Feel­ing a bit loan shark­ish to­day?

The Tribune (NZ) - - YOUR HEALTH - ROB STOCK

How would mak­ing a profit by lend­ing it to peo­ple at 39.99 per cent sit with your moral val­ues? What about 28.7 per cent? Would rates like those make you feel a lit­tle bit… well… loan shark­ish?

Both are rates on loans made by in­vestors through Har­money, the coun­try’s largest peer-to-peer len­der.

Har­money is es­sen­tially an on­line match­maker be­tween in­vestors and bor­row­ers.

It takes loan ap­pli­ca­tions from bor­row­ers who want cash for things like debt con­sol­i­da­tion, hol­i­days, re­place­ment cars and home ren­o­va­tions, and de­cides whether the would-be bor­row­ers would be able to re­pay. It then de­cides what in­ter­est those bor­row­ers should pay on their loans.

Each ap­proved loan is then pre­sented to in­vestors – of­ten or­di­nary folk with a bit of money to in­vest – and, if they like what they see, they can sup­ply fund­ing for the loan in $25 chunks.

That gen­er­ally means each Har­money loan is funded by mul­ti­ple in­vestors, which each end up with port­fo­lios of chunks of loans. The riskier Har­money loans earn more, 20 per cent, or even 30 per cent.

I spoke with a Har­money in­vestor re­cently, who told me he steered away from the re­ally high in­ter­est loans as he didn’t want to feel loan shark­ish.

The phrase loan shark im­plies more than just high in­ter­est. When I hear it, I hear knuck­les crack­ing and the sound of a base­ball bat be­ing men­ac­ingly tapped against the leather-gloved palm of the loan shark’s hand.

Nev­er­the­less, like the in­vestor, I think I would baulk at fund­ing a loan at that rate, but then with Har­money in­vestors get the choice of which loans they fund.

Through other in­vest­ments, the moral side of in­vest­ing can be far less vis­i­ble.

Take Ki­wiSaver. Most large Ki­wiSaver funds in­vest in a mix of shares, bonds and cash. Some of the com­pa­nies whose shares those funds in­vest in may not be ones all the funds’ in­vestors would feel com­pletely happy about.

Take two sub­jects as po­lar­is­ing as soft drinks and gam­bling. Soft drinks have con­trib­uted to an obe­sity epi­demic and grim mouth­fuls of teeth in poorer bits of town, and gam­bling is

some­thing some feel pretty poorly about.

But Coke and gam­bling com­pa­nies like SkyCity are in many, many Ki­wiSaver funds.

Sure, you can choose a so­cially re­spon­si­ble in­vest­ment fund, but even that’s com­plex. You’ll may find they won’t in­vest in com­pa­nies that don’t in­fringe your per­sonal moral code like al­co­hol-mak­ers.

Even less trans­par­ent is a term de­posit at a bank. Who knows what crim­i­nals, ex-crim­i­nals, broth­els, on­line porn busi­nesses and pol­luters your bank is bank­ing?

We are all moral be­ings, and have to make moral choices within the con­texts of the so­ci­ety in which we live.

Our so­ci­ety de­mands we save and in­vest or face a mis­er­able re­tire­ment. I re­spect an in­vestor who makes con­scious choices to avoid in­vest­ing in things that make them feel loan shark­ish.

Their moral money stance beats that of the com­mit­ted an­ti­smoker who un­wit­tingly makes money from Bri­tish Amer­i­can To­bacco through their Ki­wiSaver fund.


Would lend­ing money at nearly 40 per cent for profit make you a loan shark?

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