Last Saturday I was fascinated – and surprised – by a BBC Radio 4 programme, with a hard-hitting title that I could not have imagined just a few years ago: “Broken Banking.”

The BBC’s “iPlayer” website introduces the programme as follows:

“Big British banks are widely accused of damaging the economy by failing to support their customers. Michael Robinson reports on initiatives to do without banks altogether.

With peer-to-peer lending, borrowers and lenders are matched directly through sophisticated websites promising better returns to investors and cheaper loans to borrowers. Could such direct contacts form a significant part of the future financial landscape? At least one senior Bank of England official thinks it might.”

The programme talked about two such lenders: Zopa for personal lending and Funding Circle for business loans.

I’ve written before (LINK) about this peer-to-peer idea, i.e. “cutting out the middle-man” as we used to say back in the day. Just in case you missed it, here’s that LINK again.

The key question is: how can both investors and borrowers get a better deal? The answer lies in a word: spread.


If you were planning an overseas holiday, have you noticed those ads for “no commission” foreign currency; and wondered “how can they do it? How do they make their money?” Well, you know that Thomas Cook, Travelex, etc are not charities; nor is your friendly high street bank, of course.

They all make their money on currency from the difference between the rates at which they buy and sell currency, i.e. the “spread”.  For example, if you ask your bank their latest tourist rates, there will be selling rates at which they sell you Euros, dollars etc; and also buying rates for any you bring back. If you work out the difference as a percentage of the buying rate, that’s the spread and that’s how they make their money. If they charge commission as well, that’s a bonus for them (or maybe I shouldn’t use that ugly word nowadays). Maybe they’ll say “commission-free” as an inducement, because they can make enough money on the spread.


Exactly the same thing happens, of course, when banks take in deposits and grant loans. The “spread” between their deposit rates and their lending rates, (or between the rate at which they can borrow in the money market, the now-notorious LIBOR, and the rates they get on loans), is a major part of their income. It’s what would be called margin in most businesses. Fair enough; the banks have to generate margins to sustain their services. But then I got a shock.

According to this BBC programme, the AVERAGE spread at UK banks in mid-2007, just before the credit crunch, was 2%. By 2009 it had risen to 7%.

“That was a rise of over 5%”, the presenter said, but that greatly understates the case. Yes, it was five percentage points, but it was an increase of 250% on the 2007 figure, if I’m not mistaken … in just two years.

This year, the average has dropped to a more “reasonable” 6%. That’s still a rise of 200% on the 2007 spread.

In the clamour for greater transparency about banks’ account charges, the spread figure is another (and probably much larger) area on which the public is mostly in the dark.


What’s the connection with peer-to-peer lending, you may ask. Peer-to-peer lenders simply put two parties in touch, and never handle the money, so they take a commission for the service, instead of a spread. That commission, according to the BBC, averages 1%. Yes, you read it right: 1%. That’s why the borrower and the lender can both get a better deal.



For BBC iPlayer, to access the Radio 4 programme, click here:

(Note: most programmes on iPlayer are available only for a week or two but this one is apparently available until 1 Jan 2099!)




In my last post I referred to an upcoming interview on BBC Radio 4’s “The World This Weekend” with Muhammad Yunus, the Bangladeshi economist and Nobel Laureate.

35 years ago he more or less invented microfinance (or microcredit or microloans, whatever you want to call the idea). The occasion: Yunus’ brainchild Grameen Bank (the name means “Village Bank”) was about to open its first UK branch, inGlasgow.

Since then I’ve heard the interview – several times, thanks to the BBC’s wonderful iPlayer – and I am just as much a fan of Yunus as I was.

Grameen Bank’s model

Grameen’s loans are for small amounts; they are short-term and unsecured; they tend to be to poorer, “non-creditworthy” people. In the early days especially, in many cases they were to self-employed women, to get loan sharks off their backs. However, some critics have said that Grameen also charged high interest rates; and two years ago some microfinance lenders (not Grameen) were shut down by the authorities in the Indian state of Andhra Pradesh.

So naturally I thought I needed to test my opinion. In the past I’ve been critical of the UK’s growing “Payday Loans” industry with its very high interest rates; many financial journalists have urged the Government to outlaw them, especially Simon Read in the Independent. So … was microfinance just a payday loan with the added credibility of a Nobel Laureate / economics professor? Was this just the acceptable face of payday loans?

In my view; it’s not the same thing at all. The interview, and what I’ve read since around the subject, has confirmed me in the view. Although Grameen has not existed in the UK up to now, we do have credit unions, which are comparable in many ways.

Soundbite time …

Here are some soundbites that give a flavour but I urge you to listen to the BBC piece in full.

Shaun Ley (Presenter, “The World This Weekend”): “A crisis has gripped capitalism … here’s Muhammad Yunus, one of the world’s leading economists.”

 “Grameen encourages small entrepreneurialism”

 Professor Pamela Gillies (Principal and Vice-Chancellor, Glasgow Caledonian University; and Prof. Yunus’s host here): “this reminds me of self-help groups I’ve seen in Dundee.”

 Vox pop, asked about the possibility of bad debts: “if I owe money to several people including a credit union… I feel part of the credit union, so I’d pay them first.”

 US author David Roodman: “the microfinance model appeals to both left and right, despite limited objective evidence that it transforms lives.”

 Yunus: “If the microfinance industry grows too fast, you can get a bubble, as happened in Andhra Pradesh.”

 Prof Gillies: “If this works in Glasgow it could work everywhere in the UK”

 Shaun Ley: “Should we encourage people to take on debt?” Yunus: “We don’t encourage, but we say if you are stuck, we can help. Our loans are all for the purpose of income generation. Our aim is to facilitate.”

 Ley: “What happened in the Indian state of Andhra Pradesh?” Yunus: “We have no intention of making money from microcredit. Others found this profit source attractive, got backers onboard through an IPO, and were aggressive in promoting loans. That was a derailment of the original idea. Making money out of poor people is not a new idea – that’s what loan sharks have been doing for years.”

 Yunus (asked about the microfinance industry in general) “If I could concentrate on Grameen specifically; we are owned by our borrowers. Two thirds of the money we lend comes from our borrowers.”

In conclusion …

Yes, Prof. Yunus and Grameen Bank may well have come in for criticism. Anyone who challenges financial orthodoxies and massive vested interests for 35 years will attract opposition. But it’s fair to say that the West’s banking sector has not covered itself in glory recently. Thus anyone who tries to develop an alternative financial model, especially when they do it from what seems to me an altruistic motive, deserves respect and support.

I’ll certainly be following the progress of the UK’s first Grameen Bank branch with interest; but I’ll also be following other alternative finance sources that are already established in the UK, e.g. credit unions and peer-to-peer lenders such as Zopa.

Watch this space!



 BBC interview with Muhammad Yunus; available only until Sunday 18 March 2012 at 12.59: (starts at 16 mins)

Grameen Bank:

Glasgow Caledonian University, Yunus visit:

Daily Telegraph, Nick Stace, “Yunus resigns from Grameen Bank”:

The Independent, Simon Read, “Time to crack down on payday loans”:




A couple of years ago I was privileged to hear a talk, here in Bristol, by the groundbreaking and unassuming Bangladeshi economics professor Muhammad Yunus, the pioneer of the “microcredit” movement. The way he had lifted thousands of people out of poverty, by lending small sums without collateral, was inspirational. I loved too the fact he had just ignored the negative advice and nonexistent support of traditional bankers and set up his own bank. He has subsequently stepped down from the bank’s chairmanship after some negative publicity (buck the trend and that’s inevitable in our world, surely?) but what he achieved was impressive in the extreme.

Later, telecoms companies wouldn’t support him in his idea of supplying mobile phones to wannabe entrepreneurs in remote villages, so he just set up his own telecoms company and Village Phone Program. (“No mains electricity? No problem: solar power. No shortage of sunlight in Bangladesh; and solar panels are cheap here!”)

I had to smile when I saw the ICC (cricket) World Cup on TV a few years ago; the Bangladesh team were wearing the name of Grameen Telecom (the market leader, above all those global brands) on their shirts.

Grameen and its founder were jointly awarded a Nobel Peace Prize in 2006. The man himself will be talking today on BBC Radio 4 (“The World This Weekend”, 1pm) about the setting up of the first UK branch of his Grameen Bank, in Glasgow. I’ll be listening.


Wikipedia on Grameen Bank: LINK


I’ve just heard on the BBC news that the National Debt (that’s the UK, by the way) has hit £1 trillion. That’s news; that’s big news; doubtless our chief Prophet of Doom, Robert Peston, is getting ready to intone his ponderous views on its significance.

However, personal debt in the UK exceeded £1 trillion long, long ago. When my book “Back to the Back” was published in 2010, UK consumer debt (i.e. mortgages, credit card debt, loans, etc, etc) was almost £1.5 trillion and was slightly more than GDP, the usual measure of national output.

As British National Treasure Michael Caine famously said: “Not a lot of people know that.”



For information about my book “Back to the Black”, click here:


My headline is not original. The phrase might or might not have been coined, but was certainly made famous, by Bob Hope. The comedian, an American citizen of course, was a native of Britain, so he was entitled to make a joke about our weather; a good joke too, IMHO.

I shan’t have a go at our weather; that would be pointless, although it sometimes seems that moaning about the subject is a national pastime. I remember many year ago, when I was running training courses in Scandinavia, one of the things people most wanted to talk about under the heading of “cross-cultural awareness” was what constitutes appropriate subjects for small-talk in Britain. This seemed to be a challenge for many Scandinavian businesspeople because there, in a business meeting, people tended (not always but generally) to get down to business immediately; they found our custom of verbal sparring through small-talk a challenge.

Well, the experts, and I am not one, say that the weather is rightly the #1 topic. That’s obvious to us but there is logic to it. Why? “Because it’s uncontroversial and it’s the same for everyone.” They might well have added that in Britain it’s worth talking about because it is so variable, as memorably pointed out by Bob Hope. If you’d been in the Sahara, on the other hand, and ventured the startling opinion that the weather was hot, it would be assumed that the sun had got to you.

No, my moan / whinge / rant is not about the weather but about the BBC’s feeling that we need to be given weather forecasts on a minute-by-minute basis, even when (and this is the key) those forecasts are, by virtue of programming time pressures, so short as to be meaningless. That’s leaving aside whether they are accurate. It’s not enough to have a full five-minute weather forecast a few times every day; useful for those who need to hear it and avoidable for the rest of us; my beef is with the assumed need to put frequent short weather forecasts into what are otherwise current affairs programmes.

Here’s an example, from BBC Radio 4’s “Today” programme, this very morning. That’s the programme of which I heard Sandi Toksvig (national treasure in both Britain and her native Denmark, I think) say, while speaking at a dinner here in Bristol: “The Today programme; isn’t it wonderful? Twenty minutes of news, crammed into three hours.” Well, whatever the truth of her witty description, the producers feel it necessary to give us weather forecasts regularly throughout the show. A show, I stress, that is going out on a national channel, to a country with weather that famously fluctuates not just from minute to minute (thank you again, Bob Hope) but from town to town.

This was the forecast, at 0830 this morning, and it was typical: “Now the weather! Well, mostly dry today. Sunny spells but there will be a few showers.”

I kid you not.

If the forecast had been important to me, I would have been so frustrated. I would have been asking, “Where, exactly, will it be like that? In London? In Scotland? Here in Bristol, where I live? And when exactly will it be like that? This morning? This afternoon? Or will it be like that the whole day?”

Why bother with such a short and generalised forecast?

And while I’m about it; the language. I recently heard: “the rain eases this afternoon.” I think you’ll find, as they say, that the use of the present simple to describe a future event is supposed (for those of us who are anal about language) to be reserved for so-called timetabled events, e.g. “our train leaves at five”. Future weather does not come into the category of a timetabled event.

Despite the expensive facilities, large staff and undoubted modelling expertise of our Met Office, described in a fascinating recent article in the FT, the implication of certainty is ridiculous. Why, why, why don’t we adopt the US habit of saying things like “there is a 40% chance of precipitation”?

I can handle that. If they’d said 60% I might take an umbrella; for 40% I won’t.

Meanwhile, I go back to my usual method of weather forecasting. I look out of the window. That works for me.


Rail is again in the headlines but not for the right reasons. That nice Mr Hammond has been defending the fact that Bombardier, our last train maker,  has announced redundancies at its Derby factory.

To what extent this was because Thameslink had decided to buy “1200 new trains” from Siemens, according to the FT, is  not clear. It’s not even clear how many trains are involved; the Guardian on the same day said 1200 carriages, which is rather different; unless, of course, these are single-carriage trains, which we sometimes have to tolerate on some routes here in the rail-deprived West Country.

Who’s the guilty party?

The FT’s coverage went on to say that “insiders attributed the (Siemens) decision to a procurement process set up by the previous Labour Government” and in a radio interview that day I definitely heard Philip Hammond espouse that view. However he has also flagged`up his concerns about the EU procurement directive,an unequal implementation of which meant that you get German-built trains on German railways and French-built trains on French railways but we’ll get (mostly) German-built Thameslink trains, though some of the components for the latter will be UK-sourced.

Mr Hammond should decide which to blame; although the answer is probably not simple (it rarely is), it’d make better copy if he blamed just one party.

That nice Mr Hammond

By the way, the minister seemed surprised that the level-playing-field concept is not universally accepted throughout Europe. When I worked in the chemical industry, I remember it was often said that some of our European partners (no names, no pack-drill) would always press for the strictest possible regulations on safety, environment etc, knowing that they would be less strictly policed in their own countries, thus giving them a cost advantage. So the concept is not new; if it was a surprise, that justifies my having called him that nice Mr Hammond.

Bombardier: post hoc ergo propter hoc?

The Transport Secretary did, however, point out robustly  to a Radio 4 interviewer that the job losses at Bombardier were not totally, or even primarily, caused by the Thameslink decision. And he persisted in his defence even when the interviewer (no names again) pressed him with the traditional “so you are saying that …”, followed by a summary that was totally at variance with what had actually been said. Who’d be a government minister?


For the Guardian story:

For the FT story:  (but you may have to register)



My local paper, the Bristol (UK) Evening Post, has thrown its influential weight behind a cause in which I believe strongly; the need for better public transport. The first five pages of yesterday’s issue (30 June) focus on the theme and the first two sentences on the front page sum it up:

“It’s time Greater Bristol had a transport system fit for the 21st century.

Most experts believe the key to this is railways, and our map shows a bold vision for the future.”

(I would have reproduced the map but my editing skills are yet up to it)

The paper also states its support for the creation of an Integrated Transport Authority for the Greater Bristol area; an area covering four different local authorities that don’t at present all agree on the rail option.

See below for link to their full story.

Scotland takes the lead

About a week ago I heard a fascinating programme on BBC Radio 4, about the recent trend to expand railway services in Scotland: reopening lines that had been closed during the Maudling / Beeching cuts of the 60s and since.

There was talk of the “business case”, e.g. reconnecting St Andrews, with its university, golf and tourism, but also much talk of the social case, when there was not a strong business case. Strangely to my ears, it seemed that the social case had more traction in Scotland than it does in England. Or am I wrong about that?

High-speed rail interesting; local rail boring?

However … the coalition has restated its commitment to HS2, the high-speed line from London to Birmingham, subsequently to Manchester and Leeds. The cost? £37bn, maybe. But wait … Philip Hammond, the Minister responsible, said in the Financial Times (June 24) that it will probably be much less than that. Why? Because we don’t have to pay for the whole project ourselves. In other words, we can move most of the cost off-balance sheet. So, to summarise: it could be £37bn. It could, of course, be much more, judging by our track record in such projects. Or it could be less; but only if we hand the private sector a “licence to print money”. Sorry, I meant a PFI project.

When it comes to rail, it seems that the Westminster village can only get interested if the project is big enough and the sums are eye-watering enough. Improving services and reducing fares on 95% of the country’s lines, where we pay the highest fares in Europe for arguably the worst service, is clearly a boring matter.

Sketchy local rail in Bristol

Where I live (in Bristol, surely one of the UK’s major cities and a mere 120 miles from Westminster) we have a pretty sketchy suburban rail service, with trains that should have been pensioned off 30 years ago. That’s why I’ve joined a lobbying group called FOSBR, which stands for Friends of Suburban Bristol Railways.

Severn Beach Line success

FOSBR’s lobbying has been successful in improving frequency and reliability on one of the local lines, from Bristol Temple Meads to Avonmouth and on to Severn Beach. After that positive outcome, there is another focus of interest for those in favour of expanding access to local rail in this area: the former passenger line from Bristol to Portbury, on the North Somerset side of the Avon Gorge.

That’s a wonderfully scenic run that’s experienced by no passengers, as freight trains constitute the sole traffic. There has for years been a proposal to reintroduce passenger services and to extend the line a mere three miles to the rapidly-growing town of Portishead.

Portishead: growth and congestion

When I arrived in this area I was told that Portishead was the fastest-growing town in the West. In fact, according to local railway lobbyists, its population has doubled in recent years.

I’ve been told that Portishead is now the largest town in the country without a rail link. It has one congested single-carriageway road connecting it with Bristol, to which a high proportion of residents commute. The rush-hour journey of eight miles (via a predictably congested junction with the M5) often takes well over an hour; a headache highlighted by a 2008 BBC4 programme. In fact, on the day presenter Simon Calder made the journey it took over two hours. Two hours for eight miles?

Despite this, the rail proposal has got nowhere. Instead, the local planners have been proposing to address the commuting problem by means of a BRT (Bus Rapid Transit) scheme. The words Rapid Transit sound impressive and modern (and rapid), don’t they? But will the vehicles be the bendy buses London doesn’t want? And where exactly will these rapid buses run, without taking a fair chunk of Green Belt?

Hope for the future?

However, I am optimistic that with the very strong support that’s been shown by the Bristol Evening Post and of the local MPs there is now a hope that the BRT decision can be reversed and the funding reallocated to rail. After that, why not a real 21st-century transport system for the Greater Bristol area? After all, if it makes sense to reverse the Beeching cuts in Scotland, why shouldn’t we emulate that trend in the West of England?

Watch this space!



For the Bristol Evening Post’s coverage 30.06.11:

About “Reversing Dr Beeching” (BBC Radio 4 programme):

About rail pressure groups in the Bristol area:

About former Bristol / Portishead / Minehead line (BBC4 TV programme):



Shock horror: the guard drops. A politician saying what he’s thinking. Malfunction of usual filter system.

Radio 4 interviewer on ‘Today’ programme this morning: “Your party normally does well in by-elections; how do you explain … ” (i.e. the fact they didn’t win the Oldham East by-election)

Lib Dem President Tim Farron: “We are also a party that is not normally in power. Don’t know if you’d noticed.”

Could this start a trend? I doubt it Quite a few LD people have committed indiscretions lately, though rarely live on ‘Today’. This was different; a gentle rebuke for an ingenuous question.

I’d love to see a similar phenomenon when sportspeople are interviewed just seconds after finishing their match or event. For example:

“How do you explain the fact that despite ….. you lost to Usain Bolt?” (this was actually asked, in even more patronising terms, of Asafa Powell, one of the pre-tournament favourites, immediately after the Beijing 100 metres final.)

“Well, Gary (apologies; it wasn’t Gary Richardson but I just have this thing about his questioning style), I ran as fast I could (maybe I even ran a personal best) but he ran even faster. Don’t know if you’d noticed … but he’s pretty good.”

Sadly, it won’t happen very often, thanks to a combination of politeness and the media training that all public figures (politicians, sportspeople and celebs of all kinds) get nowadays. Politeness is a virtue I value; but in these situations I’d appreciate a little less of it.


Do “ugly fonts” help us remember what we read? Is the everlasting trend towards making information more “readable”, and in general easier to digest, counter-productive? There was an interesting piece on Radio 4’s “Today” programme this morning, together with a very short and unscientific test of the theory: from three short pieces on three different subjects, all the presenter could remember about the text she’d been shown in Arial was that it was in Arial.

I said the test was “unscientific”, not just because it was so short (they probably had to leave enough time for yet another weather forecast) but also because I strongly believe that interest is the key to memory. If she’d been shown three pieces of text in three different fonts, but all on the same subject, then we would have removed a very significant variable.

If this theory is true (and it seems logical that making our brain work harder will aid recall), then my wonderful Kindle is too easy to read! Maybe it needs more font options. It currently has the choice of a “regular” typeface, also “condensed” and sans-serif.

I was somewhat surprised when I found that the Kindle’s “regular” typeface was a serif font; I’d always heard that sans-serif was better for reading onscreen, serif for print. Maybe the point is that the Kindle is designed to be as close as possible to the experience of reading from the printed page.


Lots of stuff about payday loans in the media just recently. I’ve mentioned on my Twitter feed that the subject was featured in “Broadcasting House”, one of my very favourite programmes on BBC Radio 4, yesterday morning.

I thought that in several ways the programme presented a balanced view. Rather than simply saying “these loans are terrible and should be banned because of their outrageously high interest rates”, at least one interviewee said that the amount paid (and it’s generally small, as it’s generally on smallish loans) could well be less than what the bank would charge you for going into (unauthorized) overdraft.

A fair point and another reason why people would be tempted. I’d previously said in my last post (at the back end of last week) that these kinds of loans could be considered in emergency, provided you also put a plan in place which ensures that you repaid the loan at the next payday .

High interest charge … or a bank charge? Maybe both

However, there is a comprehensive article on this by Matthew Wall in ‘Moneywise’ magazine (November 2010). The article points out something else, which adds a further danger to what’s already known about these kinds of loans.

He says: “Lenders usually take your debit card details as part of the application process so they can take out the full repayment come payday. They’ll do this whether you have the money in your account or not, potentially pushing you into overdraft and triggering bank charges if you don’t.

In this situation it’s a double whammy; you’ve paid the payday loan company’s interest rate (which is well known to be very high) but then you are stung with the bank charge anyway.

Matthew Wall goes on:

If you can’t repay the full amount you can ask to defer the loan, but they’ll usually insist you at least pay the borrowing charges.

There may also be a deferral fee or a charge incurred for arranging the new loan. So it’s not hard to see how cash-strapped borrowers can quickly become submerged in debt.”

Want to know more?

1. To see the whole of Matthew Wall’s article, go to:

2. My book “Back to the Black: how to become debt-free and stay that way” is available on the Smashwords site. To sample (first 20% free) or to buy at only $3.99, go to