The informal cash economy

Customers line up outside the Penal branch of Scotiabank to exchange the 'old' $100 dollar bills for 'new' ones. - Lincoln Holder
Customers line up outside the Penal branch of Scotiabank to exchange the 'old' $100 dollar bills for 'new' ones. - Lincoln Holder

The criminal link cannot be denied. Money laundering, counterfeiting, and black market activity – all thrive in systems in which currency controls are weak. To the extent the introduction of new $100 bills gives the State a greater chance to combat these scourges, the bills should be welcomed. However, when it comes to the timeline of implementation, let’s also be mindful of the social and historical nuances that surround the use of cash in this country.

Having large wads of cash itself should not be taken as proof positive of nefarious conduct. While a high burden of proof on the individual may be a useful protective measure to discourage wrong-doing and aid law enforcement, there’s also a cost to be borne by completely ignoring the factors that have shaped the informal business environment.

A good example, perhaps, is the situation faced by immigrants from Venezuela. Venezuelans who have sought to establish legitimate streams of income to fund remittances back to Caracas might encounter challenges when it comes to interacting with the local banking system. Language barriers, difficulty demonstrating a permanent address, the problem of proving sources of income, the overall need for greater flexibility, and the matter of banking fees would all tend to push persons to keep cash instead of braving banks. Both Trinidad and Venezuela share a culture in which people turn to cash for various reasons, not only for criminal transactions. Many distrust the banking system.

That should give both bankers and the State – which is charged with regulating financial institutions – cause for self-reflection.

The world is fast becoming a paperless society. Yet some people keep cash at home, not only for ease of access, but to keep a closer eye on savings. Interest is not the only consideration, in their eyes, even if it is what banks profit from.

There’s a debate as to how much cash is appropriate in the hands of one person. One million might be pushing it for a barber, but it’s not entirely unreasonable that someone can save hundreds of thousands at home. The important thing to remember is we are looking at a working underclass of people like vendors, pensioners and farmers who trust beneath the mattress more than they trust the institutions like, for instance, Clico or the Hindu Credit Union.

Further, while it might be hard for some segments of the population to imagine, there are still people who can’t relate to technological advances, point of sale purchases, online banking, and so on. Differing education levels and varying degrees of access explain this.

There is perhaps no better example of the mismatch between local norms and the need for modern reforms than the question of how banks should handle sou sous.

A sou sou is a form of rotating savings and credit, a type of informal savings club. Each member of the group makes a standard contribution to a common fund once per time period. Then each period the total contributions are disbursed to a single member. The recipient rotates until all are recipients are paid. It’s a socially useful arrangement which now falls afoul of the tighter income regulations.

Governments and banks can’t afford to turn a blind eye to the way people adapt and create systems to suit their needs.


"The informal cash economy"

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