Vol.4 No.4, 25 March 2004

Bank Operates Without Interest


Imagine paying off a $200,000 mortgage and ending up with not only a mortgage-free house, but also $200,000 in cash.

In our interest-driven banking system, it would be inconceivable.

But for 26,000 members of Sweden's unique JAK Bank, the dream of getting rid of interest has become a reality.

Bank co-founder Eva Stenius is in Otara this week to speak at the Auckland Eco Show, a five-day "tent city" of talks, demonstrations and displays on sustainable living, housing, energy and agriculture.

Mrs Stenius said borrowers in the member-owned JAK Bank earn the right to interest-free loans after saving with the bank - also without earning interest - for several years.

Then, if they take out a $200,000 mortgage, they have to keep up repayments until they pay back the $200,000 loan plus up to a further $200,000 - a form of forced saving which means that each borrower in turn finances the next borrower.

The big difference from interest-based banking is that, instead of that extra $200,000 disappearing in interest payments to the bank, the borrowers ultimately get back the money they were forced to save.

"It's among friends. We are circulating the money amongst ourselves independent of others who want to exploit us," Mrs Stenius said. "It is based on humanitarian values rather than profit."

The system depends on people being willing to save before and after taking out a loan without receiving interest.

Mrs Stenius says JAK members are willing to do that, to qualify for an interest-free mortgage themselves, and to help their families and communities.

"You have complete control over where your money goes," she said.

"Maybe you would like to give your savings points to your children for their education, or to help fund starting a business, or you might donate it for JAK to invest in community development or women's enterprises or sustainable development.

"A typical JAK member is one with ethical values. Quite a lot are my age [60s] and many are well educated. And there is a big group with less money who are into alternative living in the countryside.

"There are also a lot of immigrants from the Muslim community because of the Muslim law of no interest."

Mrs Stenius and her then-husband, Per, helped establish the Swedish JAK Bank in 1970, inspired by a similar Danish bank which later merged with a larger commercial bank.

The name comes from the Swedish words Jord, Arbete, Kapital - land, labour and capital, "the three cornerstones to economic development".

The Swedish bank learned from the mistakes of its Danish predecessor, which ran out of cash because too many members wanted big loans as soon as possible.

In the Swedish system, a person's loan entitlement is calculated on a strict formula based on "savings points".

"We are the safest bank in Sweden," Mrs Stenius said. "You can't just have a big loan - you also have to contribute."

Administration costs are covered by a $40 annual membership fee and a one-off loan fee based on a formula which works out at the equivalent of about a 2 per cent annual interest rate.

The bank has 30 paid staff in two offices, and members do their banking over the telephone.

But it also has 460 trained volunteers who organise lectures and exhibitions on sustainable development around the country.

For more information about the JAK: www.jak.se

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