Cestas Populares

Average Loan Amount:     $200-$1200
Average Loan Payment:   $200
Term:                                     Minimum 1 year
Interest Rate:                       0%
Target Market:                    Immigrant populations with an informal peer lending circle
Requirements:                    1)  Have or open a bank account
                                                2)  Commit to participating in a Cesta for at least one year
                                                3)  Credit report and score review at intake
                                                4)  Monthly education including credit education
 

The Mission Asset Fund (MAF) has formalized peer lending circles into a loan program, Cestas Populares, developed to help low-income immigrants build credit histories and scores through their monthly Cesta contributions. Peer lending circles have long been an informal way for family, friends and neighbors – particularly in immigrant communities – to help each other gain access to capital they otherwise could not get from traditional financial sources. MAF formalizes the lending circles through a partnership with OneCalifornia Bank. OneCalifornia accepts the monthly deposits, distributes the loan to the monthly recipient, and then records and reports the monthly payment activity for each Cesta participant to the major credit bureaus.
 
Peer lending circles may have as few as 4 or as many as 30 participants although there is no limit on the number of people that can participate in a Cesta. Each participant pays into the lending circle the same agreed upon amount – the average monthly contribution/loan payment per person is $208. The combined funds are distributed to one person in the Cesta as a loan, then the cycle repeats and other Cesta members each have a turn to receive a distribution in subsequent rounds. Cesta participants decide if the pay and contribution period is bi-weekly or monthly. Depending on the number of participants in a Cesta, they may get one large loan or multiple small loans throughout the year.

To formalize a Cesta through MAF, each individual is required to have or open a bank account to make their monthly deposits, and also commit to participating in their circle for at least one year. An average loan between $200 and $1200 is lent to the Cesta member whose turn has come to receive the pot. Members are required to take a Credit 101 class up front and then meet every 2 months for continuing financial education. MAF offers interactive workshops to help members understand their credit reports and also facilitates member-led classes on topics generated by the group.

Five of the members of a Cesta team, ALAS.      The group of 9 women are entrepreneurs.

Although the MAF Cestas Populares was launched as recently as October 2008, they are already seeing results. After four months, the average credit score increased 52 points – which can mean the difference of going from poor credit to fair credit. It can also mean the difference of reducing debt since in the same time period, participants decreased their debt balance (installment and revolving) by an average $1208 and no new late payments were reported for the Cestas and all other active accounts that appear in the members’ credit reports.