William Kay: Banks must do more to help those people hit by the tsunami disaster

Since the tsunami disaster, much has rightly been made of the millions of pounds being donated by individuals and companies to provide the survivors with emergency relief. But British banks have been scandalously slow to mobilise the most powerful weapon at their disposal: finance.

Since the tsunami disaster, much has rightly been made of the millions of pounds being donated by individuals and companies to provide the survivors with emergency relief. But British banks have been scandalously slow to mobilise the most powerful weapon at their disposal: finance.

As luck would have it, the United Nations has declared 2005 its International Year of Microcredit, which is aimed at making financial services more accessible to poor and low-income people. It is intended to promote innovative partnerships among governments, donors, international organisations, the private sector, and microfinance clients.

Microfinance, or microcredit, is what it sounds like: small loans at low interest rates to enable poor people to better themselves by trading in anything from trinkets to mobile phones. Grameen Bank in Bangladesh has shown that it is possible to lend to the poor without charging penal interest rates or suffering from crippling bad debts. It has benefited millions of people in the Third World.

As the Year of Microcredit was signalled months ago most of the international banks have departments set up, some in India and South-East Asia. So you would have thought it would not be too difficult to divert this effort to the areas where finance is most urgently needed - on the battered shorelines, to help shopkeepers, café owners and fishers to restore their premises and boats. Several banks, including Barclays and Lloyds TSB, are using their links with Opportunity International, an American Christian microfinance group, to funnel money to the stricken areas. Beyond that, however, the ones I spoke to admit they haven't considered helping the area get back on its feet with finance to revive businesses that have long been profitable and are, therefore, a good credit risk.

This apparent caution is echoed by the banks' microfinance initiatives in the UK. Good work is being done at a local level, but beyond the flagship projects it is patchy. The banks' resources are such that you would think they could drive the loan sharks and doorstep lenders out of business. But the Office of Fair Trading and Department of Trade and Industry are constantly inquiring into an area of credit that is remarkably resilient despite being grotesquely overpriced.

It is bizarre that a public company such as Provident Financial can issue a credit card charging up to 60 per cent interest, while the banks slip money to credit unions and money advice centres to lend at heavily subsidised rates. Sharks routinely charge 200 per cent or more.

This suggests a combination of factors: ignorance, fear of banks, and scarcity of the cheap deals. You don't have to see every doorstep borrower as someone out of Shameless to argue that it is easier to borrow in the pub than go through the formalities that even a credit union requires. The UK banks' arthritic response to the financial vacuum left by the tsunami appears to be paralleled by their attempts at microfinance in their own back yard. Yet the need, in different ways, is just as urgent.

* I was flattered to see my old friend Edward Bonham Carter, the guiding light of Jupiter Asset Management, predicting that the hippo stock market I was the first to spot 15 months ago will wallow on into 2005.

The hippo is the modern successor of the traditional bull and bear markets. While they go up or down the hippo flounders around, occasionally breaking surface, mostly not doing too much. But it is time to move on.

I expect 2005 to be the stockmarket year of the cat. Curled up asleep for lengthy periods, every so often it will lazily stretch itself, jump up on a table, tiptoe along for a while, and then jump back to floor level again. And there is always the chance that it might find the door to the cellar.

Falling dollar brings golden opportunity

The latest relapse in the gold price could turn out to be an excellent opportunity to clamber aboard the yellow metal for what should still be a profitable ride this year. The price has come back from a peak of $453 an ounce to $428 on profit-taking, but this is being counter-balanced by fresh sources of demand coming into play around the world.

In China, the Caishikou department store has been beseiged by investors wanting to buy gold bars. And the State Bank of Vietnam has approved trading centres being set up in Hanoi and Ho Chi Minh City for formal gold trading. But the real success in opening up the gold market, previously the preserve of the privileged few, has been down to the introduction of Gold Bullion Securities (GBS). These are shares, each backed by a tenth of a fine troy ounce of gold bullion, held on trust in London vaults by a custodian.

GBS were first traded by the London Stock Exchange just over a year ago. But the big goal was to have GBS quoted in the US and Asia. With virtually no fanfare, trading began in New York in November and has already dwarfed the volume of business in London.

The next step is an Asian trading base. James Burton, the chief executive of the World Gold Council, tells me that will probably be established this year in Singapore, Hong Kong or Tokyo. While the US dollar keeps falling, demand for gold is likely to rise as investors scramble to put their assets in a portable, universally accepted store of value. Gold is still the favourite bolthole.