Lasting Words
About a moment of speechlessness
Gerold Permoser, Chief Investment Officer (CIO) of Erste Asset Management
All I want for Christmas is loan
In his Nobel Prize acceptance speech, Mohamed Yunus talked about how speechless he was when he heard
of the price some poor woman was prepared to pay for a loan of 1 USD. She agreed to sell all the products
she was going to manufacture to the creditor on his terms.
In his book The Ascent of Money, Niall Ferguson tells a similar story about loan sharks in his hometown of
Glasgow, who give out loans carrying interest rates of more than 1 million percent to people who have no
alternative.
Ferguson, a well-known conservative intellectual, and Yunus, a socially committed, helping pragmatic are two
people who could not be any more different if they tried to. But in their specific ways, both are pointing at the
same fact: people need access to capital, and this access should happen at reason-able conditions and, closely
related, in a legally secure environment.
> 90% payback ratio
The payback ratio of micro-loans exceeds 90%. Among others, this
percentage is due to the group guarantees, which also entail social
control. On site, local advisors ensure the loans granted are being used
for business procurements and activities rather than being misused for
consumption. Not only the payback ratios, but also the interest rates
can be filed under “significant” to “breathtaking”. Creditors charged an
average 27% in 2011; a figure often justified with the intensive local
advisory process.
Source: Consultative Group to Assist the Poor (CGAP)
In the years since the financial crisis, people have repeatedly pondered the connection between morals and the
financial world. Very often the lack of any morals among the actors in the financial industry is cited as reason for
the financial crisis. The fact that the general public has also had to pay for the “sins” of the financial system has
been quoted in an attempt to substantiate the alleged lack of moral values.
A Christmas wish:access to capital at reasonable conditions for all people
At this point, I do not wish to claim that no mistakes were made prior to the financial crisis or that no moral
failures happened. However, at the same time I find it useful to imagine a world without banks and where
people are forced to source money in a legal void.
Along those lines, it is particularly fulfilling to work at a microfinance product in the Advent season.
Merry Christmas!
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