MARK LEVINE, Founder, Credit Where Credit is Due: And I was just struck by how few had bank accounts and how many used check-cashing stores in lieu of banks, how many, when they needed credit, went to pawnshops and loan sharks.
SPENCER MICHELS: Now, you say there are loan sharks. What is that about?
MARK LEVINE: Prestamista is Spanish for “loan shark.” And unfortunately, it’s an industry which is alive and well here in Washington Heights. The interest rates are astronomical, as high as 5 percent to 10 percent a week. There is a threat of violence if you don’t repay.
SPENCER MICHELS: He said he understood why commercial banks didn’t lend.
MARK LEVINE: Frankly, for them to make a $500 loan, it’s as much work as making a $50,000 loan. It’s not profitable for them, and they’re generally not interested.
SPENCER MICHELS: But he was convinced there had to be a solution. So Levine became a social entrepreneur, raising grant money to open a credit union that had a bilingual staff, offering small loans to people with no credit, and giving free financial counseling.
Read it all. This was my favorite story which I caught over the weekend. This man is a hero–KSH.
This issue is particularly relevant for Mexicans. The peso crisis of the early ’80s more or less wiped out the middle class. A generation later, only about 20% of Mexicans have bank accounts. Not only do they hoard cash when they feel safe, their houses are ongoing construction projects — if you travel much in Mexico outside the standard tourist areas you are likely to see an awful lot of re-bar sticking out of concrete. It’s the appropriate link to the next phase of construction in a country where earthquakes are common and the government is not a friend of savers and sound currency.
Sharks take advantage of this, but Mexicans regard them as less evil than their own corrupt government … and far less likely to shaft the ordinary ‘chabo’ for their own personal gain.