Page 54 RAIN Summer 1986 We recently had an interchange with a reader that we thought was worth sharing with the r~st of our readership. I'm one of those retired persons who has to live on the income from savings. However, I would like the money to be invested socially, productively, and wisely. Hence I was interested in seeing the current, Spring '86 issue. I turned immediately to the "Community Loan Funds" article. That seemed .to me to be suggestive of a place I could invest _a little money, continue to eat, and feel happy about what was being done. From my point of view the article was terribly disturbing. There was hardly any mention of paying back. There is much talk of raising money, and finding places to spend it, of saying the people who lend money have to be taught social responsibility-but hardly any mention of emphasizing the responsibility to pay back the money borrowed, or of using the ability to repay joyfully and happily as one of the · cJiteria of a loan. Conclusion? Don't be a fool and loan to a community loan fund unless you are really merely seeking to make a contribution which you will be able to deduct from your inconie tax someday. . There is nothing wrong with giving money away. . But it is terribly sad when people present programs which appear good but which appear to be gift LETTERS programs masked as loans. Maybe they are genuinely pay-back loan deals. If so, this deserves ·a greater part of the glowing rhetoric. This is necessary to convince both the p~ople who will borrow and the people who will lend. For example, not.only talk about how much was lent, but how much was paid back. Another glaring gap: There are Ten Steps in Organizing a 16an fund, including applying for federal tax-exemption. In no place does it suggest the organizers develop the skill to determine whether the proposed loan can or will be paid back. All you have to do is identify that a "need" will be met. It appears that this lack was not noticed by the editors of RAIN, for it is not, mentiom~d. Thus the credibility of RAIN as a reliable guide t~ practical action is shaken. Is RAIN nothing much more than another beautiful pit into whic~ people can toss their life savings? Or rather, a guide to such pits? I am dished and blue. Paul B. Johnson Thousand Oaks, CA RAIN's response: Community loan funds have had an extremely low rate of loan defaults. They are not in any way "gift programs masked as lo(ln.s." We're sorry if this point wasn't made clearly enough for your satisfaction. Mr. John.son in turn responded with this letter: Thank you for your kind letter. I guess I have a different history from the majority of people. I;ve been involved with three or four Credit Unionsreasonable facsimilies of Community Loan Funds, I think. Of these, one appears in vigorous health. Two went bust. The last is gasping. In all of these sad experiences there was little attention paid to the payback problem. The theory, or slogan, was "Get the money out so it will build the Community and help the borrower." The managers went crazy trying to collect. Many of the borrowers felt they were doing a public service in spending the money, and, frankly resented the efforts made to get them to pay it back. Most of the money was borrowed for consumptive use. "You deserve the finer things in life." Very little effort was made to restrict the loans to productive uses-i.e. a loan which would make the borrower more productive, and hence able to pay the loan back from the extra · income the loan helpyd get him. Since I saw little.\discussion of points like this in thei article or in the steps in organizing a Community Loan Fund, I can only conclude that people who follow the advice of the article are likely to follow the path I've followed with the goal of "Meeting Social Needs." Since the agony of paying for a party after it is over is so often very bitter, I was led to write the letter I sent.
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