Pardner clubs – the original P2P lender

Nomusa Okorie, Marketing Executive at Plend, explains the concept of Pardner Clubs in the black community – celebrating them as the original peer to peer lenders, and exploring why they’re still used today.

Diversity and inclusion has long been a problem in formal lending in the UK. Since the early 1930s, the Windrush Generation experienced discrimination from banks – low paid jobs, no credit records and institutional racism meant the banks wouldn’t allow them to open accounts or take out loans and mortgages, which meant they had no opportunity to build up a formal credit record.

Credit: Howard Grey

The Caribbean community introduced Pardner Saving Clubs (a concept from their home country) which allowed people to help each other progress and settle into the UK. The first recorded Pardner Club in the UK was in 1962 by 10 Caribbean migrants from the same Baptist church; however, the Windrush Generation first arrived in the UK around 1948 which means that the Pardner Clubs likely started much earlier.

A Pardner Savings Club is an informal loan process that sees each member pay a fixed amount every week or month to the ‘head’ of the club. Every month one member of the club is given the amount collected, and this is then continued throughout the year until everyone has had their turn.

The average amount added to the pot each month is £100 per member – usually at least twelve – although some similar arrangements can go as high as forty members (a smaller number of members usually means a larger monthly contribution to the pot).

Pardner Clubs played a big role in the black community as they allowed the Caribbean and African clubs to purchase housing, cars or even start businesses – bridging the wealth gap and allowing more black people to climb the social ladder in the UK. It allowed people who had no credit record to borrow money from peers to help them build their lives in a new country.
The Pardner Clubs are the original peer-to-peer lenders – like an informal credit union. They have allowed people for years to support each other financially and build generational wealth, making sure that each club member could achieve their financial goals.

As you may have assumed, when joining a Pardner Club, a large degree of trust is needed. Many join a Pardner Club set up by family members, friends or work colleagues (although it is not a requirement and clubs often involve a couple of members outside of family or friendship groups.) In an article for Financial Times in 2018, Emma Agyemang wrote that some of the black women she met at a business conference trusted community, self-help money initiatives over formal bank savings or loans.

The real question is why do Pardner Clubs still exist today even though banks are supposed to be fairer than they were 50 years ago?

I spoke to a friend of the family who still uses a Pardner Club to understand why. “The reason why Pardners still exist,” she said, “is because they cut out the middleman so it is easier to access money. The Pardners I have been involved with are usually family-based and have few people involved – so there is more trust.

The Pardner Club is managed by one person who is called the Pardner. I ran one myself a few years ago. It’s an interest free savings account. We take turns each month. So each month one person gets the money and this is done until everyone has benefited from it.”

According to Eric Collins at Sifted, black businesses are 14% more likely to be rejected for a business loan, and 36% of black businesses receive a higher interest rate than white business owners. It’s little surprise that the black community feels like the tried and tested method of the Pardner Clubs gives both a lower interest and the certainty of being accepted for the loan.
Pardner’s also provide something a bank loan can’t – human interaction. Being part of a Pardner Club means you are part of a group of people who may have similar reasons for saving or lending money – building a financial community that doesn’t just lend money to each other, but practically gives advice on how to invest it too.

The fact that informal lending arrangements like the Pardner Clubs are still prevalent in the UK today shows that the mainstream lending system isn’t fit for purpose. Informal arrangements fill the gaps that formal lending can’t, or won’t, and while they’re resourceful, useful and empowering, it’s a sad indictment of formal lending in the 21st century that they’re still needed.
Clearly the banking and lending sector has work to do in the bias of its lending criteria – as shown by the stats from Eric Collins’ Sifted article. Bank loans rely heavily on credit bureau data, which in turn is informed by ONS stats on salary and lifestyles that are dictated by broad address averages – a kind of lending postcode lottery.

But it also needs to rebuild trust with the black community in the UK, and make real outreach efforts to show it is changing to be an inclusive, empowering industry for everyone, not just the few. Without it, informal arrangements like the Pardner Clubs will continue to feel like a safer, lower interest arrangement than the official alternatives – leaving many in the black community without legal protections in their lending frameworks.

By Nomusa Okorie, Marketing Executive, Plend