Interest-free member savings-and-loan banks

Households, small businesses and community enterprises in rural and peripheral areas pay a large share of their income in interest, or cannot get loans at all, and interest flows out of the community to distant lenders.

Born in Denmark during the Great Depression, when farmers faced repossession by commercial banks, and grown in Sweden from 1965 with a fast expansion during the high interest rates of the late 1980s and early 1990s. It thrives when interest rates are high, so that an interest-free loan is clearly cheaper, and when members are ideologically committed to interest-free money. It needs a banking licence or a legal exemption to take deposits, a disciplined savings-points system, a volunteer base (JAK once had about 650 trained volunteers in 30 local groups), and members willing to accept higher monthly payments, since borrowers must save while they repay.

Money saved and lent within a closed circle of members does not need to grow by compound interest. If every krona of borrowing is matched over time by a krona of saving (tracked as points, saving months times amount), the pool stays liquid and members can lend to each other at cost. Members pay only fees that cover administration and losses, so the benefit of lending stays with the community instead of flowing to outside capital.

JAK Medlemsbank (Skövde, Sweden) and its local member groups; Landsforeningen J.A.K. in Denmark; WIR Bank in Switzerland for related interest-free mutual credit.

Assuming interest-free means cost-free (fees and compulsory saving make loans costly, and regulators may say so). Letting borrowers spend more points than the system has earned, which drains liquidity. Treating member contributions as returnable on demand when regulators count them as risk capital. Losing the price advantage when market rates fall. Depending on a shrinking, ageing volunteer base. Placing surplus deposits in interest-bearing assets, which undermines the principle and member trust.

Origin in Danish rural savings and loan cooperatives of the early 1930s, under the name J.A.K. (Jord Arbejde Kapital, land labour capital), building on earlier German interest-free ideas and alongside the Swiss WIR (1934). The Swedish association Jord Arbete Kapital was founded in 1965 and became a licensed member bank in 1997. Knowledge holders are the Swedish and Danish JAK associations and their volunteer educators. Ideas and materials are openly shared; users of the JAK name should consult the associations.