Banking the Poor
There’s a disconnect that sits at the heart of banking: the people with the highest demand for loans aren’t the ones banks want to lend to. More often than not, it’s because they don’t have collateral – and there’s nothing a bank likes more than collateral. A private bank will lend you as much as you want against the value of your stock portfolio; a mortgage bank will do the same against the value of a house. It’s more difficult if you haven’t got a brokerage account, or any real assets, or even a bank account. Globally, around 1.7 billion adults didn’t have a bank account when the World Bank last did a survey, in 2017.
One of the ways round this, if you want to avoid usurious interest rates, is to find a guarantor.
Jonathan Swift – the author of Gulliver’s Travels – took up a sideline doing this form of lending in his home town of Dublin in the eighteenth century. He set up a small fund to lend to poor but creditworthy tradesmen who had projects that promised high returns on investmen…