I have started making loans to total strangers – scores of them. I am not mad, rich or philanthropic. The loans are tiny. The safeguards are good. So far, the borrowers are paying me back and I am turning a handy profit. Even nicer, I feel I am part of a revolution which could save Western capitalism. It is all happening in Estonia.
Banking is the economy’s biggest weakness. It offers stingy, fee-ridden savings products and over-priced loans with nasty hidden costs. Intermediaries gain colossal profits, especially when they are greedy and reckless. When things go wrong, as they inevitably do, the taxpayer picks up the bill. Apart from that, it works fine.
So alternatives are welcome, such as ‘peer-to-peer’ lenders, which put the cash-thirsty and the cash-rich in touch with each directly (they make their money by charging a fee for the service). Zopa, a British peer-to-peer outfit, has lent £260 million (€310m) since it started in 2005.
Isepankur (it means ‘Self-banker’ and sounds like ‘Easy-banker’) offers a better deal, because it is lending in countries where the banking system is less developed. Estonians (even with a good credit rating) typically pay 50% for an unsecured ‘doorstep’ loan. Isepankur gives me and other outsiders a chance to lend to them at much lower rates – 28% is typical.
That is a good deal: the best savings rate I can get in a British bank is under 3% (and half the meagre proceeds go in tax).
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