I Love finance. The stock market, the company projections, the concepts, macro economic trends, having to care about Iraqi and Brazilian Oil Fields, I love it all (okay...maybe not so much the number crunching).
But it's an inherently unfair system, the people who get loans are the ones who already have significant money and assets lying around (generally in offshore accounts). What I'd like to see is a bank that'll give a homeless guy off the street a loan to start his own business. A bank that's both profitable and altruistic. I'm a dreamer I realize, and I thank God every day that I never tried LSD, Cocaine, or any other kind of banned substance, otherwise I'd really be tripping....loans for baby mama's maybe?
I think the world needs a new kind of bank, the kind that actually has some social development goals coupled with the profit motive that can actually uplift a country and change peoples lives for the better?
1. Don't give Loans, buy Equity: Make any business loans akin to a partnership for a specified period of time. The bank doesn't earn fees; it earns a share of the profits. This may result in Banks meddling with companies to make them more efficient, but I don't think that's a bad idea.
It sounds a bit like venture capital and private equity, but the key difference here is that the profits will be shared in equal proportion to the DEPOSITORS (Management gets a sweet stake too....If you want the best, you pay for the best). And yes, the depositors will still have access to their accounts as usual, but at the end of the year, they will receive a weighted average portion of profit. If the banks declares a loss, then the depositors lose money. It's that simple. Take it or leave, it's also completely Islamic for all of you people I get to call infidels for not agreeing with me.
2. Standards & Regulations: Require companies that the Bank does business with to meet minimum standards like actually paying a minimum wage, address environmental concerns and spend a portion of their profits on non-for profit charities.
I vote donations to the Charity of Knocked up Play Boy Bunnies....It'll be good for PR...I promise.
3. Private Loans Conundrum; Now individuals often need loans for education, weddings and perhaps a good oven toaster (everyone needs a good over toaster), the question is how do you make loans under my model? Well, as always, I have a solution.
Not only will the loan be based on their credit history, their salary slip, assets etc, but that persons severance package. No loan is to exceed that amount. Period. And a contract will be signed that they will directly debit the amount from their salary on a monthly basis and if they get fired their severance will be...Or we can just take the market value of their disposable organs and monthly blood and sperm donation revenue and factor that in....what? It's a Win.
4. This Greed is Good for an Economy: Businesses will be run more efficiently, entrepreneurs will have actual business partners, Corporations will only be on the hook for amounts that they use, The government will be assured more revenue as there will be greater documentation of taxation.
The government ought to be happy about it, because they'll be more money for them to steal/borrow. I expect imports of 100 year old Scotches, BMW's and space ships to sky rocket....oh and sugar, Pakistani like their sugar.
5. Who would invest in such a Awesome model: I think the IMF, World Bank, Asian Development bank to name a few might be a tad bit interested in this sort of innovative model. Buffet and Soros like minded people might think its a good idea to park their idle cash in a system that promotes innovation and strong returns. Any excess cash can always be parked in other banks and financial institutions using liquid'ish debt instruments.
If you think about it, what the bank will be doing is entering into partnership with businesses and that assures them a share of any profits made, which thanks to efficient measures could be higher interest.
Obviously this would be balanced down by businesses that don't perform well, but that's when the debt revenue comes in handy to cushion losses. So theoretically it works....Must drink more red bull to delve deeper.
6. It Breeds Entrepreneurs: Banks themselves will help build, train and give experience to future entrepreneurs who manage their 'loan' portfolio, the next generation can get into the nuts and bolts of how to set up, run and efficiently manage a business.
The reason why so many people are corrupt is largely because they have no other way to increase their earnings rather than make more at their current jobs through....out sourcing themselves. By having programs that breed entrepreneurs, people who have no other means to make decent money have avenues for future opportunities.
Small Businesses create more jobs that big ones. And Banks can help....because it makes them money....oh and we care...a lot....seriously.
7. Promote Efficiency and Actual Credit Standards in Banks! Banks would become lean efficient machines that would have very low rates of delinquent loans, because their own profits would be directly on the line. No more 'friendly' loans. A business better have a pretty compelling power point and business plan on why it needs money.
Banks earning would go through the roof. Particularly as it's shareholders are literally everywhere. If their are some negligent morons (as there probably will be), firing them will be a public monthly spectacle where shareholders will be invited to bear witness...Sell tickets and popcorn, it'll increase revenue.
8. Banks have a Solid reason to care about their Customers: Currently, banks do what's best for the shareholders first and depositors second. Push comes to shove, they'll tack on higher fees on the depositors to keep the share holders happy. Now by making them both one and the same, it gives the bank access to it's shareholders funds, as well as it's depositors to induce better returns.
This might give the clientele a huge power trip, but there will be a lot less Customers put on hold while folks go on their 3rd tea break of the morning.
9. Give Preferential Loans to Women. They carry men's babies and need something to do during the day, have programs that help them run businesses from their homes, be it web based, sewing, writing etc.
Give some special loans for really cool innovative businesses like a Bungee Jumping facility (I love the idea of bungee jumping).
10. Invest in your Employees, expand EVERYONE'S Horizons: Offer educational programs and opportunities to everyone within the organization. I don't care if it's the maid or the CEO, everyone is entitled to the same opportunities as everyone else. If they want to go to school or gain a degree, the company ought to be obligated to cough that cash up.
It's fair and it's good PR. The costs can be mitigated by educational loan financing or that body part collateral thingy I talked about. If a bank is truly going to succeed, it needs to realize that it's merely the sum of the people that are working there. The truth is that most banks have awful work cultures, and people feel stifled by the lack of freedom.
The more educated a banks employees they are, the more they can contribute to realm of ideas on how to improve that bank. Ivy league grads are going to have a hard time figuring out how to expand their banks presence in depressed areas, but someone from that area who has gained educational opportunities through the bank is likely to be more valuable. It breeds good will in the industry. End of the day, it's good for business to local solution via the natives of the area.
The Big Idea:
The Greatest countries in the world are ones where small innovative businesses have thrived, thanks to the freedom and sources of capital to match their dreams. They have the avenues for their citizens to gain opportunities for a better life. That's meritocracy, and the J-Model of Banking can take us one step closer to opening up that dream for others (and make a butt load of money). Banks are the forefront of change.
Governments are too big, corrupt, unwieldy, inefficient and just plain unaccountable. Banks are the only sector that actually are connected to the rest of the economy and the country.
Getting a loan is hard, as it should be, but let's make it a little bit more fair.