Investing In Microlending Could Add To Our Retirement And Change How We Help The Poor

One option for investing in ways that reflect our real values.

This is an edited version of something I posted a couple of years ago and still feel strongly about:

Through a variety of microlending programs, it is now possible to assist enterprising individuals both at home and abroad while still having those investments available for our own needs in later years. Meanwhile, our money is helping others in ways that offers them dignity and opportunity rather than simply charity.

This should be celebrated as our preferred option, one that deserves to become the retirement plan of choice for all justice-minded people. 

Too many of us, for too long, have been anxiously banking on our stock portfolios for our financial futures. By speculating in a largely consumer-driven financial system we have become dependent on the fortunes of Wall Street for our security. Even “socially responsible investing” (avoiding alcohol, tobacco and/or military related enterprises) still largely supports luxury and convenience related products and services that tend to benefit the well-to-do far more than those who lack the basic means of supporting themselves. 

What if our focus shifted from investments that are merely “socially responsible” to those that offer a "hand up" to those who truly need it?

But wouldn't that be a risky strategy?

Surprisingly, the default rate on microloans has been extremely low, based on the experience of organizations like MEDA (Mennonite Economic Envelopment Association), Oikocredit, the Calvert Foundation and other microlenders. MEDA, for example, often makes loans to partner groups of small scale entraprenuers committed to seeing to it that no one defaults as a condition for everyone remaining eligible for future loans. This kind of accountability, along with the determination of these borrowers to succeed in order to survive, adds to MEDA’s confidence that such investments are as safe, if not safer, than those in the stock market. 

But shouldn’t our retirement savings grow for us rather than providing a mere 1-3% rate of interest? 

In a capitalist system we always face the risk of future inflation reducing the purchasing power of our monetary savings. But in light of Christ's teaching on not storing up anything for tomorrow, period, is it too much to expect that we should be content with modest interest rates--primarily to cover the costs of administering our retirement funds? 

Since borrowing in Bible times was primarily done by people who were destitute because of famine or other disasters (rather than for capital investment in land or other means of production) any form of usury was frowned upon. In another tradition, Mahatma Ghandi condemned “wealth without work” as one of his “seven social sins.” How can followers of Jesus justify making easy profits by simply placing our bets on a gain-driven economic system, even if to "make our money work for us," or to "keep up with inflation"?

In our personal experience, when the economy took a nose-dive back in 2008, the savings our employers had invested for us in mutual funds lost a ton of value. But what we had invested in IRA’s designated for microlending remained secure. Besides, we had already enjoyed the benefit of reducing our federal income tax liability through those investments. For us, that seemed good enough.

If many of us were to transfer the bulk of our investments into microlending, we could have an immediately positive and dramatic impact on thousands of people’s lives. And if all devout believers worldwide were to do so, plus give generously from their store of wealth, extreme poverty could be virtually eliminated.

Is it Time to Bail Out Of Wall Street?

Regardless of our feelings about the “Occupy Wall Street” Movement, most of us are deeply invested in Wall Street traded companies. We have all become increasingly attached to an economic system heavily dependent on promoting self-indulgence and on amassing wealth through producing lots of products we don’t need and are often better off without. The level of consumption required to keep this kind of economy going is simply unsustainable for our planet.

The majority of Americans also do most of their investing for retirement in this Mammon-driven system.

In recent years Alma Jean and I have felt led to move more and more of our modest retirement funds out of Wall Street traded corporations and into microlending programs that benefit people in need by offering them a hand up rather than simply a handout. Glen Kauffman, financial consultant with Everence here in Harrisonburg, helped us do this.

Here are several of our reasons:

1) We believe such investments are more profitable. Even though the actual interest earned is a mere 1-3% (one can choose the rate), investments in microlending seem far more productive in terms of faith-based values. Since Alma Jean and I want our money to really “work for us” in ways that reflect Jesus’ priorities, we are no longer satisfied with just “socially responsible” investments (no alcohol, tobacco or military industries) that still largely subsidize and promote consumerism rather than being about meeting basic needs. We may not be able to be perfectly “pure” in our investment choices, but since we actually have a choice between becoming stakeholders in, say, some water bottling company somewhere versus in a food production coop that can help lift the poor out of poverty, the latter is our obvious preference.

2) Trading in stocks represents a form of speculation not unlike a legal form of gambling. Of course the odds are generally better, and we agree that all business investments involve risk, but business profits are normally made by at least producing actual goods or services. Trading in market holdings represents an attempt to create “wealth without work,” something Ghandi referred to as one of “seven deadly social sins,” in that no products or services are created in such trades, and no actual value is added. I can understand the concept of being paid a reasonable "rent" for capital used to grow businesses, and I realize there are shades of gray between simply being fellow investors (and sharing risk), on the one hand, and the other extreme of people engaging in speculative on-line or other trading that does seem like gambling to me (only with better odds--the house doesn't always win), and/or who are constantly checking their portfolios in hopes of fate or good fortune earning them record-breaking returns. And let's be honest, most of us haven't the slightest sense of actually being a stakeholder in the many companies that are using our retirement money, nor any real interest in affecting their policies. We primarily want one thing, optimal returns for our investment, as long as no obvious harm is being done.

3) We believe microlending programs are actually safer investments. When the economy tanked in 2008, none of our microlending investments were affected. While no investments are 100% safe, the default rate on these loans has been proven to be very low, while we see ominous signs of worsening national and international debt crises that threaten the security of our entire financial system. And when this Babylon falls, most current plans for retirement will collapse with it.

So we are left with the question of whether we will trust our fortunes with the already rich who are bent on becoming ever richer (and who are consistently condemned by Jesus and the prophets) or with the poor who are working hard to support themselves and their families.

For followers of Jesus, the answer should not be that hard to come by.

I welcome your comments.

How Microlending Could Revolutionize How We Help The Poor

One important way to help those in need, especially those unable to earn for themselves, is through generous giving. Another way we can offer much needed help, especially to those able and eager to work, is by making generous loans available from our savings.

Through a variety of new microlending programs, it is now possible to assist enterprising individuals both at home and abroad while still having those investments available for our own needs in later years. Meanwhile, our money is helping others in ways that offers them dignity and opportunity rather than simply charity.

This should be celebrated as an astounding option, one that deserves to become the retirement plan of choice for all justice-minded people.

Far too many of us, for far too long, have been anxiously banking on our stock portfolios for our financial futures. By speculating in a largely consumer-driven financial system we have become dependent on the fortunes of Wall Street for our security. Even “socially responsible investing” (avoiding alcohol, tobacco and/or military related enterprises) still largely supports luxury and convenience related products and services that tend to benefit the well-to-do far more than those who lack the basic means of supporting themselves.

What if our focus shifted from investments that are merely “socially responsible” to those that offer a "hand up" to those who truly need it?

But wouldn't that be a risky strategy?

Surprisingly, the default rate on microloans has been extremely low, based on the experience of organizations like MEDA (Mennonite Economic Envelopment Association), Oikocredit, the Calvert Foundation and other microlenders. MEDA, for example, often makes loans to partner groups of small scale entraprenuers committed to seeing to it that no one defaults as a condition for everyone remaining eligible for future loans. This kind of accountability, along with the determination of these borrowers to succeed in order to survive, adds to MEDA’s confidence that such investments are as safe, if not safer, than those in the stock market.

But shouldn’t our retirement savings grow for us rather than providing a mere 1-3% rate of interest?

In a capitalist system we always face the risk of future inflation reducing the purchasing power of our monetary savings. But in light of Christ's teaching on not storing up anything for tomorrow, period, is it too much to expect that we should be content with modest interest rates--primarily to cover the costs of administering our retirement funds?

Since borrowing in Bible times was primarily done by people who were destitute because of famine or other disasters (rather than for capital investment in land or other means of production) any form of usury was frowned upon. In another tradition, Mahatma Ghandi condemned “wealth without work” as one of his “seven social sins.” How can followers of Jesus justify making easy profits by simply placing our bets on a gain-driven economic system, even if to “make our money work for us,’ or to “keep up with inflation”?

In our personal experience, when the economy took a nose-dive in 2008, the savings our employers had invested for us in mutual funds lost a ton of value. But what we had invested in IRA’s designated for microlending remained secure. Besides, we had already enjoyed the benefit of reducing our federal income tax liability through those investments. For us, that seemed good enough.

If many of us were to transfer the bulk of our investments into microfinancing, we could have an immediately positive and dramatic impact on thousands of people’s lives. And if all devout believers worldwide were to do so, plus give generously from their store of wealth, extreme poverty could be virtually eliminated.

Retirement Investing With Better Returns

The March, 2012, issue of "Everyday Stewardship,” a publication of Everence (formerly Mennonite Mutual Aid) features an article, "Unique Retirement Investing," about some of our thinking about, and planning for, our retirement investments. We initially had some mixed feelings about being interviewed for the piece, but saw it as an opportunity to share some of the reasons we've chosen to invest most of our retirement in microlending programs rather than in Wall Street traded stocks.

An earlier post "How Microlending Could Revolutionize how we Help the Poor," gives some background on this, and the November 26, 2011, post, "Is it Time To De-Occupy Wall Street?" offers some additional perspective.

P. S. The picture accompanying the article (in "Everyday Stewardship") of Alma Jean and me at our house church is taken at the home of the members who hosted the meeeting that Sunday, Guy and Margie Vlasits, who operate a bed and breakfast near Keezletown.

Keeping Our Retirement Funds Busy

MEDA photo

Imagine having the money you've set aside for retirement working around the clock accomplishing things that really matter to you, like helping farmers in South America grow and market their own coffee, providing capital for women in Africa developing small businesses, and funding alternative energy projects at home and abroad.

source

Instead of investing in Wall Street traded corporations, Alma Jean and I have been blessed by having the bulk of our retirement funds in microlending and other programs that benefit the poor and help the environment.

Our local financial adviser Glen Kauffman, with Everence Association Inc., a fraternal benefit society, has helped us do this through Calvert, MEDA, Oikocredit and similar organizations.

For us this represents the best of both worlds, having our money meet the kinds of needs we typically associate with charitable giving, yet also having it available for later use as needed for our retirement.

For example, Everence offering an Advantage Select High Impact Annuity for individuals wanting to save for retirement while their money is invested helping others. It offers an annual interest rate guarantee of 1.7% for two years or 2.05% for four years.

That may not seem like much, but it helps provide loans for causes that are priceless:

• Emerging and socially engaged congregations growing their ministries and community services.
• Green lending for nonprofit organizations making environmentally friendly improvements.
• Community development needs in underserved areas in the U.S. and around the world.

“We are excited to offer our members a way to help others while also saving for their own future,” says Michael Horn, Everence Director of Charitable Products and Church Loans. “The Everence Advantage Select High Impact Annuity gives people an opportunity to live out their faith and values through their financial decisions. It’s another way we are doing better, together.”

As a disclaimer, I am not a part of any organized effort to promote Everence or any of its products. But as one of its customers, I definitely approve this message.

Check this link for previous blogs on this subject.

Reflecting Anabaptist Values in our Investing

Glen Kauffman has been a long
time friend and financial advisor.

Some years ago Alma Jean and I decided to transfer as much of our retirement savings in Community Investment Notes as possible. These are low interest loans to organizations that promote such things as agricultural development,  alternative energy projects, and microlending to deserving people around the world. Glen Kauffman. a financial planner with Everence Financial, was very helpful to us in setting up this kind of alternative to our Mammon-driven stock market economy. 

While the interest earned is little more than what is needed to keep up with inflation, we see this as a way of having our money work for us in ways that really matter.

Glen presented the following as a part of a November 15 panel on "Rebirth of Anabaptism: Just, Joyful and Sustainable Living." 

 Reflecting Anabaptist Values in our Investing

I’m glad for the opportunity to share my thoughts about ways we can reflect our Anabaptist values in the ways we invest. 

Before I jump into this topic, I want to take a minute to share some thoughts from Everence stewardship theologian Lynn Miller. Years ago, Lynn wrote a book entitled “The Power o Enough” in which he encourages contentment as a way to be faithful. He asks, "Are we able (and willing) to live contentedly with the resources that free us to be who God has created us to be and what God has created us to do?"

I like his approach. It keeps me focused on what is necessary to fulfill God’s will for my life, rather than adjusting my standard of living based on what is available (if my income increases) or what someone ays that I need to be happy or satisfied.

Let’s talk about how our values can impact the ways we invest. I don’t intend for my comments to be prescriptive but rather invite each of you to determine for yourselves how to implement these ideas in your financial planning. I will share 3 different approaches for you to consider.

The first option would be to use socially responsible mutual funds. These funds have developed social screens that they use when investing for their shareholders. Here are the core values some such funds use when making investment decisions:

• Respect the dignity and value of all persons

• Build a world at peace and free from violence

• Demonstrate a concern for justice in a global society

• Exhibit responsible management practices

• Support and involve communities

• Practice environmental stewardship

This option is relatively easy to access and doesn’t require a large investment.

The second possibility would be accessing a fee-based managed account where you grant the manager discretion to invest the money in the account according to your objectives and risk tolerance. These accounts often provide broader diversification and allow the manager access to mutual funds, ETFs, and individual stocks / bonds. This option gives the manager greater flexibility to incorporate your values. Managed Accounts can include some personalization depending upon the capability of the portfolio manager. I will simply share some of the focused types of portfolios that are available:

• "Green" focused portfolios for investors interested in the environment

• Peace or justice focused portfolios

• Traditional values focused portfolios to name a few example types of these focused investment options

Managed accounts often require a larger minimum investment to open an account.

There is a third option for persons who desire strongly that their investments have maximum impact and wish to assist non-profit organizations. There are organizations for instance that offer community investment notes. These notes pay a fixed rate of return for 1-5 years and give individuals the ability to select an impact sector if they wish to focus their investment. The impact sectors include Affordable Housing, Education, Community Development, Microfinance, and Sustainable Agriculture.

All investing involves risk, and this type of focused investing is called ESG investing. It does involve the exclusion of certain securities for non-financial reasons as I have noted. This may result in an investor forgoing some market opportunities that may have been available to those not focusing on such criteria. There is no guarantee that any investment goal will be met. All investors should consider the investment objectives, risks, charges and expenses of the investments carefully before investing. If investing in funds, the prospectus contains this and other information about the funds. 

Contact your financial professional to obtain a prospectus first if you find one that interests you, Then you should be read it carefully before investing or sending money.

I will be glad to provide additional information on any of these types of investments or others to persons who are interested in having a conversation or have questions.

Now because of my profession, my compliance has some things I have to say to be here today:

I offer Securities through Cetera Wealth Services, LLC, member FINRA/SIPC. My advisory services are offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity. My office is located at 841 Mt. Clinton Pike Suite A in Harrisonburg, VA 22802 if any of you want to visit.

How Retirement Investments Can Bring The Greatest Possible Returns

Everence image

For a long time I have advocated investing the bulk of one's retirement funds in Community Investment Funds that benefit the poor and help the environment rather than in Wall Street traded corporations. Our local financial adviser Glen Kauffman, with Everence Association Inc., a fraternal benefit society, has helped us do that through Calvert, MEDA, Oikocredit and similar organizations.

Now Everence is offering a special Advantage Select High Impact Annuity, a fixed annuity designed for individuals wanting to save for retirement while their money is helping others. It is basically a loan to organizations that do good and offers interest rates of 1-3%, just enough to help keep up with inflation

That doesn't result in much if any financial gain, but up to 50 percent of the annuity premium dollars provide loans for causes that are priceless:

• Emerging and socially engaged congregations growing their ministries and community services.
• Green lending for nonprofit organizations making environmentally friendly improvements.
• Community development needs in underserved areas in the U.S. and around the world.

“We are excited to offer our members a way to help others while also saving for their own future,” said Michael Horn, Everence Director of Charitable Products and Church Loans. “The Everence Advantage Select High Impact Annuity gives people an opportunity to live out their faith and values through their financial decisions. It’s another way we are doing better, together.”

As a disclaimer, I am not a part of any organized effort to promote Everence or any of its products. But as one of its customers, I definitely approve this message.

Check this link to more posts on microlending.

Four Ways To Use Money To Gain Happiness

source

Here's the lesson: Use your worldly resources to benefit others and make friends. Then, when your earthly possessions are gone, they will welcome you to an eternal home. 

- Jesus (Luke 16:9, New Living Bible)

Researchers are finding that money can actually make us happier and add joy to our lives. But it doesn’t matter so much how much of it you have, but how you use it. 

Here are four ways you can manage money to add to your sense of wellbeing:

1. Resist spending money on newer or nicer material possessions. Cornell University psychology professor Thomas Gilovich suggests that buying more things doesn’t really add to our enjoyment of life because we quickly adapt to them, the luster wears off, and the new additions to our wardrobe or to our three-car garage simply become a part of a new norm we soon take for granted. (Sadly, this mindset also negatively affects our offspring, who grow up expecting an unsustainable standard of living they consider their right).  

“Human beings are remarkably good at getting used to changes in their lives, especially positive changes,” says Sonja Lyubomirsky, psychology professor at the University of California, Riverside. “If you have a rise in income, it gives you a boost, but then your aspirations rise too. Maybe you buy a bigger home in a new neighborhood, and so your neighbors are richer, and you start wanting even more. You’ve stepped on the hedonic treadmill. Trying to prevent that or slow it down is really a challenge.”

2. If you do spend money on yourself, get far more bang for your buck by investing in new experiences rather than in new possessions. Ryan Howell, associate professor of psychology at San Francisco State University, found that people think material purchases offer better value for the money because they are tangible and last longer. But he points out that a lot of the satisfaction people gain from new experiences is in anticipating them ahead of time, and also found that when people recall and relive them, they also find that such experiences are a gift that truly keeps on giving. Think traveling or serving abroad, or visiting a long time friend or relative, or hiking the Appalachian Trail.

3. Invest in generous giving of the kind that adds to others’ happiness. Multiple studies show that we gain the greatest satisfaction of all by spending our wealth to better the lives of people in need. Elizabeth Dunn, associate professor of psychology at the University of British Columbia and co-author of the book “Happy Money,” says that while earning more may tend to enhance our well-being, we become happier by giving it away than by spending it on ourselves. 

In one experiment she handed out cash to college students on campus and told some to spend it on themselves and others to spend it on someone else. Those who spent money on others reported being far happier than those who spent it on themselves. 

She also analyzed data from 100 countries and found that people who donated money to charity were happier whether they lived in poor or rich countries. As people see their money making a difference in other’s lives, it gives them great joy even if the amount they have to offer is small.

4. Put your savings to work by doing “impact investing” through organizations like the Calvert Fund and similar organizations.  This way your retirement money can be supporting causes that are truly in line with your values, like providing money for small farmers and entrepreneurs around the globe, or in funding start-up solar or other projects you feel deeply about, for example. Imagine being able to help alleviate poverty, improve the lives of people and help make the earth a better planet while still having some money available for retirement if you need it. 

The interest isn’t great, but the principal is remarkably safe, and the investment honors principles you feel deeply about.

And living by time-honored and Jesus-inspired principles should make us all very happy indeed.

Here's a link to some of my sources for this piece: 
http://www.wsj.com/articles/can-money-buy-happiness-heres-what-science-has-to-say-1415569538

See also: http://harvyoder.blogspot.com/search?q=microlending
http://harvyoder.blogspot.com/2011/05/imaginary-interview-with-galilean.html