2Yr·

More loans for people with low incomes? 🏦💰

Dear getquin Community,

I had a fascinating discussion with my friends yesterday about whether banks should be required to lend to low-income people to promote financial inclusion.

Financial inclusion is an important step in the fight against poverty and inequality. Banks play a crucial role in this by providing loans to low-income people. Personally, I find it difficult when banks are required to make such loans, as they can increase the banks' risk of default. Nevertheless, I would like to see banks make more loans to low-income people. A good example of this is Muhammed Yunus and the Grameen Bank, who have shown that it is possible to reduce poverty and improve people's lives through microcredit. In 2006, he was awarded the Nobel Peace Prize for this. There are many benefits of more people having access to credit, such as more economic stability, more business start-ups, and more employment opportunities. I personally believe that banks should take their responsibility and work harder for financial inclusion.

What do you think about this topic? Do you think banks should do more to promote financial inclusion by lending to low-income people? Or should banks even be required to do so?

#finanzielleinklusion
#banken
#kredite
#credit

48 Comments

Hannes@Hannes_SK

2Yr

In general, I do not understand the trend of my young generation to build their lives on debt. Most of them graduate and when they get their first job, they go to the nearest premium car dealership and agree on a uselessly expensive lease or financing. The main thing is to show what you do not have. 🤨 But what purpose should more loans for people with low incomes serve? More useless consumer spending? You don't solve the problem with the loan, but merely postpone it with an installment payment. A loan that I would have really wished for in Germany would be an education loan. So everyone would have the possibility to finance a further education without cutbacks. The economy would have super educated people, the employee would have a higher income and better chances for the future and the state would have higher tax revenues because of it.

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Deleted User

2Yr

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Cro@Cro

2Yr

@Hannes_SK in Germany it is unfortunately the case that it is easier to obtain a cosum loan than an education loan. 🙄

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Hannes@Hannes_SK

2Yr

@oliverplass But who are you doing it for in the end? Sure, yourself first of all. But who benefits most from it afterwards? - The state in significantly higher tax revenues usually. But you will hopefully not pay the fees with euros? 🤣 Fun.

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Hannes@Hannes_SK

2Yr

@Cro Yes, that's how it is. There are many things that bother me about Germany. Due to the fact that structurally and politically there will probably be no turnaround. On the contrary, the politics of illogic is increasing exponentially. So I have already decided in 2020 to reorient myself. 😅

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Pope Donkey XXI@DonkeyInvestor

2Yr

@Hannes_SK we buy things we don't need from money we don't have to impress people we don't like. Seems legit 👍

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Robert@Zony

2Yr

@DonkeyInvestor It's really unfortunate. But nowadays it's easy to maneuver yourself into financial problems. Everything is easy on the outside and sleepless nights at home. I've been studying for three years, now I'm going to treat myself. 🙄 Whether this is the important way. In the end, you don't get the Zwegart generation under control, you breed it. What's going wrong in this country. Maybe you should tackle the subject of "personal finances" at school. And not just as a minor subject. Today, at 40, I would have liked to see something like that in school.

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Pope Donkey XXI@DonkeyInvestor

2Yr

@Zony in principle I am with you, but I see this very much as part of the training / studies and not already in school

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Robert@Zony

2Yr

@DonkeyInvestor do not you think that from the 5/6 class something like that should be addressed 🤔. Maybe a stupid example or even a bad comparison, but sexuality is also addressed earlier and earlier in school. Because it is also ubiquitous earlier and earlier. Why not also the financial topic.

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Pope Donkey XXI@DonkeyInvestor

2Yr

@Zony because at that age - in contrast to sexuality - it is still much too far away. Besides, there are lots of things that could / should be taught. What makes the topic more important / relevant than other topics? In training / studies, you have to deal with money for the first time. Accordingly, I would also teach it when the majority of adolescents / young adults also need it for the first time.

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Hannes@Hannes_SK

2Yr

@DonkeyInvestor @Zony
Isn't the real question behind this, why did it happen this way?! It's not just my generation (mid-20s and younger). Even in the age groups of the 80s/90s children, this phenomenon of exorbitant lifestyle is nevertheless very pronounced. Is it therefore not rather a social mediation that was once steered in the wrong direction, in favor of consumption, in favor of the economy? Don't Instagrammer, Tiktoker and Youtuber give this life-style, what the world only costs?! As long as in the daily media consumption it is exemplified that it depends only on splendor outwardly to show and character values to put on, nobody is helped any more. Therefore it would also never exercise a use to work on the topic in schools. In fact, hardly anyone would be interested in it, because society lives out the opposite example.

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MaK@DollarDon

2Yr

I currently live in Kazakhstan and microcredits are the trend here. You can also pay for almost everything in installments, for example, the bread from the supermarket, if you order it online. (There are even vending machines, where everyone can get a loan and payment within 10 minutes. Conclusion of the story: Everyone is in debt and pays their 17% interest. ( the amount is normal here, because the prime rate is also close to 16%). Have hardly met people here who are not in debt. Poverty is definitely not fought by this. In my opinion, the state should first promote financial education. To your argument with more business creation. It is true that this would give more smart people more opportunities. Unfortunately, 90% of people don't even know the difference between a liability and an asset. Giving money to these people I think is irresponsible and dangerous. ✅

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Lara@larryc

2Yr

@DollarDon I agree with you, the government should definitely allocate more money for financial education! Have you had any experience with microcredits yourself?

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MaK@DollarDon

2Yr

@larryc keep away from it. I only buy things that I can afford, which is why I don't need outside capital.

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Staatsmann@Staatsmann

2Yr

We need to differentiate strongly between when the loan is available and the amount. A loan with a high chance of default every year so that people can go on vacation instead of paying off the car? Or a kind of emergency loan for low-income earners so that they can buy a new washing machine?

Even if I don't make myself popular with this: I like the Schufa Score and corresponding mechanisms to give entrepreneurs or banks the possibility to refuse cooperation if the risk is too high (especially for people who don't have their consumption under control and live beyond their means...).

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Gerit@Gerit

2Yr

Spontaneously would occur to me here, in order to bring in also simply a kind "solution beginning", because the opinion of Hannes covers my already well: If one falls by a Credit Rating, because halt not enough income according to bank is present etc. then a specific, individual/changing test introduce, which separates with a certain attitude/knowledge again clearly, thus however again more on poverty coined humans works and a chance offers nevertheless still a credit to get. (That then as additional Rating take up, if these then just punctually repaid have. Trust bonus) Monish Pabrai's foundation helps in India e.g. the poorest children with school/study money, if these come by certain tests. It is of course not optimal, but with a better conclusion, with a good credit (for e.g.. a degree for the children) one can catapult a whole family into the zone of the middle class with the passing of a single child or at least make life easier with "proper" houses, enough food, running water/electricity. Bans & constraints, however, will (almost) never achieve the right effect, especially not with such sensitive issues, where two worlds meet.

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Lara@larryc

2Yr

@Gerit I find the approach with individual tests very exciting and cool! Would probably be costly but a step in the right direction, because often the reasons for a loan are very different.

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Enrique@Dividenden_Monteur

2Yr

What amount are we talking about here? Up to let's say 10,000 actually almost everyone gets a loan, provided the Schufa is correct and even that can be ironed out if the score is not high enough, with a good income again.

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AI@Alpaca-Invest

2Yr

Dear Lara, I find your article very exciting and the topic is open to discussion. For me, the comparison with Muhammed Yunus is very questionable. The system of the Grameen Bank was completely different and also their use. You speak of financial inclusion? What do you mean by that? That we all have the same wealth? That the gap between rich and poor is getting smaller? How people in Germany live in poverty or poor conditions because there is a lack of education and the money that is available for consumption is wasted. In Bangladesh, the concept was used so that people could afford food or drinking water. My generation and those who follow have rather the problem that they have developed an unhealthy attitude to consumption. For me, a very clear no!

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Lara@larryc

2Yr

@Investingforfreedom I think one should differentiate: Of course, there are people who have little money and would buy consumer goods with a loan, but there are also people who need a loan to enable education (I understand this to include rent, food and drink, if you leave home as a young person, for example, to study at a university).

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Lorena@Lorena

2Yr

Interesting topic! I think that this only combats symptoms, but not the cause. We should start with financial education, I would worry that otherwise this makes debt even more attractive

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Moritz@leveragegrinding

2Yr

@Lorena well, also for education (study) needs possibly the credit. my professor has right well argued that it would make sense to make the study more expensive, so that the entry hurdles are again higher, but at the same time more money similar to Bafög to pay out to still give everyone the opportunity, but to make it a little more difficult. so a small level of effort before starting to build, I finds not so stupid.

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Lorena@Lorena

2Yr

@leveragegrinding I see education loans and comsum loans separately from each other

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Moritz@leveragegrinding

2Yr

@Lorena well financial inclusion can mean both :)

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Lorena@Lorena

2Yr

@leveragegrinding NÖ

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DonaldTruck@DonaldTruck

2Yr

I agree with you that microcredit can counteract poverty. But they can. However, the subjunctive of this statement is the fine line between your example and thousands of others. If these credits are used for the foundation or something similar, the added value is certainly positive on average. As soon as they are consumed for this purpose, it is nothing more than aiding and abetting private insolvency (at least for people who are lucky enough to live in a country like Germany, where society then helps to bear the debts of a provatinsolvenz). Otherwise, you can only hope that someone else has built a bridge with his Milkrokredit, which you can use all-purpose. As hard as it sounds now, the whole concept needs financial education to be fruitful. Rarely does this go hand in hand. Rather, people unload money with a wheelbarrow and wonder why this is not enough.

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Fetzen@Fetzen

2Yr

Yunus was originally about microloans to GROUPS so that poor women in rural Bangladesh could buy livestock. The microfinance system has since gotten a bit out of hand. A policy that requires banks to lend to at-risk groups must also consider what those loans are for and how to secure them. This is not a free-for-all Ps: I work on these things, have lived in Bangladesh, and have met Yunus.

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Lara@larryc

2Yr

@Fetzen Cool that you already met Yunus! I think he is a very inspiring personality. You are right, the microloans were given to groups and not to individuals. I find the concept really exciting, because it also created a community and people motivated each other to pay back the loans.

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Kevin E.@KevinE

2Yr

I think this money is much better spent on (good) school education for everyone. The school books and the bus may also be free of charge (at least I was allowed to pay for three years from the 11th grade - so much for equal opportunities). In principle, I think it is important that everyone receives a good - also financial - education. I can say that for the most part I was very lucky with my parents on this subject. Less because of the stock market (they were very badly positioned for a long time), but with the handling of money. 1. don't buy anything you can't afford. 2. if possible, think twice if you really need / want it. 3. try to achieve your goals in life yourself. Especially the last point has brought me further. I have accepted no more money from my parents from my 18th birthday. I lived there for free, that was already a big benefit for me. I bought my first car (1.800,-) by myself, and I was able to finance my education and my studies without any further help. This has brought me much further in life than any loan.

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Lara@larryc

2Yr

@KevinC Hi Kevin, I agree with you! There should be much more investment in financial education, preferably already from high school, so that everyone has dealt with the subject!

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Krynt@Krynt

2Yr

We saw how that turned out in 2008. In the credit crunch

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Dennis@GordonGekko83

2Yr

What comes to mind spontaneously is. What risk can banks be trusted with, especially since it is usually the taxpayer who is ultimately responsible for the banks' mistakes? And that can not be right! An important point, which has already been mentioned, around what kind of loans we are talking here?! Is it the vacation or otherwise (senseless consumption) that does not help one out of poverty or is it a further education, a business start-up, etc. that is to be financed?

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Lukas@Nike7

2Yr

This already exists: Micro finance. It is not obligatory. But it is often available in countries such as Pakistan. The banks even do it voluntarily. Personally, I don't think much of it. Nobody should be forced to lend money to someone. Especially not, since the interests of other bank customers must be taken into account.

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AI@Alpaca-Invest

2Yr

@larryc what I not only do not understand? You ask a question in the room and there is no participation on your part in the discussion?

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Lara@larryc

2Yr

@Investingforfreedom I was unfortunately flat the last few days. Am just reading all the comments :)

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TeilzeitKapitalist@TeilzeitKapitalist

2Yr

It is simply not realistic to expect that banks should be required to lend to low-income people. This would enormously increase the default risks for banks and ultimately they could jeopardize their own financial stability. 😕 It is important that lending is based on creditworthiness and repayment ability in order to maintain the integrity of the banking system. Instead of a commitment, we should focus on providing education and financial assistance to help people improve their financial situation and access traditional financing options. 💪💼

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Deleted User

2Yr

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DonaldTruck@DonaldTruck

2Yr

@Mauromar you are right. I am very curious how our society will deal with the bursting hypotecs of all those who, with a household income of 2.5-3t€ have a 500t€ and more property with 5-10 years fixed interest rate over 35 years to be fully financed and how the market then develops locally. Probably once again everyone else is to blame. In particular, those who decide even with high 4 to 5 digits on the note consciously against an almost vollfinnanzierung.

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Deleted User

2Yr

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DonaldTruck@DonaldTruck

2Yr

@Mauromar Oh nice. Switzerland is becoming more likeable to me every day 😅 well, but that's also because you can get a one-room apartment in Zurich for 500t€ and an EFH here 😂👍

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