Several weeks ago I was delighted to see an advert for a Jubilee Centre conferences with the slightly intimidating title of Forgive us our Debts?. I was delighted because we're now living in Cambridge where this organisation is based, and run most of their conferences. So we went along this afternoon and had a fascinating time listening to some experts in two rather different aspects of finance, from their distinctive Christian perspective.
First up was Matthew Gray describing an alternative to mortgages. Having painted a pretty depressing picture of the effects of negative equity, he then showed that fully 25% of people in the UK with mortgages are in negative equity or are close to it. And this is just one of the downsides of the mortgage system; we know all too well how US mortgages mis-management precipitated the Financial Crisis that hit much of the West very hard.
Instead he outlined the RISER idea, that brings together investors and their capital with occupiers that they know (or come to know), in a long-term co-investment trust where the investors have a regular return and equity, and the occupier (the 'tenant') gradually also accrues equity. The method doesn't involve interest or debt or financial institutions. And it responds to changing market conditions equally for the investors and occupier, thus avoiding the problem of negative equity.
The idea will hopefully soon get out of the legal drafting and scrutiny stage, and getting tried as a pilot soon. I'd be keen to be involved in something like this that uses capital in a much more tangible way, than investing in ISA or Fund where it's very rare to know where the money goes and how it's used. Instead this very nicely brings one of the Jubilee Centre's key ideas into play, of increasing the quality of relationships across all aspects of our lives.
We like this idea of investing money in ways that are both more transparent, and will help other people. Some other examples that I'm aware of are:
- Grameen Bank of Bangladesh: The originator of the micro-loan principle back in the 1970s, it's "a micro-credit institution that lends small amounts of money to poor people who are ignored by the conventional banking system due to their lack of collateral."
- Shared Interest: lends funds to fair trade buyer and producer organisations, to finance very small producers in remote areas across the globe that otherwise have little access to finance. You can choose to receive a low rate of interest on the money, or waive it entirely, so it can be more fully used for micro-loans.
- Funding Circle: investing in small UK companies that otherwise find it very hard to get bank loans. And earn a healthy rate of return.
- Zopa: "a marketplace for money. Lenders get lovely returns, borrowers get low-cost loans and money becomes human again". Again, without involving standard financial institutions, lenders can decide how much risk to take with any investment.
None of these are particularly small-scale, with capital holdings of 100s of £Millions or more.
Personally, we've been fortunate that we've been able to do one other thing directly. We used capital to buy a property for people who couldn't otherwise raise the deposit necessary for a mortgage, receving enough rent to cover the mortgage. It's highly relational, and is somewhat similar to the RISER idea above, but still involves debt and a mortgage. But we were still pleased to find others at the conference today that have done this. We wonder whether this should be encouraged more amongst church congregations, and particularly for those who've been in "full-time ministry" for long periods and find it hard to find suitable housing on retirement.
That's what I've come across, but I'm sure there are many others. What other ways are there of investing money that are more relational and transparent?