The JAK Bank: Interest Free Full Reserve Banking!
The JAK Bank provides us with an important model for interest free saving and lending. It is a fully fledged alternative for interest bearing Full Reserve Banking.
The Swedish JAK Bank is based on a Danish concept from 1931. It started in 1965 and obtained a banking licence in 1997. It’s a cooperative bank owned by its members, of which there are about 38,000. JAK stands for Jord Arbete Kapital, which is Swedish for Land, Labor and Capital, the factors of production.
Its main goal is to provide its members with interest free loans.
It operates under four basic principles:
- Charging interest is inimical to a stable economy
- Interest causes unemployment, inflation, and environmental destruction
- Interest moves money from the poor to the rich
- Interest favours projects which yield high profits in the short term
The Jak bank basically works as we expect a bank to function: it takes in deposits from its members and lends these out to other members.
Loans are backed by either collateral or guarantors. The JAK has very low default rate, for which there are several reasons. Interest free loans are obviously much easier to repay. Members are far more committed than ‘customers’. And JAK requires its members to save to obtain the right to borrow. Savers are known to be good debtors.
How can it be interest free? Well, very simple: instead of interest savers are rewarded with interest free loans for themselves.
Most people would rather have interest free loans than interest on savings, especially if they actually did the math.
To obtain the right to a loan, new members must have saved for at least six months. During this time savers acquire ‘saving points’. Saving points are a product of savings and the Savings Factor. JAK members can choose from 6, 12 and 24-month deposit accounts which represent the advance notice required to make a withdrawal. The longer term deposits are associated with a higher ‘Savings Factor’: 0,7 for a six month deposit, 0,9 for a 24 month deposit.
Saving 1 Krona for 1 month is 1 ‘Saving Point’ times the Saving Factor. 1 Saving Point is the right to borrow 1 Krona for one month.
This is the simple mechanism of the JAK bank. In this way people are basically organized to provide themselves with loans based on their future savings and income. Exactly as it should be.
The main problem with the JAK bank is that it has problems financing itself. Members are not willing to pay high fees. New members pay 200 Kronor (about 22 euro) and yearly membership fees are 200 Kronor also. This is only just about enough to pay for its operations.
The JAK model is important, both in a debt free currency environment, for instance Social Credit, and in an interest free Mutual Credit environment.
Full Reserve Banking is promoted by many monetary reformers. The problem is that it does not end the wealth transfer from poor to rich through Usury.
The JAK bank provides a very effective mechanism to create non usurious Full Reserve Banking and thus deserves more attention.