New banking solutions needed

Ramesh Sujanani, Contributor

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 the 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 Bangladeshi banker, called 'Social Lending' (Mohammed Yunus). I recall that many banks in South-eastern Asia are now considering more pertinent bank lending methods, because two thirds of the world's population are excluded from loans, and one third get the money depending on their status. We need a system which takes deposits from depositors and gives small loans to poor people (including beggars).

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. Then there are financial organisations in Jamaica that lend money for small loans at six per cent per week, plus penalties in case of a late payment.

Microfinance already exists in many poor countries, managed by specialised 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 will then be job-givers. Developing an open financial system and making available the benefit of new technology will develop any country, especially one like Jamaica, to its maximum.

Specialised laws would be needed to regulate micro-financing and should be managed by an independent 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.

produce and consume

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 dressmaking establishment, her beauty shop, her cookshop, and her vending stall; and to carefully purchase and supervise the use of such supplies that they remain intact, subject to use.

rsujanani78@gmail.com