Credit Unions are a mutual bank that makes loans to people who need small amounts of money. Small loans are very expensive and so conventional banks are not interested.
Credit Unions also find small loans expensive and their interest rates show this. However, they are nowhere near as high as rates charged by loan sharks, the amounts owed are low because the principles are small and the way they administer their loans supports the person who takes out the loan. Consequently, credit union repayment rates are frequently higher than conventional banks.
Micro-creditMicro-credit is similar to credit unions and found in disadvantaged parts of the world. Usually, the bank makes a single loan to a small group of business start-ups. The members are jointly and severally responsible for the loan and so it is in their interest that all the participants are successful. Mohammed Yunus is the founder of micro-credit and his auto-biography, “Banker to the Poor: The Story of the Grameen Bank” is a good introduction to the topic.
The Grameen Bank, founded by Mohammed Yunus has made significant inroads into poorer communities. However, I find it difficult to see how micro-credit might work in the UK. I’ve heard of a few attempts but nothing that has proved significant. One major problem is equipment and raw materials are more expensive in the west.
Local Economic Trading Schemes
Local Economic Trading Schemes (LETS) are an alternative currency. In Sheffield, where I live, they trade in Stones, which sadly were not named after the late lamented local Stones brewery! A group of people who know each other, trade in stones. You gain them for offering a product or service and give them away for receiving a product or service. A healthy LETS is where most members often cross zero stones. There is no central bank (apart from a record of transactions) and everyone starts with zero stones. Accumulation of stones in either direction tends to reduce the activity in the LETS.
I’m sceptical about similar alternative online currencies. Once people don’t know the others involved and the currency can be converted into conventional currency, I think it is much easier for trust to be lost.
However, LETS might work online, so long as it is within a small group of people who trust one another. For example, website designers might meet online for mutual support. A LETS might work where they do work for one another. I’ve no idea whether any groups of designers have tried this.
Do let me know of other alternative economic systems you encounter, off or online.