I love interactive gadgets and “what-if” spreadsheet-type things, so I was very interested to learn about this boon for students. I got the info on Twitter, via a post by @ZeroCredit.
It’s a budgeting calculator: I wish I’d had one when I was at university. Here’s the link:
http://www.studentcalculator.org.uk/
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!
WANT TO KNOW MORE?
BBC interview with Muhammad Yunus; available only until Sunday 18 March 2012 at 12.59: http://www.bbc.co.uk/iplayer/console/b01d24ym (starts at 16 mins)
Grameen Bank: http://en.wikipedia.org/wiki/Grameen_Bank
Glasgow Caledonian University, Yunus visit: http://www.gcu.ac.uk/newsevents/news/article.php?id=40898&c=126
Daily Telegraph, Nick Stace, “Yunus resigns from Grameen Bank”: http://www.telegraph.co.uk/finance/personalfinance/offshorefinance/8511461/Muhammad-Yunus-resigns-from-Grameen-Bank.html
The Independent, Simon Read, “Time to crack down on payday loans”: http://www.independent.co.uk/money/spend-save/simon-read-time-to-crack-down-on-payday-loans-7547420.html
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.
WANT TO KNOW MORE?
Wikipedia on Grameen Bank: LINK
The paperback version of my book “Back to the Black: how to become debt-free and stay that way” is now available on Amazon.com.
It encapsulates what I learned from my own debt problem a few years ago, when I very nearly had to file for bankruptcy but found another way.
Hopefully the lessons I learned are set out in such a way as to help others who might now be in the same situation as I was.
The marketing material reads as follows:
You can also find a kindle version on Amazon; a .pdf version on my own site: and other e-formats in the Smashwords store.
WANT TO KNOW MORE?
For the paperback version of “Back to the Black”: LINK
For the ebook versions:
Smashwords, for a multi-format ebook: LINK
Kindle store: LINK
For .pdf only: LINK
Most financial experts say that it’s important to maintain a good credit rating, even if you are not planning to increase your borrowings in the near future. At some point in the future you may well want to do so; at that point, if your credit rating is poor, or simply inaccurate or out-of-date, it could cause you problems. At the very least it could cause you delays.
As I have mentioned before, I subscribe to “Moneywise” magazine and I find it a useful resource. It’s also a quick read, which is very important to many people. I wish I had known about it back in the late ‘90s when I faced my own debt problems. Being in debt is stressful and that’s why very often advice needs to be clear and succinct.
This month’s issue of the magazine contains a helpful article on the very question of boosting your credit rating. The article is not available yet on the Moneywise website, so you’ll have to buy the magazine to read the full piece. (March 2012, page 44; good value, I’d say, at £3.95)
To summarise:
CREDIT SCORING ADVICE FROM A CREDIT RATING AGENCY
Way back in 2004 I found a great online resource on this subject from Equifax. That’s really “from the horse’s mouth”, because they are one of the three UK companies mentioned above, who do the credit reporting. The information is still valid and it’s still on Equifax’s website.
The title was “Rebuilding Damaged Credit”. Some of the advice overlaps with that of “Moneywise”, some not. Here’s a summary of it:
Open new accounts … and pay them off
Being able to repay a variety of new accounts helps rebuild your credit. Opening and paying off as many different kinds of accounts as you can is better than adding more debt to an existing credit card.
Start small
Rebuilding your credit can be similar to starting over from scratch; starting small may be the easiest option. Credit cards from department stores can be useful. (Warning: if you don’t pay the full balance every month, their interest rates tend to be among the highest)
Consider asking for help
If you can’t qualify on your own, ask a friend or family member to co-sign for a small loan or credit card.
Consider a secured credit card
They are guaranteed by a deposit that you make with the credit grantor; they offer the purchasing power of a major credit card. Make sure the grantor reports payment histories to a credit reference agency, so you’re building your positive payment history.
Use new accounts in moderation
And make payments that are more than the minimum.
Keep balances low
Avoid carrying a balance that is more than 30% of your credit limit, because creditors may view that as excessive debt.
The bottom line
It’ll take time for your new credit history to gain momentum, so be patient. You’re demonstrating your financial reliability; that’s why opening and paying down accounts may make it a little easier to get more credit in the future if you need it.
WANT TO KNOW MORE?
For the resources mentioned above:
For the Equifax resource in full: http://www.equifax.co.uk/Products/learning-centre/rebuilding_damaged_credit.html
For a short “Moneywise” video on improving credit rating: http://www.moneywise.co.uk/cards-loans/credit-cards/how-to-improve-your-credit-record-tv
For the article: “Ten ways to boost your credit rating”. Available in “Moneywise”, March 2012, page 46.
For info and links re my e-book “Back to the Black: how to become debt-free and stay that way”, click HERE.
It’ll also be available in paperback from Amazon in a couple of weeks; I have the proof copy in my hand right now.
According to the BBC news this morning, the UK’s Justice Minister Jonathan Djanogly says clarity is needed about what bailiffs are legally allowed to do.
New proposals are in the pipeline, including a ban on the use of force. There’ll be detail on what items bailiffs cannot take from homes.
This is welcome news. However, as I say in my book “Back to the Black”, there is already a code of conduct about debt collection; a code that is often broken by debt collecting companies. Let’s hope that the new code of conduct for bailiffs will be better observed, or this will be a waste of time and money.
Here’s what I say in my book about the existing code:
Harassment
It is illegal for creditors to harass debtors. The following definitions of harassment are taken from the website of the UK’s Office of Fair Trading (OFT). Sadly, I know from experience that many of these practices are used by many creditors.
Physical/psychological harassment: putting pressure on debtors or third parties is considered to be oppressive. Examples of unfair practices are as follows:
Source: OFT website, “Debt collection guidance: final guidance on unfair business practices.”
WANT TO KNOW MORE?
For the BBC News item on the proposed law changes: click here
For a link to my book “Back to the Black,” containing details of the existing UK code of practice governing debt collection: click here
“Back to the Black” is now available to buy from this site. Continue reading
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.”
WANT TO KNOW MORE?
For information about my book “Back to the Black”, click here:
I appear to be stalking Simon Read of The Independent. If so, that’s because payday loans are again in the news and this is a story and a cause he has taken up and because he writes well on the subject.
The latest twist in the story: research by Shelter (a UK housing charity) reveals around seven million people are turning to credit to try to keep a roof over their heads.
A million use payday loans to cover rent or mortgage
In the past year alone, almost one in seven of those – i.e. just under one million people – have resorted to payday (i.e. emergency) loans to cover rent or mortgage payments.
The Independent has warned that payday lenders are cashing in on the struggles of millions who are unable to borrow from mainstream lenders and those companies charge interest rates of up to 5,000 per cent.
The impressive Campbell Robb, CEO of Shelter, said that this “… shows the extent to which millions of households across the country are desperately struggling to keep their home.
“Turning to short-term payday loans to help pay for the cost of housing is totally unsustainable. It can quickly lead to debts snowballing out of control and to eviction or repossession and ultimately homelessness.”
What’s the alternative?
I cannot disagree with anything that’s been said above. It’s a sad state of affairs and I’ve no doubt payday loan companies in general are cashing in on the misery, despite what was said by the boss of Wonga to Simon Read and which I reported in an earlier post. There have been calls for these firms to be outlawed. But for the people who feel they have no alternative, what will they do if that happens?
Anyone in debt crisis who consults an adviser at one of the debt charities – such Citizens Advice or National Debtline or CCCS, here in the UK – would probably be told to avoid payday loans. But I wonder how many of the million people mentioned in Shelter’s report have actually talked to such an adviser.
I know that these resources are stretched; and as the charities reply to some extent on grants from the public sector, they may well become even more stretched because of spending cutbacks.
Need for financial advice
I don’t know the full answer – and of course it’ll be different in every case – but wider access to free, impartial and high-quality financial advice must be part of it. What’s more, financial education has to have a higher priority than it does now.
WANT TO KNOW MORE?
For the Simon Read article (4 Jan) click here:
For information about my book “Back to the Black”, click here: