JAK Interest-free Banking in Sweden

Part 1 - Ethics

This part introduces the JAK bank in a very simple way, and then mostly makes an argument (which we already understand) about why our virtual (exponential, interest-based, debt-based) economy is unethical and ultimately unsustainable.
"Money is produced as a loan, mostly. In the OCD countries, only 3% of the money is produced as coins and notes. The rest of it is debt. And debt has to be repaid with interest. To avoid getting inflation, everything you use money for also has to grow at the same pace as you increase the money. And money has to be increased, because you need to repay the earlier years' debt with interest.

What are the problems linked with and interest based-economy?
The main problem is that it forces people to borrow more money each year in order to pay the interest on the loans they already have. If you dn't do that you have to cut your other expenses in order to pay thie interest, and this means you have to choose between exponential debt growth or a rapid increasing unemployment.

Now in September (2007) the ECB is going to raise again the interest rate on moeny, they say to counteract inflation. But this is quite wrong. I've done some statistical researches that analyze Swedish society over a perioud of 20 years. It very clearly shows that about 4 months after you have raised the interest, you get an increase in invlation, a price increas. And then between 8 and 9 months after a raise of interest, you get an increase in unemployement. And this will ahve an impact on the prices downward, but this downward is not so big as the initial rise of the prices. if you rise the interest by 1%, you will get an increase in inflation about 0.5%."


Part 2 Techniques

0:45 Begins the explanation of the bank. I would like to discuss this, why it works out equivalent to a 2.5% interest rate on the loan.
2:06 Post-saving, or after-saving: The member pays back the loan, and then is allowed to withdraw the resulting savings. It seems that in a way, she gets the money twice.
3:11 Savings are not the same as savings points.

Since there is no interest given to members, won't a member who only saves and doesn't borrow lose money?
Answer at 4:22. The point is supporting the community. When the community is wealthy and stable, everyone benefits. So saving your money in this way is not about individual profit, it's about profiting the whole group, and making the community viable. The JAK bank is mostly staffed by volunteers.
"Loaning as a mutual service among people, that is the financial heresy of JAK bank."



A question: Would this bank be legal in Taiwan?


Some other points to consider:
It's a kind of virtual bank
JAK is a virtual bank in the sense that it has no branches and business cannot be transacted in person. A necessary and prudent decision since the membership of JAK is quite spread out over a large country, and also resulting in no bias against rural members who would have to travel much farther to their nearest branch. A result of this "virtual" status is that JAK members must have an account with another bank with which to conduct their day-to-day financial affairs. Members transfer money into or out of their JAK basic account via post giro, bank giro or Internet into their other accounts. With improvements in technology and the changing financial infrastructure, JAK hopes in the near future to offer direct deposit of paycheques and credit/debit card facilities to its members. For some members, this might negate the need to bank elsewhere.

Low Default Rate
Very few JAK loans end in default. Borrowers are decidedly involved "members" as opposed to disinterested "customers". Many feel quite strongly about the idea of interest-free banking and this common bond goes a long way towards encouraging good behaviour. Personal guarantors rarely need to be asked to make good on their guarantee.

It's still a lot of work
A significant amount of JAK's energy is devoted to communicating with its 21,000-strong membership. JAK is a co-operative, fully owned by its members. In addition to a quarterly newsletter, 24 regional offices staffed by trained volunteers keep in touch with members through study groups and exhibitions. While JAK's primary function is to provide interest-free banking, it is also viewed by the membership as a vehicle for economic reform.

A Local Enterprise Bank
A recent innovation in support of economic reform is the Local Enterprise Bank. Community members save in a special JAK account and, rather than earning points themselves, their savings are used to provide an interest-free loan for a local enterprise. Savings are fully guaranteed, so members are not exposed to any financial risk. The first two projects to be funded in this way are an ecological slaughterhouse and a replica Viking village. It is an interesting experiment in local finance for local projects, and so far has been very warmly received by local media and participants. While savers don't, of course, receive any interest on their savings, they benefit both economically and otherwise from the improvements in their local economy and infrastructure as a result of the projects.


A Brief History from Wikipedia
The co-operative society Jord Arbejde Kapital was founded in Denmark during the Great Depression in 1931.
The society issued a popular local currency which was subsequently outlawed by the Danish government in 1933.
In 1934 it founded an interest-free savings and loan system and a Local Exchange Trading System. Though both systems were forced to close, the savings and loan system re-emerged in 1944.
The experience of JAK-banking in Denmark inspired a group in Sweden to develop a non-profit organisation named Jord Arbete Kapital - Riksförening för Ekonomisk Frigörelse (National Association for Economic Emancipation) in 1965. This pioneers' group developed a mathematical system based on Saving Points, designated the "balanced saving system". The association grew slowly at first.
In 1997, a legislative amendment required the association to receive a banking license from the Swedish Financial Supervisory Authority in order to continue operating as a financial institution, which was granted in that year. The bank's deposits are insured by the government.


Part 3 Loans to Members

Some stories of members.
A key point is that the JAK system keeps the money focussed in local investment.
"In Sweden, in my opinion, it's hard to run small companies. You have to have very very good results if you want a big bank to beleive in your company. JAK is about a society that is closer to human beings."

Part 4 Community Support

"In your opinion, why is interest not a good thing?
"It doesn't support those who are weak. [The JAK system] really supports the weakest, smallest people."

"What does the Koran say about interest applied to money?"
"It is a very strong injunction against taking or giving interest on money. It puts people in a very undignified position, they get enslaved by the people who give them the money."

http://www.jak.se
http://www.feasta.org/documents/review2/carrie2.htm
Consulting Service to help people in other countries begin a JAK system:
www.cajasweden.se

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