WHY NOT DO WITHOUT BANKS ?
The banking crisis has come back with a vengeance. The combination of plummeting interest rates and the lending clampdown brought about by the credit crunch made the access to the capital a real struggle. Are banks reluctant to lend money? Why not do without them?
Specialised NGOs and associations are sidestepping banks by creating a marketplace where people lend to and borrow money from each other.
Zopa, an international social lending website that brings lenders and borrowers together on agreed rates, seems to be an appealing alternative to banks. Many borrowers can obtain loans at low rates cutting out banks from the process, while lenders enjoy an average annual return of 8.4%.
“It's a smarter, fairer and altogether more human way of managing your money, where both borrowers and lenders get better rates. The business grew rapidly in the second half of last year as bank lending prices rocketed while savings returns tumbled,” says a spokesperson from Zopa.
Lender from Taunton, David explains on Zopa's website: "I like the idea of lending directly to an individual and cutting out the banks. It means everyone gets a better deal without making the fat cats even fatter. The returns are as good as I could get with any building society and I am planning to increase my lending in the very near future."
Peer-to-peer lending websites Prosper.com and the American LendingClub.com are also streamlining the process between those who have the money and those who need it. They offer varying approaches: from helping set up loans between family and friends to cobbling money from many lenders for a loan between strangers.
"As the financial crisis becomes deeper and more challenging, even for creditworthy clients, it's hard to get funding," says Renaud LaPlanche, chief executive of Lending Club.
In Japan, NGO Ap-Banks —Ap standing for ‘Artists Power, Alternative Power’— lend money according to the projects rather than looking for the financial results of the company.
Kenichiro Mirayama, administrator of the Ap-bank said to Japanese newspaper Asashi Shimbun: “Instead of watching our money vanishing with the subprimes, we prefer to finance projects that make sense and have a reality”.
Muhammad Yunus made a more ethical use of money and invented the ‘microcredit’ 30 years ago by lending money to the poorest so they could improve their lives. As a result, he was awarded a Nobel Prize.
The Bangladeshi banker and economist made his Grameen Bank unique: no consultants or bureaucrats had “designed” the bank. It grew organically from the bottom up, proving that to create wealth, all we need is to give access the capital.
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