Investing in Ethical Financial Products part 3
Nov
01
Looking at tending practices
The biggest impact any bank or building society makes is through its lending policy. If it doesn’t have an ethical lending policy it may lend to businesses that trade arms, harm the environment, and exploit workers.
Even if you don’t have any savings and simply need a bank to have your salary paid into and to pay your bills from, be sure you’re happy with that bank’s lending policies. If not, move your account and tell your bank why. If you have savings, choose a bank or building society that won’t lend them to any organisations you disapprove of.
An example of an ethical lending organisation is Shared Interest, a co-operative lending society that aims to reduce poverty in the world by providing fair and just financial services. It pools your investment with money from other savers to facilitate fair-trade practices in which producers are paid a fair amount for their labour and products.
Shared Interest works with fair-trade businesses all over the world, both producers and buyers, providing credit so that producers get paid in advance and can therefore afford to produce their goods and make a better living for themselves and their families.
Taking the interest out of banking
Whether or not you’re Muslim you may find that the ethics of Islamic banking suit your needs. Basically the charging and paying out of interest on accounts and investments is forbidden. You make money on your savings because they’re put to work in real transactions. Your money is used to buy a real stake in a company and as that company makes money you get a share of the profits. The companies invested in have to conform to Islamic beliefs, so you’re assured that you won’t invest in firms that produce tobacco, alcohol, or pornography, for example.
If you borrow to buy a home, the bank buys the home for you, and you pay rent to the bank each month plus a bit extra to buy a share of the property. Gradually you own more and more of the home until it’s all yours.
You can’t get an overdraft on a current account or receive interest through an Islamic bank.
Islamic financial products are mainly available through the Islamic Bank of Britain but other high street banks are getting in on the act with their own versions. Lloyds TSB has an Islamic current account and Islamic mortgage in England and Wales, and is launching an Islamic student account. HSBC bank offers Islamic home insurance policies and there are more Islamic accounts coming on stream from other banks. Shop around as with any other account to find the one that suits you best.
Banking on an alternative
Banks and building societies aren’t the only places for your money. Credit unions are financial co-operatives owned and controlled by their members. They offer savings and great-value loans plus they are local, more likely to follow ethical guidelines, and know what their members want.
Members of each credit union have some sort of common bond which determines who can join it. They may work for the same company, live in the same area, or belong to the same club, church, or trade union. Members save at least a certain amount regularly and once you have more than the threshold in the credit union, you can apply for a loan. Credit unions usually offer a cheaper rate than a bank loan and there are no hidden charges or penalties for repaying the loan early.
The idea of credit unions is people helping other people. If someone’s in debt, the credit union may be able to give him or her a loan to help that person get out of debt. Credit unions can help when banks can’t or won’t. You may find that you can borrow from your credit union to adapt your home to be more green.
There are almost 400 credit unions in the UK with around 400,000 members in total, holding about S380 million in savings with another S350 million out on loan.
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