Make Arisan Great Again
A gloss over a money saving culture uniquely Indonesian
You’ll be forgiven if you don’t know what “Arisan” is, since as far as Wikipedia is concerned, “Arisan” is an Indonesia-only phenomenon.
It’s some kind of social gathering usually between moms. One of the main component of “Arisan” is a pooling of money by its member. Let’s say you have 10 area moms. Each month (or at any interval of their choosing) they each give IDR 200,000 to the “money pool”, for a total of IDR 2 million. Then they draw lottery with names of the 10 moms in it. Let’s say Mom no. 7 gets picked in the lottery, then the IDR 2 million in the money pool will go to Mom no. 7. But after that, the winning name, Mom no.7’s is taken out of the lottery so the next time they hold an “Arisan”, Mom no. 7 will not win again, giving the chance to the other 9 area moms. Repeat that each month (or at any interval at their choosing) until all 10 area moms had their name taken from the lottery once to complete one cycle. And repeat.
Here is the catch. Mom no. 7, who had already received a winning of IDR 2 million, will still have to commit to paying IDR 200,000 at every gathering during the cycle.
So for every winning of IDR 2 million per one cycle of 10 Arisans, one has to pay out IDR 200,000 for every Arisan held which in this case is 10 times, tallying up to another IDR 2 million. We can conclude an “Arisan” is a zero-sum situation. At the end the loss balances out the gain.
So the question. If in the end it tallies up to zero, why are people still doing it?
I can think of several reasons why people do “Arisan”:
- It can be seen as a form of “saving”. Especially to those who have difficulty holding onto money without spending it. You may have plans to purchase a new phone but is having difficulty cutting back on unnecessary spending.
- The happiness you feel when receiving a relatively large amount of lump sum when your name is withdrawn from the lottery.
Even though you can easily do so by putting your money in the bank. Why not put it in a bank?
“Arisan”, at its core, is a social gathering. The money pool lottery thing is just one (albeit major) aspect of “Arisan”. They gather, chat, sometimes maybe opens up new business opportunities, or just hang out.
Still, the money pool thing is a major part of it and in its current most popular state, is not the best vehicle to put your money in.
When one receives the payout from the money pool early in the cycle, some tend to see this as a “loan”, since they receive the money up front and has to pay for the rest of the cycle. This is generally (somehow) seen as unfavorable. While receiving the payout later, is seen by some as a “saving” since you put your money to where you can’t readily withdraw them, and receive them later. This is generally (somehow) seen as favorable.
But I believe it is actually the opposite that is true. Suppose you receive the payout early from the money pool. If you are familiar with the time value of money, you will understand that it is better to receive a dollar today than a dollar next month.
Over the course of 10 months horizon (assuming that the lottery is played every month for 10 participants), receiving payout in the first month means you have 9 months of opportunity the make the money “grow”, by depositing the payout at any safe investment product. Hence, over the 10 months period, your revenue will be IDR 2 million PLUS any interest you received for putting the payout in an investment product, and expense of exactly IDR 2 million, netting a gain by the amount of the interest.
While the people who receive the payout later, will have much shorter period to “grow” their money assuming they too, put it in the same investment product.
There are other forms of Arisan too. There is an Indonesian company that tries to facilitate “Arisan” electronically (with an App, of course), but the payout is a product, not cash. Some forms of “Arisan” may use product as the payout. Each member pledge what product they wish to buy, and the amount of contribution will be depending on their “weight” relative to the total value of all products desired. But this restricts the growth potential of the payout to the resale value of the product (which almost always go down).
Ultimately, “Arisan” is not a very good place to put your money in if we are thinking in terms of Return of “Investment”. Nonetheless, since at the end “Arisan” is a social gathering, just think of it as spending money to hang out.
