In an article on Coindesk entitled, “What DeFi Can Learn From ‘InFi’,” Leah Callon-Butler of Emfarsis Consulting deep dived into the FIlipino “Paluwagan,” wherein a group of people pool their money for the purpose of saving. This group verbally agrees on the amount to save and each take their turns to collect the pot of cash.
Leah argues that while the goal of the paluwagan is to achieve a financial target, it also represents an opportunity to socialize, network, and build relationships in the community. Of course, it has flaws, like those in the group who refuse to contribute once they already collected their earnings.
The paluwagan system can be paralleled to Decentralized Finance or DeFi, says Leah. DeFi uses the blockchain to provide traditional financial services to its users without any middleman. Services could be savings and even lending. In its very core, “its decentralized nature means it is an open, peer-to-peer solution that is controlled by the community rather than a centralized authority,” she said.
A number of DeFi products have resembled the paluwagan system. One of them, “PoolTogether” incentivizes users to pool their cash for a set period. “At the end of the term, everyone gets their money back, plus one lucky punter wins the interest earned on the fund during the lockup,” Leah said. However, she warned of what’s at stake:
“However, with our poorest communities still unable to secure some of the most basic requirements such as electricity, internet connectivity and smartphone penetration, a paluwagan, or maybe, a triple-locked box, is still the best bet for most.”