Any alternatives to Dogs and Vomit?

After much apocalyptic huffing and puffing last year, which involved touching each one of us for three grand a taxpayer to bail them out, UK Bankers seem to be back to business as usual. Holy Scripture (Proverbs 26:11) suggests that it is the nature of dogs to return to their own vomit, and sows, having washed, to go back out there and roll in the mud. Nick Baines reflects some of the anger and frustration many feel at all this:

Let’s get this straight. Some of my friends are bankers. I don’t have a problem with bankers getting paid for the work they do. Some bankers should get paid more than others. Big bankers should get paid big salaries. But bonuses should be rationalised and spread about the people who work at all levels of the business. How do you justify a single individual getting a one-off (almost guaranteed each year) payment amounting to many multiples of what the ordinary bank staff earn in several years? And whose money is it that they are playing with anyway?

It’s certainly a shame if a good crisis has been wasted.

One development I will be watching this year, after discovering philanthropic microfinance through Kiva, is the growth (or not) of Zopa. Billed as the “eBay of banking,” this is a microfinance site that enables people to borrow or lend directly with minimized middleman profiteering. Risks are potentially higher, but not perhaps by as much as you would think, and returns rates have held up much better than convnentional banks in the past year or so. For a small investor, there’s more flexibility and returns are substantially higher than anything you would have got last year from the UK high street with its pathetic levels of customer satisfaction, up t0 20 point differentials between bank rate and their rate, and fat markups for the fat system.

As ordinary low-risk borrowers and lenders increasingly use microfinance sites, what’s holding back change? Personal inertia — apparently disgruntled Brits are more likely to change their partners than their banks. Also Brits are not currently awash with cash, being legendarily more inclined to borrow than to save. Finally, the UK tax régime around savings income isn’t (yet?) favourable to such direct ways of saving — or indeed any ways of saving?

However, the times are a’changing, and if direct lending sites, presently a bit of a joke, develop, the Drones Club with its fat bonuses and useless customer service could be begin to experience an interesting run for our money.

Floating the Brixton Pound

Tesco’s et al work by hoovering up as much money as they can out of a community, often having closed half the local shops along the way. About 10% goes back in. They pay a small local workforce, often not very exciting wages, but the lion's share is retained or siphoned out to shareholders. They operate on a scale that enables them to hammer their suppliers hard on price, and to finance in-store offers, whilst also providing finance for to extend the empire, by screwing up of fresh communities. “Unto him that hath shall more be given...” comes to mind.

The Brixton Pound challenges this seemingly inexorable logic. Using it, people’s everyday shopping decisions work harder to enrich their neighbours. The scheme hopes to draw some of the power back from Lord Tesco and chums into the hands of the local consumer. Along the way, the premium the BP puts on local suppliers helps reduce environmental footprint and builds genuine diversity across the country.

That’s the theory anyway. Such schemes have been tried in market towns, but this is the first time it’s been done in a major urban centre. If the BP works, it will take us back to the way things were a couple of hundred years ago, when the banks issuing notes were usually local family businesses gathering farmers’ profits at harvest to give them back out on market days when it was needed.

The Brixton pound is an attempt to limit the seemingly inexorable power of big business over ordinary people’s lives. It may also, of course, limit the benefits of big business in ordinary people’s lives (potentially less choice and higher prices?). The balance of power around this decision, however, will, just for a change, lie not with Lord Tesco and his chums, but with people themselves. Either they will use the Brixton pound, or won’t, in their everyday lives. Check back in a couple of years, and see.

PS: Kudos and h/t to photographer Arn, from Finland, for his fabulous thin cat Sparkle.

Microfinance: trading Real Futures

One powerful moment in the Leadership Summit was an appeal by Andrew Rugasira, founder and CEO of Good African Coffee, social enterpreneur from Kampala, for Trade not Aid. He drew attention to the distorting effects of aid on economies with significant proportions drawn from overseas aid, that could unintentionally suppress the life and economic skills of poor people, whilst feeding a huge and sometimes corrupt panjandrum of dependency. We need a new paradigm that will read Africa in terms of potential as well as need and deficits.

This is not to say all aid is simply bad, but that it has to be applied for emergencies, short term or infrastuctural pump priming, not as a substitute for regular economic activity. By analogy, you can employ people in a social or vokuntary enterprise, but there is a law of diminishing returns about the benefit, and whatever you do, it is important to build, not kill off the voluntary capacity of the organisation.

This put a great context around the session with, IMHO, the most impressive entrepreneur at the summit, Jessica Jackley, founder of Kiva.org, a microfinance site that lets anyone with computer access invest small loan sums in a targeted way, mainly in the developing world. The clever bit is marshalling all the agents into a slick process that connects loaner and entrepreneur as directly as possible, making it easy for anyone with a credit/debit card or paypal to get involved at the click of a mouse.

This is not an entirely rose-tinted process — some have criticised Kiva’s recent inlusion of US small businesses in its portfolio, as well as some interest rates the other end (not astronomic by UK small finance standards, but high and largely dictated by the partners who make it happen, in a way that’s almost inevitable with microfinance). Potential collywobbles some feel about child sponsorship might apply; Microfinance investing from home may not be for everyone. That said, Kiva does boldly go to places conventional banks don’t and makes the connections. Kiva would be the first to say microfinance is not the magic bullet to end poverty — but some involvement in microfinance certainly seems as defensible as sitting around on your spotty behind, beefing up the bottom line of conventional banks to the tune of £3,000 a taxpayer, which is what we’re all compulsorily doing anyway.

In terms of Leadership learning, kiva.org shows how someone in their twenties can impact world development to the tune of 86 Million dollars in four years with a good idea, creative use of technology, and the guts and stickability to pursue her vision out of Sunday School, through Business School, and out onto the streets.