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In Pakistan, Savings Circles Beat Banks

Ballot committees force citizens to save, but pay no interest
Tahira Bibi and child with her new microwave oven
Tahira Bibi and child with her new microwave ovenPhotograph by Asim Hafeez for Bloomberg Businessweek

Ali has been selling wall clocks and wristwatches in a crowded Karachi market for 15 years. He’s been participating in savings circles with fellow shopkeepers for just as long, and has used the proceeds to buy a car and acquire a new store.

Now he’s a few months away from getting 400,000 rupees ($4,100) from a savings group of 16 shopkeepers into which he’s been paying 1,000 rupees a day for almost a year. He plans to put a down payment on an apartment. “This system is flawless,” says Ali, 35, who goes by one name. “You can never save this way without this binding commitment of making payments every day or every month. At banks there are hassles and procedures that waste time. This is simple. The organizer comes to collect the money himself, and because of the trust element, it’s a given that we’ll get the money.”