Healthy Money Healthy Planet - library.uniteddiversity.coop

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to lend to groups rather than individuals, with the group members guaranteeing the loan.
Both solutions maximise the chance of the business succeeding by designing a structure
that increases the number of people with a stake in its success, and increase the exposure
to business mentoring. I will look at the specific examples mentioned in more detail later
on in the chapter.
Unsecured Small Loans
There are many would­be borrowers who have virtually no security but who are looking
for very small loans. This type of loan is called microcredit. Although the sums involved
are small, banks are unwilling to lend to these borrowers because of their lack of security.
Solutions to this problem are similar to those discussed in the previous section: risks
can be reduced for lenders by increasing support given to borrowers; and the money can
be loaned to groups rather than individuals. In New Zealand, there are a number of
microcredit schemes that lend unsecured small sums to borrowers. In Bangladesh,
meanwhile, the Grameen Bank was established in 1983 to help the poorest of the poor –
rural women with no form of collateral. Again, these organisations will be discussed in
more detail later in the chapter.
The Advantages of Community Banks
Community­owned banks are in the best position to deal with the problems discussed
above, because they have the power to serve the local community by keeping fees low and
branches open, they are willing to lend to small borrowers at low or interest­free rates, and
they tend to provide more support for the businesses they serve. With publicly owned
institutions such as these, profit is never maximised at the expense of other factors like
employment, fees and personal service.
Locally owned banks and financial institutions keep money, and hence jobs, in the local