From: mkim@husc3.harvard.edu
Newsgroups: soc.culture.korean
Subject: Re: keh
Date: 17 Apr 92 00:04:57 GMT
Distribution: soc.culture.korean
Organization: Harvard University Science Center

In article <1992Apr13.181151.2302@medtron.medtronic.com>, tp0001@medtronic.COM (Terry Pinotti) writes:
> A KEH is where a specific number of people get together and agree to
> pool funds together in order to help someone that needs some short
> term cash.

The institution of Keh has been around for centuries in Korea.  Peasants
used the system to help each other during difficult times, as well as to
expand their fields and so on.  Several different versions of 
Keh's exist, and this form of revolving credit system is by no means 
unique to Korea.

> 
> 	1) if the group is 24 people the group will meet for 24
> months. If 38 then they meet for 38 months.
> 
> 	2) if the amount needed is $2,400.00, each person will bring
> $100.00 to the meeting. If the lump sum is $9600.00 then each person
> brings $400.00. 
> 
> 	3) an arrangement is agreed upon in advance as to who gets the
> cash for each of the 24 months. Usually those in need get cash first
> and those trying to help get cash last.
> 
> 	4) usually once you get your lump sum you pay a little more
> than the $100.00. Maybe $105.00
> 
> 	5) The extra payments adds up to 23x5=$115.00 for the last
> person to receive the lumpsum.
> 
> 	6) It is more a way of the financially well off helping
> persons in a short term bind. It is probably one of the reasons that
> the Koreans are successfull at small businesses. They help each other
> and avoid the high interest rates the banks charge.
> 
> My ex-wife was involved in several Kehs and this is how it was explained
> to me. No one makes a lot of money but those that help those in need
> gain lots of clout and respect.

Actually, depending on the version of keh you happen to be participating
in, you can make quite a lot of money.  A typical example is the "bidding
Keh," where each individual bids every month for the common pot. I know
it sound's really altuistic to help out your fellow Korean, but I think
without the financial incentive, keh's would have died out a long time ago. 

1) say 30 people are involved, each contributing $1000 a month.  The total
   amount at stake would naturally be $30,000 every month.  

2) each person bids, say $28,000 or $25,000, maybe even $20,000 if you are
   really desperate for cash.  The lowest bidder wins the pot and from
   that point on, for the duration of the keh, he or she must make the
   maxamin payment of $1,000 a month.  The payment for those people who
   have yet to win the keh becomes reduced.  So gradually, if you wait it
   out and not win the keh until the end, your payment may be reduced to
   something like $700 or $600 dollars a month, yet when your turn comes
   up you may win upwards of $29,000 or $30,000.

3) As you can see, depending on the level of bidding, the potential for 
   a handsome profit exists, if you can afford to wait it out and not win
   the keh until the very end.  You may put in $20,000 and get $30,000
   back, depending on how much money your fellow keh members need.

4) This system works to everyone's advantage.  Those people who otherwise
   may have difficulties getting loans at the local banks can get credit,
   while those members of the Korean community who have cash to spend can
   play banker.  Of course, if you are involved in an ill-fated keh, as is
   sometimes the case, you may wind up losing quite a bit of money.  I have
   heard of instances where people could not afford to make their keh
   payments and scooting out of town.  Or the person who organizes the keh
   may decided to take off with the money in which case you are out of luck.

Like I said, there are many different variations on the keh, but I believe
the one I outlined above is fairly common.  The interest rate of some of
these bidding kehs can exceed what you would find at the local banks depending
on the level of bidding.  In fact, in L.A at least, sometimes Korean American
banks organize kehs themselves.  Just thougth I'd add my $.02 worth.


Michael Kim
  


> 
> 
>  
> -- 
>    Terry L. Pinotti       |                          tp0001@medtronic.com
> Pinotti Consulting, Inc.  | What's mine, is mine. It doesn't come from 
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Newsgroups: soc.culture.korean