Paluwagan

[lastlid]

I am forever discovering something new about the Philippines. Paluwagan was explained to me today. I thought at first it was like the old pyramid scheme but evidently not. I discovered my wife's mom runs one....

"Pooled money scheme (or locally termed as: “Paluwagan”)


Paluwagan is the local concept of mutual fund. But this “fund” doesn’t go directly to a broker. In Fact, this system has been so popular in the Philippines especially in the rural region. Informal settlers are also fond of this kind of practice because this is where they can get the fund to buy the appliances they wanted.
The concept of Paluwagan is to pool the participants money, by means of daily, weekly, or even monthly collections to be collected by a leader (sometimes called Aling or Manong). The participants will be having a “bunutan” (casting lots) to know who will receive the total pooled money. And believe me, this is a “fiesta” if one gets to be the first! Others would prefer to choose not to be the first and not to be the last, but rather somewhere in the middle.
There are other ways on how paluwagan system works. It’s up to the participants on how they should plan on what kind of rotation they will implement. But the bottom line is that they don’t have to hunt for a Bombay to borrow money because they can borrow the fund in the paluwagan. This is one advantage of being in this local practice."

[Terpe]

Haha. I have lots of stories about paluwagan here in UK.
Some not so pleasant :NoNo:

[lastlid]

Haha. I have lots of stories about paluwagan here in UK.
Some not so pleasant :NoNo:

Ah, I havent really heard of it before......until now. Must have lived a sheltered life....

[raynaputi]

We always do that (me and my officemates)..someone's collecting money every week or every payday..hahaha..:icon_lol: we pay P500 every payday and then the first one on the list would get all the money..we're usually around 10 persons who do that so one would usually get P5000 every payday. :xxgrinning--00xx3:

[lastlid]

We always do that (me and my officemates)..someone's collecting money every week or every payday..hahaha..:icon_lol: we pay P500 every payday and then the first one on the list would get all the money..we're usually around 10 persons who do that so one would usually get P5000 every payday. :xxgrinning--00xx3:

That sounds like it. And my wife says they did them at college too..with smaller sums of money.

[raynaputi]

That sounds like it. And my wife says they did them at college too..with smaller sums of money.

yeah same with me back then..but when I was in college, all of us would get our total potluck money all at once..that made me saved my money...hahaha :xxgrinning--00xx3:

[Jamesey]

My wife explained it to me a while ago.

But I just don't get it. Why bother going into an arrangement with a group of people? If you know them, the risks may be low, but still higher than opening a savings account with a bank.

[lastlid]

My wife explained it to me a while ago.

But I just don't get it. Why bother going into an arrangement with a group of people? If you know them, the risks may be low, but still higher than opening a savings account with a bank.

In the document in the link it suggests that it forces you to save.........the wife says it only works if you know the others in the "club" well or you are all relatives....

[raynaputi]

My wife explained it to me a while ago.

But I just don't get it. Why bother going into an arrangement with a group of people? If you know them, the risks may be low, but still higher than opening a savings account with a bank.

Lots of people in the Philippines doesn't have bank accounts..and this paluwagan forces everyone to regularly give money for their "money pot" which would eventually give them a big amount in the end. I have a bank account in the Philippines and honestly I can't put money in it regularly because I'm not obliged to..but with paluwagan, someone would constantly collect money and it's a requirement that you give the amount..hahaha..well just join in that club if you know all the members though..I used to do it with my teammates at work and group of friends in college..works fine for me coz it did help me save..:D

[Dakila]

How does the interest in the paluwagan work?

So is it any different if you saved say 12x 100 pesos and get 1200 pesos at the end of the year, or join a paluwagan and chip in 100 pesos per month and get 1200 at the end of the year (or whenever your name gets picked)...

Sorry I have heard of this before, in fact there was a popular one in our neighborhood in Manila, but I don't seem to get the point? (except of course if the person does not have a bank account..)

Thanks,
Daks

[raynaputi]

There's no really interest for this..you just get the total amount of whatever you've put in..although I've joined one paluwagan in my previous work were we allow someone (even outside the members of the list) to borrow from our money pot and put interest on the borrowed money..so in the end we gained extra money more than we've put in total..there are different ways to do this paluwagan..it's up to the group members how they would gain from this.

[lastlid]

How does the interest in the paluwagan work?

So is it any different if you saved say 12x 100 pesos and get 1200 pesos at the end of the year, or join a paluwagan and chip in 100 pesos per month and get 1200 at the end of the year (or whenever your name gets picked)...

Sorry I have heard of this before, in fact there was a popular one in our neighborhood in Manila, but I don't seem to get the point? (except of course if the person does not have a bank account..)

Thanks,
Daks

From what my wife said, there is no interest. Just a way of forcing yourself to save as part of a group. Gives one an incentive not to spend it immediately you get it. She explained that in her mother's group, people elect a month when they get a payout....it could be December for Xmas or in a month when you intend to go on vacation or to save for the special present that you mean to get someone.......from what she says it can work but I can also see how it can fail......that's why it depends on the group that you are a part of................apparently....

[Dakila]

Thanks lastlid and raynaputi for the explanation :)