Early in 2008 I commented on the shaping of a post-imperial world where the flow of investment funds, and coporate takeovers, was coming from the East to the West, with China, India, Russia and the Gulf States recycling $ reserves and new found wealth into weak and failing companies in the West.
The catastrophic implosion of the US financial system in the last year has merely emphasised this change in the balance of monetary might.
So when Kiva, that beacon of social entreprenuership, decided to offer loans in the US itself, there was a huge intake of breath. The US needs microloans??!!!
Of course it does. How do small businesses get funded? Normally by people taking out second mortgages, borrowing from friends or ramping up credit cards. In fact I’m told many businesses fund cashflows problems using personal credit cards. Why?
Because banks have a model where they lend on housing as collateral…oh yeah that worked well…not.
The old fashioned approach to banking (one my father was involved in for 42 years) was lending to small business people and supporting them through the ups and downs of the business cycle. Investing in people and creating relationships of trust.
I think we are headed back to this and it’s peer to peer lending that is making this happen. The web itself has allowed these bonds to be built, that’s what networks are after all. Lots and lots of micro connections. Isn’t that the amazing thing about the web? It’s so huge and vast yet it’s simply a conglomeration of molecules connected together.
I know I’ve been bagning on about this for ages but banking, like media, will be forced to change. The micro world is causing new networks to be created, new bonds to be formed and new efficiencies to be found.
Harnessing the power of the web is allowing this to happen.
Microfinance has shaken up the banking world. I enjoyed reading Matt Flannery’s piece on the Kiva story.
Microjustice will no doubt change the legal world in due course.
We already have microrelationships, micromedicine surely on the way.
And the biggest prize of all………..microgovernment.
The change is coming, the inexorable march of system reorganisation is humming away in the background. It’s not top down, it’s an unseen mass movement with no control function. A pure chaotic system in action, free to develop and receive feedbacks in real time.
Who would have thought a lender from Domenica would be funding a borrower in the US.
Yes times are changing.
