NEW BANKING SOLUTIONS NEEDED
With all the excellent articles I read around me, I have yet to see one that comes up with a solution for Jamaica’s problems. If truth be told, there are so many problems, there might be a multiplicity of solutions. So I decided to read, hopefully to find an answer( I do read occasionally).
I came across an interesting idea from a Muslim Banker, called “Social Lending. ” (Mohammed Yunus). I recall that many banks in South-Eastern Asia are now considering (Non- Usurious) Islamic Law lending methods, because two thirds of the world’s population are excluded from loans, and one-third gets the money depending on their status. We need a system which takes deposits from depositors, and give small loans to poor people including beggars. ( In one country over 100,000 beggars borrowed small amounts of money to buy goods they can offer when begging from door to door; some have left begging and started their own business.)
Financial systems are flawed in advanced economies; they focus on big banks and big customers, and shall continue to have monetary crises, unless more persons are brought into the Financial system. This is quite evident in Jamaica, where small loans from small people are hardly accommodated, and then only at horrendous interest rates. There are financial organizations in Jamaica that lend money at 6% per week, plus penalties in case of a late payment, for small loans.
Microfinance already exists in poor countries, managed by specialized bankers, who need to be brought into the mainstream banking system. Their attention is on the poor: Macro finances men; Micro finances women. Macro banks lend in cities, Micro banks lend in villages and districts; Macro banks ask for collateral; Micro asks for no collateral. Macro Banks have legal advisers; Micro has none. Micro goals are not to satisfy shareholders overseas, but rather to create income for their proprietors. It is possible to create a Micro bank with young people, who then will be job-givers. Developing an open financial system and making available the benefit of new technology will develop any Country to its maximum.
Specialized laws would be needed to regulate Micro-financing, and should be managed by an independent regulatory body; becoming effectively a “socially active” business.
Islamic lending was also the pattern of Judaic, and Christian lenders, (Mustaquim Bleher) before they turned to secular lending; It does not allow lending for money, only lending to procure goods (and services). The only true producer of wealth is labour, whether it is applied to land or capital. Money is man made out of nothing, and at a tiny real cost.
This Bank created-credit is based on the nation’s ability to produce and consume (not backed by Governments), and guarantees a certain return in debt service payment from its revenues . When you take a bank loan, you pay twice: You guarantee the loan in terms of real wealth (your collateral) in the event of default, and you pay a penalty (the interest) which costs the lender nothing and did not exist until it was created as a loan to you. (Heads you lose, and tails you lose again).
So the solution is to begin small lending to small people, so they may grow successfully: To the small man for his bicycle shop, or his garage, or his new store, and the small lady for her dress-making establishment, her beauty shop, her cook-shop, and her vending stall; and to carefully purchase and supervise the use of such supplies that they remain intact, subject to use.