Your chance to save - and serve the world's poor

Steve Lodge reports on the new account from Triodos, a bank that only lends to 'ethical' projects
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Triodos Bank, one of only a handful of ethical banks in the UK, has launched a savings account whose deposits will provide small loans to individuals in developing countries for projects aimed at helping them to work their way out of poverty.

The idea is to help individuals who do not have sufficient security to get loans from local banks or who would otherwise have to resort to loan sharks, but at the same time to give UK savers a reasonable return.

The North South Plan is the bank's latest targeted savings account; earlier this year it launched its Earth Saver account with Friends of the Earth, under which deposits are lent only to green energy projects such as wind farms.

North South pays savers interest starting at 3 per cent gross on balances of pounds 300 on 33 days' notice and 3.75 per cent on 90 days'.

Most savings accounts offer little or no control over where savers' money is lent, but Triodos, which makes loans only where it sees the prospect of social or environmental improvement, is building up a range of targeted accounts that carry the strictest ethical criteria available through any public savings institution in the UK.

Aside from Earth Saver and North South, its Dana account is aimed at Buddhists and will lend only to Buddhist projects; it also has an account that will lend only to social housing projects, and it is planning an account aimed at supporting organic agriculture.

The bank is small - it has only 2,200 savers in the UK - and interest rates are not as high as those available from some "unethical" institutions, although in some cases they are reasonable. With North South, the interest on low balances compares well with those of many non-ethical accounts. For higher balances the rates look less good: for example, for pounds 5,000 on 33 days' notice, the rate is 4 per cent gross.

The deposits will provide microcredit loans to poor people in the developing world to buy such things as tools to help them earn extra income. The loans - as little as pounds 50 for three months - are provided via local specialist partner organisations, which also provide training to poor entrepreneurs. Instead of traditional security, partner organisations use such assessments as an individual's reputation in the community, says Triodos. These organisations include Tulay Sa Pag-Unlad in the Philippines, which has made more than 10,000 loans to poor people and claims a 96 per cent repayment rate.

The interest paid on the North South Plan will not directly depend on whether loans are repaid. Instead, rates are set to look reasonably competitive with the general savings market and are paid for, Triodos says, by the commercial rates of interest it charges the partner organisations. If they wish, savers can also donate their interest or even part of their capital to help fund the work of the partner bodies.

Triodos is a Dutch bank, now more than 10 years old, which operates UK accounts by post through its Bristol office. Deposits and withdrawals can also be made through high-street banks.

It is one of the few ways for savers to direct the use of their money. The Co-operative Bank and the Ecology building society are the only other "ethical banks" in the UK. The Co-op, however, is more about avoiding making loans to unsavoury borrowers rather than positive targeting, although it also offers a range of charity-linked credit cards enabling users to directly support particular causes. Money saved with the Ecology building society is used for general property lending, although the society does concentrate on environmentally friendly properties - those built with old bricks or used timber, for example.

For savers who want to put money into the stock market, there are also investment funds that screen out companies which, for example, are big polluters. Again, however, these investments tend to be about avoiding the worst-offending companies rather than actively supporting the most ethically oriented.

One alternative for the most active ethical investors is to invest directly in ethical businesses. But as with investing in any one share, this is more risky than investing in a fund or supporting a range of projects through saving in a targeted account.

A book published last week* also underlines the lack of opportunities and mechanisms for direct investment, as well as warning that returns are likely to be modest and the risks disproportionate.

Examples the book lists of organisations with their own shares or some other form of investment medium include Bioregional Charcoal, a private limited company which promotes the supply of charcoal to national retailers and aims to promote the sustainable use of woodlands; The Centre for Alternative Technology; Out Of This World, a chain of ethical and environmentally sound shops; Paperback, a distributor of recycled paper; and Traidcraft, a "fair trade" organisation.

q Triodos Bank 0500 008720; *'Ethical Investment - a Saver's Guide', by Peter Lang (Jon Carpenter Publishing, 01608 811969).