Microlending Could be the Answer to Big Banks’ Image Problem
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- By Robert Kiyosaki
- April 1, 2013
Below is Robert Kiyosaki’s full response to our April expert roundup — see all the expert responses to our question: “What one major change do banks need to make in order to regain the trust and confidence of Americans?”
Have the reputation of banks been damaged?
That depends upon who you talk to. For the rich, the big banks are their best friends. With low interest rates and banks handing out money to anyone with strong financials, banks are loved by the rich.
But if you talk to savers who are earning a negative interest rate on their savings (when inflation is factored in) and people who lost their homes during the last down turn in the economy, banks are mean ugly giants.
Making matters worse, the U.S. government has failed to prosecute any banker for corrupt practices. Most taxpayers know that they are the ones who are paying for the big bankers’ bonuses and bailouts. And, in their eyes, that stinks.
So what can banks do?
Micro-finance seems to be the new global trend. In China, an e-commerce giant Alibaba Group launched Alifinance, which lends to small Chinese businesses and is expanding to make micro-loans to consumers.
In China, huge Chinese state banks channel cheap capital only to large state-owned enterprises, shunning everyone else. Alibaba recognized this under-serviced market of small businesses and consumers and is growing Alifinance, its SME financing arm, into a powerful competitor.
As expected, the large Chinese banks are lobbying to shutdown Alifinance. I am afraid the same thing would happen in the United States, if Amazon, eBay, Yahoo, or Virgin, followed in Alibaba’s footsteps.
If one of our big banks, like JPMorgan Chase or Wells Fargo, went into micro-finance they could lend small sums of money to millions of little businesses and people. By servicing this underserved market, they would build up a database of responsible micro-borrowers and cull the cream. Anyone in business knows that one of the greatest assets of a business is a database of responsible customers and their lifetime value.
The bank could then work hand-in-hand with the responsible and well-managed micro-businesses and micro-customers, servicing their needs as they grew.
Unfortunately in the world of big banks, “Too big to fail” seems to mean “Too big to care” — and that is the perception problem with the banking industry today.