Totally outside of financial institutions. Made on the basis of trust and friendship
The formal economy often appears distant and complex to the majority of the population. However, it is interesting to note that, even without fully understanding traditional financial market concepts, people develop informal financial ventures that exude creativity, resembling, in a certain sense, official investment dynamics.
A notable example is the common practice in northern Brazil, mainly in the state of Pará, known as Caixinha, a type of unofficial financial investment that operates on the fringes of the capital market but enjoys great popularity among locals.
What is it and how does it work?
Caixinha is a contribution paid every month by groups of friends, family or work colleagues, in which participants can carry out actions to increase the group’s income. The process generally involves participants (shareholders) making monthly payments of their shares and contributing each month to events that aim to increase the fund’s collection, such as raffles, trips and parties.
Furthermore, in many of these boxes, participants are encouraged to apply for loans remunerated with a specific interest rate, with the aim of further increasing the company’s income.
Is Caixinha an informal investment fund?
The peculiarity of this model lies in the allocation of money, as the organizer not only collects contributions, but also takes actions to make the money grow, such as organizing raffles, excursions, bake sales, etc.
A curious thing to note is that people try to participate in boxes organized by people with the best track records of profitability and reliability, just as happens with traditional investment fund managers. Depending on the strategies of the organizers, there are boxes that are better and worse than others, just like in the universe of funds, shares and debt securities.
To ensure organized operation, the box administration must have a regulation that establishes operating conditions, such as fee values, payment dates, interest rates on loans, late policies, organization of events and other relevant aspects.
At the end of each year the Little Box is opened and the money is divided into a 14th salary. The organizer receives a percentage for administration, adding an additional layer of incentive for efficient management of the collective fund.
What do the pit crew say?
In local newspapers you can read testimonies from participants such as psychologist Cleide Nascimento, who believes the boxes are an excellent way to save money for end-of-year celebrations, birthday gifts and incidental expenses.
He also underlines the usefulness of having a financial reserve at the end of the year, comparing it to a piggy bank, but with the advantage that the money does not remain idle, as it always undergoes market corrections, even if modest. Another positive point mentioned is that the return on investment occurs with less bureaucracy.
The trader Diva from Belém (PA), in turn, says that she has been organizing a box for many years and this helps people a lot. She also says that there are some boxes that are better than others, depending on the organizer’s strategy. She proudly declares that her parents even fought to get in.
Elder, a 47-year-old civil servant from Belém (PA), said the box is a cultural practice in the city. He mentioned that in Belém it is normal for each company to have a box in each department, and in each street there is a resident responsible for organizing the neighborhood box.
Passive income vs active income
Unlike conventional investments, the box is not limited to investing resources in formal financial instruments. Instead, the organizer looks for creative alternatives to generate income, such as raffles, parties, trips and other activities that can raise additional funds.
This informal approach reflects the adaptability of the system to the needs and characteristics of the local community.
Necessary care
Despite the admiration for this innovative local initiative, it is essential to exercise caution to avoid the activity being considered illegal. Since the participants do not operate in parallel with the financial system, but use the banking system, carrying out transactions via their mobile phones with “fintech” applications, the practice occurs in compliance with the law. But, even though it is an informal activity, participants must treat it seriously.
The biggest challenge lies in determining the interest rate, which in some cases exceeds that charged by the average institution, thus potentially constituting usury, an infringement against the popular economy provided for by law no. 1521/51. It is therefore advisable to align the rate with the average of the main credit lines on the market to avoid legal problems.
Furthermore, it is very important to document all meetings and collect signatures to prevent possible legal disputes, including hiring a lawyer in case of non-payment or other irregularities.
Creativity generates accessibility
In summary, the practice of cash in northern Brazil highlights the ability of communities to develop creative financial solutions suited to their needs, even when they are far from the formalities of the traditional economy. It is interesting to note how the box becomes a sort of economic microcosm, incorporating elements from the official market in a simplified and accessible way.
This unofficial initiative, although it operates outside the capital market, uses similar principles, such as circulating money, seeking returns and even charging interest. The box not only highlights the creativity of local communities, but also raises reflections on the need to make the formal financial system more accessible and understandable to a wider audience.
By understanding informal practices it is possible to see opportunities for integration and development, promoting a more inclusive and equitable relationship between the population and financial services.
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Source: Terra
Rose James is a Gossipify movie and series reviewer known for her in-depth analysis and unique perspective on the latest releases. With a background in film studies, she provides engaging and informative reviews, and keeps readers up to date with industry trends and emerging talents.
