Real Banking

I suspect we are going to be seeing more of this:

The Bank of Dave was born. Today, hundreds of businessmen and women hold accounts at his modest town-centre shop, marking a return to the sort of old-fashioned, face-to-face banking that the big operators have mostly chosen to leave behind.

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Strangely, the giant banking corporations have a very difficult time with the small businesses and small loans which power a large part of even the most modern economy. And, with tiny interest rates paid to depositors the entire edifice has ceased to make much sense for a significant segment of the public.

In Canada credit unions have, to some extent, stepped in; however, credit unions are really designed to deal with personal rather than business banking.

The Bank of Dave pays 5% to its “depositors” and lends at 8.9% to good credit risks. A little less than a four point spread. If Dave keeps his overheads down and actually manages his loan portfolio aggressively that spread should be enough to make a profit. And it has:

At the Bank of Dave, which opened in September, only one borrower has defaulted so far. Savings are pouring in and there is a waiting  list for investors. The bank is taking in about £25,000 a week and giving out about the same in loans. The £10,000 accrued in the first six months has been divided equally between five local charities.

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One thought on “Real Banking

  1. The Tiger says:

    Micro-credit for the First World?

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