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Can someone explain to me that "pool of money" thingy?

WillyBaldy
#1
I'm sorry if my questions seems vague but it's very hard to explain. I came across many Vietnamese who told me they lost a lot of money by being betrayed by "friends" in some type of pool. My Vietnamese-Canadian friend tried to explain to me. It's something like you're in a pool of money with people, each of them have to pay some interest every now and then, but it has "good potential" and the money can grow over time... but my friend told me all it takes is one person to leave with all the cash and you lose all. Since gambling is very taboo in Vietnamese culture, and even though this is not strictly speaking gambling I have the feeling many people do this here but they won't talk about it.

Anyone knows what I'm talking about and could clearly shed the light of what scheme this is? My girlfriend currently has some money in this and I would like to understand fully before I scold her  :D
See also
THIGV
#2
In other Asian cultures this is called tanamoshi.  If I had to guess I would say that the term is Japanese in origin but the word is used by both Koreans and Vietnamese in Hawaii as well as by Japanese.  It could be described as a sort of poor people's bank.

Let's say that there are 10 participants who each put in $500 each month.  The pool is $5000 and any of the group may bid to borrow the money, usually to start a small business.  Higher interest bid means a better chance to be the borrower.  Usually the loans are interest only.  The next month there is a new pool.   All ten must put up the $500, which is a sort of principal repayment for the first bidder,  but only the remaining nine may bid.  In the mean time the interest paid is added to the pot.  The cycle continues until all have had access to the pot.  One strategy, if you don't need to borrow the money, is to wait until the end and you may borrow interest free as you are the only bidder.  I am not sure how it all works in the end but everyone theoretically gets all of their principal ($500 over ten months = $5000) when they take a loan as well as their portion of the interest taken in.  Also the organizer takes a cut but I can't say how much that is.

The danger, as you alluded to, is if someone leaves town with the money.  This is particularly a problem in Hawaii because people can disappear to the US mainland fairly easily.  I would think in Vietnam where every one is in a hộ khẩu Red Book it is less likely.  If you disappear, you still have relatives who may be shamed into paying your bad debts.   There may be variations to the system in Vietnam compared to other Asian cultures but the basic idea is the same.
WillyBaldy
#3
Man you're my hero. This is exactly what I was asking about. I have read your text quickly but will re-read.  I will be better equipped to handle what's to come. I'm supposed to buy a motorbike with her, 25 millions each, and that's where she's going to get her part of the money from. I'm not sure I like the idea.
THIGV
#4
I should have specified that I have never participated in a tanamoshi but only had it explained to me second hand.  Please don't hold my feet to the fire if I got some of the details wrong.    :sick   Otherwise glad to help.

Up to you but my experience is that there is no way to tell a Vietnamese woman how to manage her own money.  They can carry a load of numbers around in their heads and can usually tell you which markets have the best prices for which items.  In the same way, they also can probably tell who has taken money out of the pool and exactly how much interest they have paid.  If It's her money and not yours that she is putting in, better to just let her go.
WillyBaldy
#5
What happens in your example when one month no one needs to borrow the money. The pool will then have $10,000 instead of $5,000 available to the next borrower? Also, do you have to borrow the full amount of the pool or you can simply borrow part of it? What if no one ever borrows from the pool?
WillyBaldy
#6

THIGV wrote:

I should have specified that I have never participated in a tanamoshi but only had it explained to me second hand.  Please don't hold my feet to the fire if I got some of the details wrong.    :sick   Otherwise glad to help.


Well I just wanted to get an overall idea, I will probably ask her in details, every cent and amounts and so on. I'm a very precise, meticulous person especially when it comes to money.

Ciambella
#7
It's called hụi in the South and họ or hội in the North.  THIGV has already given a great explanation (90% correct) so I'm only expounding a bit to clarify the other 10%.  Since I'm living in the South, I'll use the term hụi.

The organizer is chủ hụi (chủ: owner, chief).  The more members, the better the collection for everyone.

On the first month, everyone pays her share into the pot.  Let's say the share is 5M and there are 11 members and 1 chủ hụi.  The collection on the first month would be 60M, untouched.

Starting on the 2nd month, any member who wants to hốt hụi (hốt: collect, sweep up) would submit a bid stating how much interest she's willing to pay to other members (IOW, how much she's willing to lose, as the interest is taken out of her collection).  The highest bid wins. 

If the highest bid is 5K, 11 members will pay 4.5M into the pot for that month instead of 5M.  The winner will collect:  5M x 11 members = 49.5M + her own share of 5M = 54.5M. 

The original 60M stays untouched.

You can see that the person who hốt hụi the earliest is the one who loses the most money.  While the other 11 members earn 5K of interest that month, she loses 5.5M.  Not only that, she must pay the full 5M into the pot every month afterwards as the interest on subsequent bids do not apply to her. 

You can also see that for each month passed, the pot becomes bigger because the number of members who pays the share minus interest is decreased and the number of members who pays the full share is increased.

The same scenario repeats itself every month until the last month.  The interest which the members who do not need to hốt hụi earn each month varies depending on the bid.

On the last month, no one pays her share because the original 60M is used for the last pot.  The last member standing collects the entire 60M while earning interest on the previous 10 months (first and last month do not count).

To answer your question of what would happen if/when no one bids on a certain month.  Rarely ever that happened, but if it did, the understanding is that chủ hụi must hốt hụi even if she didn't want to do so.  She would receive a compensation, however, by not having to pay interest to the other members since she didn't bid on the pot.

To the question of the possibility of collecting half the pot, the answer is no.  No way, no chance, no how.
THIGV
#8
I noticed that Ciambella chose to use the feminine pronoun.  From my observation, this is almost exclusively a feminine enterprise form.  Perhaps this is based on the fact that females did not traditionally have access to banks, in Asia or elsewhere.  Many international aid agencies are adopting a policy of mini-loans for women to start small village businesses in developing countries.  This tradition apparently serves a similar purpose.
Ciambella
#9

THIGV wrote:

I noticed that Ciambella chose to use the feminine pronoun.  From my observation, this is almost exclusively a feminine enterprise form.  Perhaps this is based on the fact that females did not traditionally have access to banks, in Asia or elsewhere.


Very true.  Hụi has been around forever, or at least almost 200 years AFAIK, since my father's time (he was born in 1902).  He told me his mother had always chơi họ (I'm switching to Northern dialect now as that's our family roots).  It's the most traditional saving account for people who didn't have a chunk of money to put in the bank.  The members are mostly women because they use leftover household money to pay their share monthly (or weekly).  With trusted organizers and trusted members, it's a great way to save money or having access to immediate funds.

WillyBaldy
#10
Thank you my dear friends. I showed Ciambella's post to my girlfriend, she doesn't speak English but agreed with the Vietnamese words, that's exactly what she's doing. What's kind of "funny" is that she always says "no" when I say she makes money from other people's interest payments, but it seems to be exactly what it is, and there's nothing wrong with that.

From the wording of Ciambella, it seems to be a relatively safe system. I still don't like a system that's not protected under the law but I guess it's cultural, it's just something I'm not used to.
WillyBaldy
#11
One more question: how is a person who don't pay her share dealt with? I'm guessing you can't really go to the police, so is public shaming enough? I'm also guessing you don't send someone to break women's legs in Vietnam :D
Darwin123
#12
I know it a bit different then Ciambella, but my friend is Thai.

They do a circle for example for a year with 10 people. Every month they put 200 Eur. There is a minimum "interest" of 10% per month (based on the input). If noone wants the money it's random, but someone gets the money. Surprisingly, someone always wants it.
After they took it, they pay 220 (or more) until the end of the circle. In the end, they distribute it (I think equally).
Ciambella
#13

WillyBaldy wrote:

she always says "no" when I say she makes money from other people's interest payments, but it seems to be exactly what it is, and there's nothing wrong with that.

From the wording of Ciambella, it seems to be a relatively safe system. I still don't like a system that's not protected under the law but I guess it's cultural, it's just something I'm not used to.


You could say your gf makes money on other people's interest payments.  OTOH, she could say that the person who wants to hốt hụi pays a compensation to the other members in exchange for using the pot (everybody's share) that month.  It's a much fairer system than banking. 

In banking, the bank decides on the interest while the account holders have no voice.  With hụi, the person who needs the pot decides how much she wants to pay for the privilege.  She has the power albeit one that is constrained by her own circumstances that month.

In banking, the borrower pays interest for the life of the loan.  With hụi, she pays the same principal every month after collecting the pot.  The only interest she pays is on that one month, and she has the options to choose the month.  The longer she waits, the less interest she has to pay.   

If everything being equalled (meaning everyone involved is honest and trustworthy), I would say hụi is the bank of the people, by the people, and for the people while commercial banks are definitely not of, by, or for anyone but the bank owners and rich shareholders.

WillyBaldy wrote:

how is a person who don't pay her share dealt with? I'm guessing you can't really go to the police, so is public shaming enough?


Public shaming is not that important anymore unless one lives in a small town.  But yes, even though the law doesn't really protect hụi system, you can go to the police to complaint about a person who doesn't pay her share after she already hốt hụi, or to sue a chủ hụi who giựt hụi (giựt: steal, snatch). 

Decree 144/2006 / ND-CP regulates on Họ, Hụi, Biêu, Phường (all terms that describe more or less the same system) indicated that  "In the event of a dispute that cannot be resolved by negotiation or conciliation, and at the request of one or more participants, such dispute shall be settled at the Court according to regulations and the law for civil matters."

How well the theory works IRL, I don't know.

Ciambella
#14
To protect herself, a member of a dây hụi (dây: thread, rope, chain) should only works with a highly reliable chủ hụi.  She should look at all aspects of chủ hụi's life such as reputation, social standing, personality, family's finance history, and social behaviours.

She should know well, or if possible, have a hand in choosing other members.  Find out the source of their income and the level of their obligations.

Dây hụi must have a clear record wth full, accurate and detailed information on the members and how the hụi would process.  Every member should have an agreement on the procedures, payment cycle, amount of payment, form of payment, chủ hụi's responsibility, the rights and obligations of the members, and how dispute would be handled.  In short, the agreement should be similar to a loan contract in which members are both lenders and borrowers.

These are very important evidences that will serve as a basis for the Court to consider and settle disputes.
Ciambella
#15
A new friend of mine here in VT has been making a good living since her separation from her husband 10+ years ago by being chủ hụi or a member of several dây hụi.   She does that full time and the interest makes up half of her monthly income. 

My mother and sisters all involved in họ at one point or another in their lives.  Myself, I've never done that as I only believed in stock market to augment my assets back in the day when money and material items still held important role in my life.  Without personal experience, I cannot strongly recommend nor can I be adamantly against chơi hụi.  But, as you acknowledged, "it's cultural, it's just something I'm not used to" and as THIGV spoke of his experience,  "there is no way to tell a Vietnamese woman how to manage her own money" (or the money you entrust her to manage), I think I would go with it if I were in your shoes.  However, I would insist that my SO exercises caution.  Investigate well to minimize risks is always the best policy no matter which method one uses to save and invest.
vndreamer
#16
FWIW - my wife was explaining this to me last month because her cousin was the ring leader in one of these arrangements one of them ran off with the pot.  Her cousin ended up losing her real job over it because she convinced some co-workers to participate.  Based on my understanding, it is a way to get a loan for people who don't want to use or do not have access to traditional loans via a bank and probably safer than borrowing from your local loan shark.
WillyBaldy
#17

Ciambella wrote:

Without personal experience, I cannot strongly recommend nor can I be adamantly against chơi hụi


Thanks for all that information on the subject. I had a good talk about this with my girlfriend earlier. It's interesting because although it seems to be very common, she did not tell her parents she was doing this, so I'm guessing there's still some sort of stigma about this system in some families. I did not ask her to stop doing this but told her I still thought it was relatively risky, especially since she lost a big chunk of money a few years back loaning some money to a friend who disappeared. She said she'd stop doing this once she gets her share in June, but it's really up to her as I'm not trying to control her, I'm just trying to warn her about the potential danger.

By the way her "pool" has something like 80 people, and they all pay 300K every week. Seems to be huge!

WillyBaldy
#18

vndreamer wrote:

FWIW - my wife was explaining this to me last month because her cousin was the ring leader in one of these arrangements one of them ran off with the pot.  Her cousin ended up losing her real job over it because she convinced some co-workers to participate.  Based on my understanding, it is a way to get a loan for people who don't want to use or do not have access to traditional loans via a bank and probably safer than borrowing from your local loan shark.


There seems to be a lot of responsibility being the hủ hụi, I could never put up with all the pressure of having to handle so many people.

G
#19
Willy.
I have been following the posts on this subject and I have to say that just about all that has been written has a high degree of accuracy, albeit that none of it is entirely true as there are so many variations as you would expect from an unregulated loan system. My wife comes from a large family based in Tra Vinh, most of whom have managed to move in with us at one point or another for a month and stayed for several years,  with so many related females I cannot even remember all their names despite living with my wife for the best part of the last 6yrs ( only recently married but that's another story ) All the women seem to be involved in one way or another with this loan system which is incredibly commonplace if not talked about. It is a very relaxed non banking system that in general seems to work and rarely gives cause for concern. However, despite being CEO of a large group of research companies prior to my retirement I have to admit I still can't get my head around how the system is able to function with what appears to be so little formality or risk. There will always be cheats of course as in every walk of life including banks, but this loan system seems to be pretty secure. I guess the only advice I can give is that as long as no large sums are involved it would be best to let your girlfriend do as she she's fit. Interfering with female finances here can only lead to conflict. My wife will travel several km to a market that has a cheaper item with no regard for the amount of fuel used to get there thus negating the gains. Just the way it is.
THIGV
#20

Supafish wrote:

I guess the only advice I can give is that as long as no large sums are involved it would be best to let your girlfriend do as she she's fit. Interfering with female finances here can only lead to conflict. My wife will travel several km to a market that has a cheaper item with no regard for the amount of fuel used to get there thus negating the gains. Just the way it is.


I can't agree enough.  See my #4 above.

G
#21
I think the reason Vietnamese men are not involved in this loan thing, and no offence intended, is because most seem to view their wives as surrogate mothers with the added bonus of being able to sleep with them. Handing over daily finances to my wife was certainly not easy but over the years have learned that Vietnamese women are in general incredibly adept at managing the household budget and where they put the money. albeit on occasions entirely illogical. Maybe male expats should have their own informal banking system ? Maybe not . ..  We are too formalised, none trusting and experts in our own fields re investment etc. I think we would build our portfolio to a point where the authorities would get involved. Better let our women do it :-))
WillyBaldy
#22

Supafish wrote:

I think the reason Vietnamese men are not involved in this loan thing, and no offence intended, is because most seem to view their wives as surrogate mothers with the added bonus of being able to sleep with them. Handing over daily finances to my wife was certainly not easy but over the years have learned that Vietnamese women are in general incredibly adept at managing the household budget and where they put the money. albeit on occasions entirely illogical. Maybe male expats should have their own informal banking system ? Maybe not . ..  We are too formalised, none trusting and experts in our own fields re investment etc. I think we would build our portfolio to a point where the authorities would get involved. Better let our women do it :-))


I get your point and you're probably right for a lot of cases but when it comes to myself it's a bit different. I've always been in total control of my finance and always scrutinised everything I did with money. I'll check all of my credit card transactions every few days, check my bank account a few times a week and I'm also trading quite a bit on the stock market. I've got a good knowledge of finance in general so it's way too deeply anchored in myself as to be able to just let my other half do "stuff" with my money. We all got our limits, and having control over my finances is something I'll bring to the grave, for better or worse. My money ought to be protected by law. That's one thing she would have to accept, as there's many things from her side I'll need to accept too.

That being said, I'm not someone who likes or try to control my better half. She can handle her money the way she sees fit, as long as she takes responsibility for her actions. If we had a common bank account, I guess the "problem" would need to be handled one way or another. I also find the fact that she's willing to put *all* of her savings into a new motorbike a bit extreme, but it's definitely her choice.

G
#23
I think you will need a period of adjustment. Vietnam is a different ball game. Good luck.
WillyBaldy
#24

Supafish wrote:

I think you will need a period of adjustment. Vietnam is a different ball game. Good luck.


Well, having been married to a Vietnamese woman from Saigon before, I think I've been through lots of adjustments already :lol:

G
#25
Lol.
2nd attempt ?
Sounds like you are still going through the learning process. As stated, Good Luck.
WillyBaldy
#26

Supafish wrote:

Lol.
2nd attempt ?
Sounds like you are still going through the learning process. As stated, Good Luck.


There's no right or wrong when it comes to relationships, because we're all different. I'm not sure what is your point about this "learning process" but if it's about the idea that you need to let a Vietnamese woman handle the finance or else, that's quite a limited view and very generalised. A lot of Vietnamese women are quite happy to let their Western husband handle finances, as long as they feel safe. That being said, I'm always learning and always will.

G
#27
I handle our finances, I don't control it, but more or less guide my wife who has no idea about these matters. I would never let someone take full control over my money, that to me is just asking for trouble.
G
#28
Who said anything about letting the wife or anyone else take full control of finances ?
The thread was about the women's loan schemes which they are perfectly able to manage without the husbands interference. Western men have such a self opinionated and entirely unjustified image of themselves. We are not in Brussels, London or New York. Viet women are far from stupid. I would never let my wife run 6 research companies of course, not because she would not be capable but because she hasn't acquired the skills needed. But as for life in her own country she is perfectly capable of managing day to day affairs without my interference, and better at it too.
WillyBaldy
#29
The thread was about understanding the scheme, not about passing judgement on "men interfering with Vietnamese women". She lost USD$20K before because she was a bit naive so being overcautious in her case might be understandable. You seem to be on a judgemental streak, keep on going I'll get some popcorns.
G
#30

Supafish wrote:

Who said anything about letting the wife or anyone else take full control of finances ?
The thread was about the women's loan schemes which they are perfectly able to manage without the husbands interference. Western men have such a self opinionated and entirely unjustified image of themselves. We are not in Brussels, London or New York. Viet women are far from stupid. I would never let my wife run 6 research companies of course, not because she would not be capable but because she hasn't acquired the skills needed. But as for life in her own country she is perfectly capable of managing day to day affairs without my interference, and better at it too.


Who said I was talking to you.
I posted under the person I was replying to.

I also didnt ask for your advice, as you would put it.

G
#31
OK children.
WillyBaldy
#32
So you're actually a troll, you *did* fool me for a minute.
G
#33

WillyBaldy wrote:

So you're actually a troll, you *did* fool me for a minute.


That was short lived, he has gone to Guestposter.

WillyBaldy
#34

colinoscapee wrote:
WillyBaldy wrote:

So you're actually a troll, you *did* fool me for a minute.


That was short lived, he has gone to Guestposter.


I'm somewhat saddened, his display of self righteousness and condescension was a bit entertaining if not somewhat annoying  :lol:

Wxx3
#35

WillyBaldy wrote:
Ciambella wrote:

Without personal experience, I cannot strongly recommend nor can I be adamantly against chơi hụi


Thanks for all that information on the subject. I had a good talk about this with my girlfriend earlier. It's interesting because although it seems to be very common, she did not tell her parents she was doing this, so I'm guessing there's still some sort of stigma about this system in some families. I did not ask her to stop doing this but told her I still thought it was relatively risky, especially since she lost a big chunk of money a few years back loaning some money to a friend who disappeared. She said she'd stop doing this once she gets her share in June, but it's really up to her as I'm not trying to control her, I'm just trying to warn her about the potential danger.

By the way her "pool" has something like 80 people, and they all pay 300K every week. Seems to be huge!


Not telling her parents would be a big red flag for me.
Maybe because they would not think 50M for a motorbike is a good idea??

WillyBaldy
#36

Wxx3 wrote:

Not telling her parents would be a big red flag for me.
Maybe because they would not think 50M for a motorbike is a good idea??


Well, she did not tell her parents about the pool she's in, it seems they would not agree with her doing this. As for the motorbike, it's actually 72M with taxes but I'm not sure they would mind. A motorbike and a smartphone seem to be the two things many Vietnamese don't put any limits on, no matter the cost  :D

TanRay
#37
There are variations in these pool thingy.  If one person bid (per your example) $50, then the 9 members pays him only $450 each. The next month if someone bids only $10, then the balance 9 pays $490. So in the first case the bidder gets (450x9) $4050, and the second case the bidder gets (490x9) $4410. In another scenario if someone bids an amount, the rest pays as per above but subsequent months he/she pays the full $500, until the 10 months is up. There is one person within the pool or outside the pool that is responsible for the collection and gets a commission for it, but you never know what's going to happen.  I've seen both and been invited to join but never trusted them enough to join. It's a risky game to save and make some money.
TanRay
#38
Oh, I must add that it's one way for people who needs cash and have no means of getting it from the banks. It's also a lot cheaper than getting a loan for the loan sharks that charges 300% interest when compounded annually. For some it's a way of saving with "high" interest but with high and unknown risks. To each his/her own. Personally I would not allow my wife to join it if she has to stretch, if it's her spare cash, so be it. Women here are very strong minded and it takes quite a reasoning to get them to change which is why they're so special.
WillyBaldy
#39
Thanks for your feedback @TanRay

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