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Ayuuto: An African Microfinancing tradition


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When a baby is born, it is as a matter of life and death for it to have instant supply of food whether in the form of the mother’s milk or any other suitable substitute for the baby to not only stay alive but to grow and be healthy. 

Likewise, not only do humans have needs that are multiplying exponentially, evolving continually, and diverging widely from person to person but there are also wants to arise out of the intrinsic nature of human life. Luxuries of yesteryears have become necessities of today. The desire for comfort and ease of life have piqued the curiosity of human beings which have led to the inventions and discoveries we see today which were hitherto unknown to humans.

The desire to satisfy the material demands keeps on increasing, so do the desire to have the wealth required to realise that. In the struggle for the acquisition of wealth, there are wide disparities between people. Though a minority, some people, just by virtue of their status in the society or by some entrepreneurial gifts they are born with or through acquired knowledge and skills, become wealthy. Today, this small minority own large multinational corporations, financial institutions and thereby wield overwhelming economic power. The lavish life they enjoy at the expense of others is beyond imaginable. This minority group not only do they control the life of the less fortunate majority but even determine their financial destinies.

However, history bears testimony to the fact that societies are never without people who feel the urge to break free from this financial chokehold. Thus, they come up with their own ideas and try different ways to acquire wealth and micro-manage their socio-economic life and have full control over their financial autonomy.

For brevity’s sake, this article will cite an age-old funding scheme which Somalis adopted which is known in Somalia as Ayuuto according to Southern Somali dialects or Hagbad according to Northern Somali Dialects. It does have some common features of the Chit Fund Schemes existing in India but enjoys more flexibility.

This scheme is adopted by the poor in the society, and it has been quite instrumental in the establishment of many small businesses. The owners of such businesses have found this scheme best suited to become a decent source of income for the less privileged households. And with the emergence of the banking system, this alternative source of savings and investments have become more prevalent among the poor and enabled them to completely dispense with the interest-bearing loans offered by the conventional banks. The money collected under this scheme has given the beneficiary what it takes to circumvent the conventional banking system and its demand for collaterals and the rigorous financial background or credit worthiness checks and never to worry about the compounding interest rates charged for such loans. 

According to this scheme, the participating members (acquaintances, relatives, friends, workmates, neighbours) pool their money into one pot with agreed-upon amount to be paid by each member on monthly instalments. With the first such collection, a lucky draw is made to choose the first recipient for the amount collected. The monthly contribution by all members continues till the last person receives their share. The cycle is repeated if the participants agree to continue for another term either with the same number of participants or in some cases new members get recruited into the scheme to increase the amount in the pot.

Members are free to use their money in any way they see fit from holidaymaking to paying educational fees to buying new things to covering wedding expenses and so on and so forth. With this scheme, many low-income families have managed to pay for their children’s university education.

However, the money given to the recipient is mainly used for either new small business start-ups, or to reinvest in an already existing one. Countless businesses have been established in Somalia through this scheme, which in the last few decades also got replicated by the Somali diaspora living in the West. Many big businesses owned by Somali communities in the West were made possible by none other than this scheme without taking resorting to any outside help be it from conventional banks or other financial institutions.

The inexhaustible ingenuity and the formidable will quite characteristic of humans always brings to the fore qualities which sometimes defy logic, bearing ample testimony to the famous saying, “where there is will, there is a way.”

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