Sharing the Wealth

Philadelphia CityPaper – by Samantha Melamed
Thursday, December 15, 2011

Makemah Kamara, a Liberian immigrant in a brightly patterned blouse and head wrap, does passable business at her all-purpose grocery and clothing store on Woodland Avenue near 65th Street. But, she admits, competition is fierce along this Southwest Philadelphia commercial corridor, a haven for immigrant businesspeople from at least a dozen countries — many of whom open nearly identical stores within blocks of one another.

“Everybody’s selling the same thing,” she says. “I need more money to improve my business” with more, better and more exclusive inventory. Because, of course, “If you have what people want, everyone comes.”

The problem is that, although Kamara has been in business for four years, she has no formal credit history.

The only loans she’s taken out are from susus — the West African name for peer-lending circles in which businesspeople pitch in money toward a rotating loan that’s then borrowed by each member in turn. The business world calls it a Rotating Savings and Credit Association, or ROSCA; but the practice developed independently, and by different names, in cultures from Cambodia to Mexico — anyplace where financial services were limited.

Immigrants to the city have brought the tradition of the ROSCA with them, to the Dominican-owned bodegas of North Philadelphia and the West African markets on Woodland Avenue, where participants can sometimes get access to rotating loans worth as much as $50,000. Now a few micro-lending and business-assistance organizations are looking to use the custom as a gateway into the formal economy — and as a means to unify immigrant businesses in the face of an increasingly challenging climate.

“Given … the economy, we realized that some of our applicants weren’t ready for loans: They had no savings or they had very poor credit scores,” says Bertha Sarmina, who works for Finanta, a local nonprofit. “So we decided to come up with a training program that would build on this ROSCA idea.” In April, Finanta launched its first ROSCA, a Spanish-language circle targeting Dominican business owners in North Philly, and in September it launched a second one in Southwest Philadelphia for individuals like Kamara.

A $125,000 grant from Citi Group’s Citi Community Development Impact and Innovation Fund to Finanta and a similar Philadelphia nonprofit, Entrepreneur Works, helped enable the two organizations to put a new twist on the ROSCA tradition.

In this version, the nonprofit fronts the money so that each participant can get a small loan right away — in the case of the Woodland Avenue group, either $500 or $1,000 — rather than waiting their turn for a larger lump sum. But like a traditional ROSCA, everyone shares the risk, via an agreement to assume responsibility for their peers’ debts. That peer pressure drives near-perfect repayment rates.

More important even than access to capital, participants are building their credit histories and getting advice. “We’re using the ROSCA as a way to draw people in, and then the meetings also serve to provide some training,” Sarmina says.

That type of counseling could prove especially vital on Woodland Avenue, says Vaughn Taylor, project manager of Southwest Community Development Corp.‘s Woodland Avenue Revitalization initiative, which helped Finanta launch the ROSCA there.

He worries the abundant Afro-Caribbean groceries on the corridor are beginning to cannibalize one another — and notes that they’re further threatened by the recent opening of the Cousin’s Fresh Market, a supermarket known for hard-to-find ethnic foods of the type these groceries specialize in.

“Some of these people are at risk of losing their businesses,” Taylor acknowledges. “So if they can band together to start buying products wholesale … if they can improve their storefronts, maybe they can compete. And if all those things were achieved and they still felt they couldn’t compete, some business owners may have to consider relocating — and the ROSCA will help prepare them for that.”

Taylor says other, informal susus already in action in the neighborhood have demonstrated the potential of collective purchasing, noting some grocers currently pool their resources monthly to bring in a tractor-trailer full of palm oil to Woodland Avenue.

Among the grocers participating in the ROSCA is Nina Williams, who came to the U.S. from Sierra Leone in 1989. She says business is a little slow, but she’s optimistic about her shop at 63rd and Woodland, Nina’s Grocery and Variety, a narrow space lined with shelves of palm oil, fufu flour, hair extensions and DVDs, and fitted with freezers stocked with turkey necks, cow feet and cassava leaves. She plans to borrow money to improve her storefront and add a walk-in freezer.

For now, she says, customer loyalty keeps her business humming: “Everyone has their own community coming to them. [Sierra Leonean] people come to me; the Liberian people go to the Liberians. If there’s competition, the business is healthy.”

But the problem, says Heather Hanowitz, who runs the Southwest Philly ROSCA for Finanta, is that with so many similar stores competing, “The only thing they’re competing on is price. The difference may be 25 cents or it may be 50 cents.”

That’s why she wants to teach her clients not only about finance, but also about merchandising, marketing, customer service — and the more basic points of supply-chain dynamics. For example, she says, many retailers shop at the same wholesaler, South Philly’s Jetro Cash & Carry. “They bring their friends and family along, and all of a sudden everyone knows what base rate they’re paying for their goods — and they don’t understand why they have to pay more.”

There’s a lot to learn for businesspeople who have been operating informally for years in Philadelphia. One ROSCA member, Keita Lassina, an Ivorian mechanic and owner of BB Auto Repair on Chester Avenue, has been in business for eight years without ever taking out a formal loan. He hopes to build credit so that he can purchase new car lifts, which would allow him to hire more workers. Others, like Martha Banks, a native of Liberia who’s planning to open a food truck selling barbecue, face even greater challenges being unable to read or write.

“Our legal system is very complex — you need to understand taxes, you need to buy licenses,” says Leslie Benoliel, executive director of Entrepreneur Works, which is working to set up its own ROSCA. “There is an informal economy in this country, but if you want to grow your business, you have to understand what it is to exist in a more formal way.”

Hawa Sheriff, who owns Habibah’s Place, a purveyor of groceries and Islamic and African clothing on Elmwood Avenue, is a case study in the frustrations facing entrepreneurs who don’t understand regulations. Sheriff opened her store in June and was shut down in November; the Department of Licenses & Inspections told her she would need to install three sinks, because the shop sells food.

She’s borrowing $1,000 from the ROSCA and hopes to save another $4,000 from her job working nights as a nursing care provider to make the upgrades.

Still, as complex as doing business in Philly may be, for ROSCA members the most exciting part remains getting their checks.

Al-Mamy Diaby, a Woodland Avenue grocer, seems incredulous when asked why he joined Finanta’s lending circle.

“It’s a susu,” he shrugged. “Everybody like it. That’s all.”