Money: Savers show their heart

If you want to invest while helping others, consider social banking, says Faith Glasgow
Many of us fret vaguely about environmental degradation, human rights or sustainable development. We want to do something to help; we might even support Oxfam or Greenpeace, and perhaps invest in an ethical fund or two. But we can also make money work hard in the cause of developmental issues while it is earning interest. It is a philosophy that is popular in the US and in parts of northern Europe. Now it is taking off here.

Social banking, as it's called, means financial institutions can use savers' deposits to lend spec-ifically to appropriate enterprises (which may otherwise find it hard to get backing) at fair rates, while still paying their customers a decent rate of interest.

For many years social banking in the UK was dominated by the Co-operative Bank, which takes an ethical stance on all its loans and issues a wide range of affinity credit cards - for Greenpeace, Amnesty International, Help the Aged and Oxfam, among others.

Since 1995 the social banking arena has been broadened by the presence of the Dutch-founded Triodos Bank; it takes a proactive approach in ensuring its savers are able to help the sector (or even a specific organisation) where their interests lie. Triodos has seen savings growth of 50 per cent in the UK alone during 1998, so its efforts appear to be paying dividends.

The bank stresses that it will "lend money only to businesses, projects and charities delivering real social and environmental benefits". These include organic farming projects, renewable energy businesses, sustainable transport, social housing and complementary healthcare organisations and Third World fair trade companies.

What does such a policy mean from the point of view of the bank's savers? "Our general policy is to pay savers reasonable and competitive interest rates," explains Susan Jenkins, a Triodos spokeswoman. "On the whole we don't aim to match headline rates, partly because they tend to be short- term sweeteners to attract customers and we feel that's rather dishonest. But we want to offer a good spread of rates so that customers can make the choice. They may focus more on returns, or they may opt for a greater social commitment and rather lower rates."

The Social Investor account is currently paying 3.5 to 4 per cent gross on pounds 5,000 plus, depending on how much notice you're prepared to give. The Young Saver account (designed as a long-term fund for a child's future) pays the same rates across the board. A mini-cash ISA is also available, paying 5 per cent tax-free.

If you want to channel funds into a specific social cause, you may opt for one of several "partnership accounts". These include the North.South plan, which provides so-called "microcredit" for small-scale Third World businesses and social projects. These modest loans at decent commercial rates enable them to establish and expand their enterprises without being crippled by debts to local loan sharks. Savers into the North.South plan earn 2.75 per cent gross on pounds 5,000 at 90 days' notice.

Another option is the Organic Saver Account. Through this, funds have been made available to such projects as the Organic Milk Suppliers' Co- operative, the Henry Doubleday Research Association (Europe's largest organic garden association) and the organically based Hambleden Herbs. This account pays 3.5 per cent at 90 days' notice on pounds 5,000.

"We find people prefer these pooled accounts where they don't have to nominate a specific cause," says Ms Jenkins. "But some savers with a particular project in mind do opt for the Social Target account." Under this, they can choose how much of an interest rate cut they are prepared to stomach, and the bank then lends at a correspondingly lower rate to the chosen project.

If you are prepared to accept lower financial returns for a greater social benefit, you might consider making an investment with Shared Interest, a co-operative lending society set up in 1990 to promote the ideals of fair trade.

Again the money deposited is lent to Third World producers on fair terms. Usually the loan takes the form of credit so that the producers can finance orders for goods. But it has a knock-on effect, in that their profitability enables schools and other businesses to be set up.

Among the producers to have benefited from Shared Interest's efforts are Cafe Direct, whose coffee is sold in Oxfam shops and in supermarkets. Organic honey from the Tabora co-operative in Tanzania (also available in Oxfam shops) is another fruit of Shared Interest's involvement.

Because the society is owned and controlled by its members, they shape its loans policy. The flipside of this, however, is that if it makes a loss in excess of reserves from past years, the members are liable for the shortfall, while any net profits affect the level of interest they receive.

"Membership of Shared Interest will not make you rich," the literature says pointedly. "But we intend that over the long term the interest we pay exceeds any charges we make against capital, so that an individual member receives an acceptable annual return on average."

Normally, interest is fixed at 4 per cent below base rate; currently it stands at 1.25 per cent. The maximum investment is pounds 20,000; the minimum is pounds 100.

n Contacts: Co-op Bank, 0161- 832 3456; Triodos, 0117-973 9339; Shared Interest, 0191-233 9101.