Once a week at a swap meet booth in Westlake, several Latino merchants each contribute $250 to a cundina , an underground lending pool that is part cooperative and part bank. Each week for 10 weeks, one of the group's members receives the $2,250 pot.
In Koreatown, members of a crime-prevention team met monthly at a restaurant, $500 in hand. One month at a time, each used the $2,500 to buy a ham radio so team members can communicate while patrolling their neighborhoods.
And in Southwest Los Angeles, 30 people attend monthly meetings of one of the more than 50 "family investment teams" that have sprouted in the African-American community since last spring's riots. Each person pays $38.66 a month toward the goal of one day buying property in and improving black neighborhoods.
For centuries, many cultures have practiced group lending as a means of raising money for weddings, burials and other occasions. But in Central Los Angeles, communal lending circles are flourishing for different reasons. They have been fueled by waves of new immigrants, who make up half the area's residents, and the ambition of people unable to qualify for bank loans because of poor or no credit.
"Nobody loses; everybody wins. We all use each other's money," said Javier Becerra, a Mid-Wilshire resident who uses cundina funds to invest in his small herbal tea business Downtown.
Experts say group lending and saving circles also have been discovered by organizations helping micro-entrepreneurs, who are generally defined as business owners employing fewer than five and needing less than $5,000 for start-up.
Police say these underground lending circles are legal. However, the practice is not without risks. Members have been left empty-handed by shady participants who take off with everybody's money. And people who rely solely on lending circles can be shut out of the mainstream financial system, experts say.
People who are "really living on the margin" can benefit from community lending, said Paula Sirola, program manager for the Coalition for Women's Economic Development. "And if that's what it takes, fine. But there's also the risk factor."
The Downtown-based nonprofit coalition has used lending circles for several years to run a successful micro-business loan program for inner-city women. The organization has lent nearly $154,000 to 80 low-income women since 1990.
Because of the underground nature of these lending circles, experts are unable to estimate how widespread they are.
In the Latino community, cundinas are popular among the immigrants whose small businesses fill swap meets and strip malls from Westlake to South-Central. Many participate on a regular basis, starting up a new lending circle once all the members receive their money.
As the organizer of her cundina , Maria Eva Mejia collects $250 from each of the nine other women in her group, excepting the one who receives the weekly pot (Mejia also contributes a share). Generally, those with the greatest need receive their pots first. But on other occasions, the women draw straws to determine the order in which the money is disbursed.
"We do it out of necessity," said Mejia, 50, a Salvadoran immigrant whose original clothing business in Pico-Union burned to the ground in last spring's riots. "No one else is helping us. So we have to help ourselves."
Unable to qualify initially for a federal disaster loan because she lacked the appropriate business documentation, Mejia started up two \o7 cundinas\f7 with 19 other merchants. Mejia said she used her $4,750 share from the two \o7 cundinas\f7 to buy clothing and rent space at the Westlake Swap Meet. She eventually received a $27,000 loan from the U.S. Small Business Administration after she and others lobbied the director of the agency's disaster loan program.
Mejia said the 10 members of her current \o7 cundina\f7 are close friends; three of them work with her at the same swap meet. In other groups, the members sometimes do not know each others' identities.
"Above all, (the \o7 cundina\f7 ) is a system based on honor and trust," said Alfonso Castro, who uses money from his lending group to reinvest in his Pico-Union convenience store. Castro said banks have turned him down several times for business-expansion loans because he did not have a credit history or enough collateral.
Castro said he knows only the organizer of his \o7 cundina\f7 , who visits each business when it comes time to collect the $250-a-week contribution and pay out the weekly $2,250 sum.
"It's not important who is playing. It's important that we get the money," he said.
In Castro's native Guatemala, the lending circles are called \o7 cuchubals\f7 . Mexicans and Salvadorans use the term \o7 cundina\f7 or \o7 tanda\f7 . The custom of using the circles has been in existence for generations to finance everything from business ventures to burial services.
