Photo: Ben Baker
The Power of Organic Banking
Do you know where your money is? Yeah. Me neither. Until recently, that is. I live in a small town, which is fighting bravely to hold itself together during a big recession. In the past few years, a couple of locals have surfaced with bright ideas to help revive our economy—for instance, by opening a bakery, like my friend Patricia. Or a coffee shop, a Pilates studio, or a pair of funky gift shops, like my friends Maria, Sarah, Kate, and Meg.
These entrepreneurial women were talented and passionate. The only thing they didn't have was capital—and that was a big problem, because it's become almost impossible to pry loans out of America's mighty, TARP-hoarding banking interests. But I had some money. So my decision was simple: Take my money out of the bank and fold it, instead, into my community.
I offered each woman a loan at half the going rate, along with a year off before they had to start paying me back—and I'm still earning more interest than if I'd left that cash in a savings account.
There are three things I want to make clear: (1) This is not charity (we set up legally binding contracts, with online services like Virgin Money and LoanBack), (2) obviously you don't want to deplete crucial family funds to make private loans—only do this if you can afford the risks, because... (3) of course there are risks. Still, here's my manifesto: If you're lucky enough to have extra cash sitting around these days, get out there and become a bank yourself. You cannot imagine what riches await you. — Elizabeth Gilbert
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