Debt into Community Investment
The interest payments on debt is diverted from financial institutions and invested in local communities.
Debt is common everywhere, particularly credit card debt. Interest payments from credit card debt earn profits for credit card companies. It's a simple system.
Standard Debt Cycle
Standard Investment Cycle
Proposed Debt-to-Capital Cycle
Kiva, the micro-lending organization, brings individual small investors together to fund projects and opportunities.
The question at the root of this concept is "What if the interest from debt payments could become a benefit to a community instead of only profit for credit card companies?"
The credit card debt of groups of people is combined. These groups would be formed from people in common organizations or programs. Examples of groups include parents of students from the same school, religious congregations, library users, apartment tenants, public housing tenants, or neighborhood organizations. The following steps explain the concept:
1. The individual credit card debts of these members is combined to form an investment opportunity.
2. Investors, using the Kiva model, put together money that covers the combined debt of the group of people.
3. The credit card company is paid in full using the investment money.
4. Monthly payments from the credit card holders continue. The payments go to the investors. A standard interest rate is charged. This rate should be what responsible credit card owners receive or lower (i.e. fair and allow people to pay off their debts).
5. The money from the interest rate is split up. A small amount (5%) goes back to the investors. This payback could be similar to a bank savings account. The rest of the interest goes toward a project that directly beneficially impacts the people paying the debt.
Examples of projects include:
Apartment building: energy saving measures (insulation, HVAC equipment improvements, tight windows) are paid for. This will result in lower energy bills for tenants. (Could be complimented with a savings program to put the money saved into accounts to fund future education or small businesses).
Schools: classroom materials, computer labs, job-training resources, business incubator.
Religious Organizations: community center, computer lab, outreach programs.
Libraries: computer lab, literacy program.
Expectations must remain reasonable. The capital raised for the projects/opportunities would be modest. Investors would have a long pay-back period with little return. And with any early concepts, many variables not yet included.
However, this is an attempt to think about making use of a common financial drain (paying credit cards every month) and using it to improve some aspect of your life/community.
What resources (money, time, people, technology, etc) will your concept need to be successful?
An organization to manage this entire process. To combine donations, pay the initial debts, handle monthly payments, and distribute money back to the investors and projects.
To be successful, many small donors, or a few large donors will need to invest in the idea of people paying off their debts.
Community leaders and leaders of community amenities will be needed to determine what projects and opportunities are feasible and needed.
What steps could you take to implement this idea today?
Discuss the concept with financially knowledgeable people to determine feasibility and realistic projections.
Discuss the concept with legally knowledgeable people to determine what the contracts would entail.
Discuss the idea with foundations to gauge their interest in funding.
How can your idea be scaled so that it's implemented in cities around the world?
The scale depends on the number of investors, debtors, and size of project. Other types of debt could be considered (home mortgages: would keep people in their house to maintain communities).