March 26, 2009 1:42 AM

Personal Banking

During this time of banking failures and to misappropriation of funds, I thought that I would share with y'all another type of "personal banking."

Stable, institutional, banks are quite a new thing in non-Western countries. Back in the old days of Taiwan, banks didn't offer loans to common folk. If someone needed a loan, they would have to find a pool of friends that were willing to loan money. The number of people in the pool equaled the number of months that the pool would continue for. Each month, people would put in a set amount of dollars. Say.. $10. Then, each person would go around and say what percent interest they would pay to get the pool of money for that month. A offers 10% interest, B offers 20% interest, C offers 30% interest. C wins and becomes a "taker". So then everyone except for previous takers takes back $3 (cuz that's 30%), and C takes all the money left. The next month, the cycle repeats, and people who have no yet taken can bid for the new pool of money. So the later that you decide to be a taker, the less interest you will usually need to pay. Also, the first taker, who is the person who set up the pool, gets the money with no interest. One of the dangers of this system is that it is built on trust (therefore everyone must trust the pool maker enough to jump in on this. If anyone person decides to just take the money and run for it, people normally stop paying in. In addition, the pool maker must repay the rest of the people who did not have their turn--which is why there was no interest req for the pool maker. Anyways, I just thought that this would be an interesting psychological game for the X-labs to carry out. ^^


K. Lee | Permalink | Comment on this article | Comments (0)

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