Are ‘Partner’ Savings Plans better than traditional ways of saving?

Do you have a bank account?

A number of people do not have bank accounts.

They save their money by using informal savings plans which give them the financial flexibility that works for them.

Partner Plans

One popular informal savings plan in Jamaica is called a ”partner plan’.   This fund involves members who are required to make a small monthly contribution to the community fund.

A banker is assigned to collect the money and supervise the distribution. The banker is usually paid a small fee for their role in the group.

Withdrawals  are done by taking monthly deposits from each member of a group and then giving the whole monthly sum to one member of the group.

The recipient of the monthly sum is based on a predetermined rotation, ensuring each participant will eventually receive a large payout.

Benefits

This kind of informal savings plan allows members to shed the pressure placed on their free cash by husbands, neighbors, and friends. Ultimately, this enables people to commit their surplus cash towards future purchases with the potential to improve their quality of life.

In case of unforeseen illness, members can rely on their group members and the resulting group fund to quickly take out a loan.

Group members have to repay the loans or end up contributing the same amount over twelve months as if they had saved the money themselves, but participating in a group creates additional flexibility and builds a social structure that creates discipline.

Such discipline also enables members to save up for large purchases, since the cash is safely put away for extended periods.

So the hassle of going through endless bureaucratic  process for a loan is eliminated.

Risks

Of course there are risks to using this kind of informal savings plans as there are less rules to govern the practice.

Corrupt persons can do withdrawals then disappear without paying their portion of the loan.

Bankers for these types of saving plans might also be dishonest and arrange the finances that he gets a bigger ‘cut’ than originally agreed.

If the money is lost there is no insurance for savers!

This is not to say that persons have not benefited from the ‘partner plan’.

Have you tried a partner plan?

Let me hear from you!

Teri Ann Paisley

Gleaner online writer

Tags: informal saving plan