Thursday, April 2, 2015

Alternate banking

Over Lent, Martin and I have been doing a study series called the Household Covenant.  It looks at seven areas of daily life (work and leisure, consumption, giving etc.) and considers what the Bible has to say.  You are then asked to make a commitment to change one thing in each area over the next 12 months.

Last week's topic was 'savings and investment'.  In considering our commitment, we looked at what types of savings and investments we currently have.  These are:
  1. money for day-to-day use (currently with the ASB)
  2. medium-term savings for emergencies and replacement of larger assets (these were with Prometheus, a non-bank deposit taker that invested in environmental and social projects, but are currently with the ASB and the receivers as Prometheus has recently gone into receivership)
  3. Kiwisaver (currently with SuperLife Ethica and Grosvenor Growth SRI)

From early next year we also expect to start to accumulate retirement savings.

We are comfortable with the ethics of our Kiwisaver funds, having examined this in some detail last year.  We don't think it matters too much where we put our money for day-to-day use: the sums are too small to be very important.  So our commitment from the study was to find somewhere to put our medium-term savings where they would at least do no harm, and hopefully do some good.

To do this, we looked at what alternatives to regular banks (including the New Zealand-owned banks*) are available.  I've listed out what I've found below, so that you can make use of the work I've done if you'd like.

* You can do things that aren't pro-social in New Zealand just as well as in Australia, so just being NZ-owned isn't good enough :-)

Building societies

These are organisations that are owned by their members, and the money in them is only loaned to members, not to businesses.  They offer all the normal banking services, so if we put our medium-term money with them we'd be looking at savings accounts and term deposits.

The core business of building societies is mortgages: I'm not really interested in funding the housing market (although I acknowledge people need somewhere to live), so we probably won't be going with one of these.  If you are interested in doing so, however, the dominant building society in New Zealand appears to be SBS.

Co-operative banks, mutual societies and credit unions

The differences between these are beyond me!  They are all owned by their members and loan money exclusively to them.  Often they have a regional focus.  They do all the normal banking services (although not all offer mortgages), and seem to be a little less secure and a lot more friendly than a regular bank.

In general I'm not hugely interested in these - they seem like a good 'do no harm' option, but not necessarily an option that does a lot of good.  The one that stood out to me was Westforce: they focus on West and South Auckland and Whangarei, so may be worth investing in as a way to provide liquidity into relatively poor areas or New Zealand.

Other credit unions and co-operatives are listed below.  I think this is a comprehensive list of all such organisations that have open membership:

Community banks

Community banks have ownership vested in a community trust so their profits go to community projects.  The only one in New Zealand appears to be TSB, which distributes funds in Taranaki.

Other non-bank deposit takers

Non-bank deposit takers seems to encompass a wide range of institutions.  A full list of them is available here.  Three were of interest to me:
  1. NZ Bible Society.  They offer term deposits.  The profits they make on this money is used to fund their work of translating, publishing and distributing Bibles.
  2. Baptist Savings.  They offer term deposits and on-call funds.  They use this money to provide loans to Baptist and Presbyterian churches.  I'm slightly leery of this as I suspect that most loans are used to fund buildings and I'm a bit sceptical of the need for buildings.
  3. Quaker Investement Ethical Fund (QIET).  They offer 6-month term deposits, after which funds are available on-call.  They loan this money to "ethical" businesses (they've long supported TradeAid), to small environmental projects and to people suffering financial hardship.  They offer a range of interest rates so you can choose a below-market one if you want - this enables them to make below-market-rate loans.

Other options

A few other banks stood out to me.

Firstly, RabobankDirect.  They invest exclusively in New Zealand agrigulcuture. I think NZ doing agriculture well is important for the world (as we're land and water rich and the world needs lots of food), but I'd like to know more about quite what they invest in: if it's mostly dairy conversions then I'm not interested.

Also, two of India's 'big four' banks have a presence here: Bank of India and Bank of Baroda.  As these banks are state-owned, their profits go to the Indian government.  Could investing with them be a way of helping development in India?

Final comment

In the process of doing this, I learned that three of the ethical Kiwisaver Funds I looked at earlier (SuperLife Ethica, Craigs Investment Partners SRI Fund and Amanah) can also be invested in outside of the Kiwisaver scheme.  We will consider these next year when we decide where to put our retirement savings, along with seeing what else might be available.

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