A Case Study: Korean Kye
Last updated
Last updated
The Korean Kye system plays a significant role in the economic advancement of Korean immigrants in the United States, particularly evident in the 1970s and 1980s. A notable example is the expansion of Korean-owned green grocers in New York City, which grew from 30 stores in 1977 to an impressive 1,300 by 1988.
This growth can be attributed to the Kye system's role in helping new Korean immigrants establish themselves economically.
Typically, an immigrant would start with a low-paying job, earning less than $500 per month. They would then join a Kye group, usually comprising about 12 members, and commit to contributing approximately 40% of their income to the Kye monthly.
This arrangement guarantees that at some point within a 12-month cycle, they would receive a lump sum, potentially as much as $2,400. This sum could then be used to invest in a share of an existing business or start a retail venture, often in partnership with members from another Kye group.
This investment strategy leads to an increase in their income, allowing them to participate in larger Kye groups with bigger payouts. Within a few years, many are able to manage Kye groups with substantial lump sum distributions, enabling them to purchase their own stores without needing to rely on mainstream financial institutions.
The effectiveness of the Kye system is recognized beyond the Korean community. In the United States and Ghana, mainstream banks often view participation in Susu (a system similar to Kye) as a sign of financial responsibility, especially in the absence of a formal credit history.
In India, the equivalent system, known as Chit, is a regulated financial service offered by established institutions. These examples illustrate the impact and acceptance of traditional financial systems like Kye and Susu in modern economies.
