centuries. Members of the group help each other pay for short-term goals by leveraging the capital resources of their community. Just as some people turn to a credit card when they need to make a large purchase, others turn to money pools. In one form or another, the money pool concept has always been part of my family’s life. As a child, I often went to my Aunt Silvina’s house after school, where I would wait until my mom got off work. I occasionally saw my aunt go to the front door and exchange money with her friends. I was too young to understand what was going on, but that was my introduction to a money pool. How do traditional money pools work? A small group of people, usually ten, contribute money to a common fund, from which they take turns receiving the entire lump sum. A group member with an immediate need draws from the pool first, then repays the group in regular installments. A group member with a less urgent need will choose a later turn while making contributions to the pool up front, effectively using it as savings tool. When their scheduled turn comes around, they draw from the pool to pay for whatever they choose. It’s a tightly synchronized dance, where everyone knows ahead of time when their payments are due and when it’s their turn to draw from the pool. This allows them to plan ahead for large purchases or life events. Surprisingly, the vast majority of participants say that saving money is the main benefit of participation. So why choose a money pool over a savings account? Because unlike traditional savings accounts, money pools offer participants access to funds before they could have saved for a purchase on their own. Lets imagine that John and Jessica both put away $100 a month. It will take John ten months to save $1,000 using a regular savings account. Jessica, on the