Wealth Creation

WEALTH CREATION

The simplest creation of wealth is by way of a piggy bank. Setting aside a coin or two for a “rainy day” is fine when you have have a surplus of coins, but not easy when things are tight. All of us do this more easily together than we do singly. Surely, that is how a stokvel came about. Committing to save with others brings about the need to comply, to “not let anyone down”. “Stokvels” (known in the West Indies as “loan clubs”) are a good example of how much easier it is to save “together”.

Story:

In the factory of a large multinational corporationin Harlesden, London, a high percentage of the unskilled workforce were West Indies immigrants. As happens in immigrant situations, a few started out, and over time, pulled more and more of their countrymen and women into the firm. The immigrant population grew. Over years, some married, had children, and found the need to buy houses once they knew they would get permanent residence in England.

There was a problem, however. England, although there was no apartheid, nor any segregation in law, was a toxic place where banks were “mysteriously” unable to advance mortgage loans to black West Indian immigrants. So, the workers at this plant started a loan club. They worked out “how many people”, contributing “how many pounds”, for “how many weeks” from their wages, would take “how long to pay cash for a house”. The money was calculated, saved and used, and inside a decade, every “loan clubber” at this factory bought a house, paid for in cash.

Putting it another way, because of their … racism?, banks cost themselves the opportunity to earn interest on several hundred houses, and saved thousands for the imigrants who paid cash for their properties in Harlesden.

This was at a time when “conservative” (read Fascist?) Enoch Powell would bluster “you don’t have to live next to one” and so on, but Harlesden did not make a name for itself as a hotbed of crime or whatever. It quietly continued as a middle class residential area. Once people owned houses, banks found themselves “able” to loan money to the new residents. As usual with banks and loans, they only have money to lend when you don’t need it. The immigrant workers continued using loan clubs, patiently waiting for their payout turn to purchase cars, alter houses, and so on.

In practice, what were the details? Let’s say a Harlesden house sold for 2500 pounds back then. Weekly wages were around 8 pounds without overtime. The decision was they could afford to put 3 pounds per week into the loan club, and out of a total workforce of 850 people, there are 400 in the loan club. That’s 1200 pounds per week. Three weeks amounts to 3600 pounds, enough to pay for a house cash, with 900 poounds left over for expenses like electricity, bond charges, whatever. A house can be saved for bought and paid for, every three weeks. 400 members = 400 weeks. Divide by 52. That’s slightly less than 8 years.

So, wording it another way, in 8 years, 400 people own a fully paid up house. Not bad.

Bad luck, racist banks! The people got 400 houses without your loans! You should have been wide awake instead of lolling around … What? you were ‘having a midlands’? Too bad. No wonder an English banker tried to have a court order put in place to forbid people calling him a “banker” …