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The priority goals set by the community banks for making loans are not only for basic needs. On a scale of priorities, social events such as birthdays, weddings and baptisms are placed fourth, while family holidays are listed in last place. At the top of the scale is obviously health care, accommodation, enterprise initiatives and business plans. This model strengthens our commitment to the social economy and demonstrates that the ultimate purpose of solidarity finance is not to help capital to grow but to help people to grow and broaden their lives. “Just as the capitalist company is the proper form of basic micro-economic organisation for capital, the household or the domestic unit is the proper form of basic micro-economic organisation for work. Capitalist companies are able to merge, form official or de facto networks and consolidate into groups with common interests, the better to accumulate capital.
In the same way, domestic units can extend their raison d’être through partnerships, organised communities, various formal or informal networks, while at the same time building up socio-economic entities whose goal is to improve their members’ living conditions.”6 For the reasons mentioned above, one characteristic of solidarity finance is that everyone connected with the financial activity knows exactly what is happening to his or her money. The money produces a sort of whirlwind effect within the community, which in turn creates a leverage effect in terms of development whereby people begin to look at their own neighbourhood with fresh eyes. They start to identify their particular needs and are able to share the challenges facing them. Similarly, the inhabitants of the neighbourhood get together to celebrate when a neighbour has managed to overcome his difficulties or has achieved her Coraggio, José Luis, “Economía del Trabajo”, written for the review A Outra Economía (The Other Economy): www.coraggioeconomia.org/jlc/archivos para descargar/ECONOMIA DEL TRABAJO3.pdf 288 Trust and Ethics in Finance dream. And it is at that moment that the positive spiral of solidarity finance starts to achieve its full purpose and completes the circle of life’s renewal.
Just as no member of the community is denied the opportunity to save, however small the amount may be, in order to capitalise a local organisation that devotes its resources to its own community, no-one should be denied a hand in the management of those resources. This principle might appear to be self-evident but putting it into practice might prove difficult. It would be naïve to imagine that the hitherto accepted way of doing things, at least in the eyes of a large part of society, can be overturned simply by saying so and repeating it. There exist a number of tools that help women to believe in their own abilities because they understand both how things work and also the logic behind the system.
It is perhaps useful to point out that those within the formal financial system are proud to use language, explanations and tools that are incomprehensible to the majority of ordinary people and therefore give those insiders a sense of superiority. Nor does the author think it too naïve to claim that if we could all grasp this financial logic, it would lose its power over us. On the other hand, it is essential that all the operations carried out by a community bank must be basically easy and transparent.
Each and every partner must be able to understand what is going on so as to be able to analyse the pros and cons and spot the tendencies that take root over time. On many occasions we have thought about the possibility of computerising the community banks’ systems to enable every individual to carry out the management of his or her assets from a computer terminal. That would make the system much more efficient and reduce the risk of human error. Nevertheless, we believe that the “digital divide” between the computer-savvy and the rest is still quite wide and there is still a long way to go to bridge the gap. While we do believe that information technology can make an enormous contribution to the manSolidarity Finance 289 agement of an organisation, we are nonetheless well aware that people’s time – especially when we are talking about collective time in a historical context marked by marginalisation – calls for a completely different logic. Given this situation, while we are designing and preparing for the shift to computerised management of the community banks, they are still for the moment carrying out all their operations on paper, using tables and noticeboards intended to provide simple visual checks on the state of savings and the loans granted to members.
The self-auditing and self-regulatory mechanisms at the community banks constitute a major challenge. The people are more used to being told what to do and how to do it than asking for details of how to correct errors or drawing attention to the mistakes made by a colleague. It is the job of the coordinator designated by Nuestras Huellas to work hand-inhand with the group in this area. S/he is the first person the members call on to show them how to proceed or advise on the best decision to take.
With this simple move, what the group is doing is delegating all responsibility for their own money and what happens to it to a third party who is not involved in the savings that are at stake or in the cultural reality of the neighbourhood or the links that have been forged. The solution the coordinator comes up with is merely a surface varnish on top of the really basic questions to be asked and answered to ensure that the financing is genuinely appropriate for the people concerned. From time to time we ask ourselves what would happen to the community banks should Nuestras Huellas cease to operate. Our conclusion is nearly always one of striking optimism: that the community banks would not hesitate to continue with their activities since self-management is fully rooted in the training they have received. And it is through this learning process based on asking questions, as Paulo Freire points out, that we are able to encourage these groups of women to take charge of their own money, their own organisation, their needs and their own destiny.
290 Trust and Ethics in Finance The fact that each cycle of a community bank begins with the drawing up of a set of internal rules, decisions on lending policy, cohabitation and other specific rules is not sufficient to attain autonomous selfmanagement. It is interesting to note that it is only when the partners come to realise over time that they actually own the organisation that they for example become able to challenge one of the members who is requesting a loan that may exceed his or her repayment capacity. That does not mean that the person in question will not be able to repay the loan but that in order to do so s/he will have to give up some priority – or even indispensable – household items. The culture of individualism means not interfering in other people’s business – the “every man for himself” attitude. Breaking through this individualism to offer good advice based on a link that has been forged is a great achievement and should be seen as one of the revolutionary changes the social economy can bring about.
As a sign of transparency we would first and foremost mention the link that is forged between people who organise themselves around a stock of capital that arises from the work of households and the management of their savings and whose purpose is to encourage people to broaden their lives. That is to say because people know where all the various partners got their savings from. No one would be able to build up large savings without having to account for their origins and prove that they didn’t come from illegal business, arms trafficking or drug dealing. Of course we cannot claim that this kind of scenario could never come about, but if it should happen, the partners in a community bank would be able to decide whether they wanted this “dirty” money in their bank or not. This implies asking themselves whether, in order to improve the quality of life of those living in the neighbourhood, to use funds that have come from activities that do harm, destroy lives and break up families. It is necessary to mention this last point because it is of course not the same thing whether the consumers of the cheapest and Solidarity Finance 291 most health-damaging drugs are children or teenagers from other communities or even other countries instead of your own children, grandchildren or nephews and nieces.
So anyone who goes to the community bank to apply for a loan generally knows where that money has come from, who is dealing with his loan application, what criteria will be applied, why the bank does not at a given moment have the necessary funds to grant a loan or why s/he will have to wait a week to obtain the loan. Every day we see cases where two people turn up asking for a loan at the same time but the bank does not at that precise moment have sufficient funds, and the one who is first in line gives way to the second-comer, whose need for the loan may be more urgent or vital than his or her own. Little stories like this have an enormous impact on communities because they help to create good relations, which are then frequently transposed to other similar situations that arise at school, at the supermarket or in a public place.
During these years, in which we have worked with and supported over a hundred community banks, we have on several occasions encountered two particular situations that tend to destabilise the organisation, jeopardising its meticulous and transparent functioning and even threatening its continued existence.
The first case arises when a person who has taken out a loan is unable to repay the full amount of the debt. The reasons are many and varied but nearly all have one common denominator: a complicated situation of social and economic vulnerability affecting the home. A second characteristic is that in general this is a temporary situation, i.e. the borrower has to delay payments for just a few days, which confirms that it is not intentional but a case of genuine inability to repay at that moment.
For such cases we have set up a solidarity fund, fed by monies the community banks raise from neighbourhood gambling activities, such as bingo and tombola, or the sale of food. This provides the group with a 292 Trust and Ethics in Finance fund to support people who find it impossible to make loan repayments to their community bank on time, even if it is only for a few days.
It is important to prevent reimbursement delays not only in order to keep the level of overdue debts down but also to avoid the borrower feeling that s/he has failed in her duty. When people feel supported at a difficult moment this creates a powerful force for changing the cold hard logic of finance and the general feeling of alienation that seems to characterise the world of finance. When the idea that a payment delay of less than thirty days is a frequent and perfectly normal occurrence is generally accepted, that will greatly change the way judgements are passed on people. Realising that each and every person might go through some difficult times – unexpected illness, inability to go to work because of flooding or severe damage at the house – encourages the whole group to commit to supporting the solidarity fund. Of course, this commitment comes with very clear rules regarding the return on the funds.
The second situation that we often encounter is that in many cases the partners take out a loan to cope with an emergency, most frequently due to ill health, a death or disaster. We have never thought it was fair to have to pay interest on the loan under this type of circumstance when a family finds itself in a very difficult situation that affects income and increases expenses. It is important to point out that in many cases a loan is paid out of the savings that the loan applicant has himself deposited. So when a person has to pay interest on an emergency loan s/he is paying out when in fact s/he needs to be saving as much as possible. Any member is entitled to withdraw his or her savings from the community bank at any time but is encouraged not to do so in order to avoid decapitalising the organisation. That is why we have inaugurated community funds. These are funds set up by each of the community banks by allocating a percentage of the interest taken in, and in some cases supplemented by a contribution from each partner or group of partners. The exclusive purpose of these funds is to provide interest-free loans to Solidarity Finance 293 members facing emergency situations such as those listed above. The payment schedule is decided on a case-by-case basis and the mechanism also tries to create an order of priority for the various different needs a family might face and prioritise those emergencies that cause its members the most worry and pain.
We face numerous challenges each and every day in our attempts to improve solidarity finance and create a powerful tool for local development in impoverished communities. Experience has shown us that we can’t just set off armed with a compass and hack a trail through the undergrowth from scratch with a machete. We are convinced that people possess an enormous wealth of mechanisms for organising themselves and managing their resources, including their own money. Our process of creation always requires us to arm ourselves with tools and strategies before we plunge among the masses of knowledge and practice that have been developed in the daily life of the home, the business, the neighbourhood club, the school and the many significant social happenings. We try to find out for example how people raise and manage the money needed to enlarge the football pitch for the local children, how an entire family plans and organises a fifteenth birthday party at which a girl becomes a woman and joins the adult world.
In this process, the middle and upper classes sit calmly on their thrones of wisdom and do not deign to come down except to take over their ancestral wealth, update it and then use it to make more. We cannot ignore the fact that at this moment in history there are forces opposed to the process. It is perfectly clear why some people would like to see these self-management mechanisms fail as they do not aid the concentration of economic power and by extension the domination and manipulation of people’s lives. In this context, one of the biggest challenges we are facing is that a community bank needs time to accumulate the funds 294 Trust and Ethics in Finance necessary to meet the demands of the community. It must not be forgotten that their ability to generate surpluses is rather weak due to the low personal incomes and the rising cost of living, which is weighing more and more heavily on household budgets. This is why we believe governments and authorities ought to live up to their responsibilities and commit to creating mechanisms to tip the balance a little more in favour of this type of experiment. Nuestras Huellas has decided to establish a line of credit to community banks so as to help them capitalise more rapidly and gather more funds in order to meet the requirements of communities. This credit line, which we decided to call a complementary account, charges a much lower interest rate than the loans granted to the partners, with special conditions for repayments and so on.