If Wonga are trying to muscle in to the business market, we need a British Investment Bank more than ever

Payday lenders, not content with squeezing individuals, are now going after businesses too.

Anybody who lives in London and/or uses London buses will know that those ghastly Wonga adverts have been replaced. By Wonga adverts. Though this time, for small businesses.

Wonga for Business offers loans of £3,000 to £10,000 which are available for terms of between one and 52 weeks. Costs vary with an interest rate of between 0.3 per cent and two per cent which seems competitive if repaid early, but a 52 week loan, according to Tim Harford, at 2 per cent could work out to have attached to it an interest rate of 280 per cent per year.

Another estimate, this from Sharlene Goff (the FT’s retail banking correspondent), estimated that the largest loan (£10,000) for the longest term (a year) would rack up almost £11,000 in charges.

I exchanged emails with a spokesperson from the company during the week, hoping to find out some tangible figures for how well the new venture is going. All I was told, sadly, was that there have been thousands of applications thus far, and good feedback from people who have been approved, but due to the commercial nature of the company all evidence was kept under wraps.

OK so the suspicion is that it is all bluster. A commercial company with no evidence to show off saying that they're doing great to put the willies in their competitors. But I'm not so sceptical, unfortunately.

Wonga have come to be recognised as another unsavoury payday lender, and for good reason in my opinion, albeit one that is slightly more public-facing than the rest (and this says an awaful lot about the rest). Though what I've come to learn about this financial product is that it often fills in and exploits the gaps where mainstream services are falling behind.

This is the case with payday loans to individuals. And it is the case for businesses as well. Research in November by the Federation of Small Businesses showed that between 2007 and 2010 there was a 24 per cent fall in successful loan applications, while more than half of the small firms that applied for an overdraft last year were rejected.

Even in the good times things weren't sparkly. As Duncan Weldon at the Touchstone Blog has pointed out, "around 85 per cent of bank lending [had been] going to either financial companies or property" even in better financial times.

Competition in this market is rather flat as well. In 2011 the Independent Commission on Banking identified that the largest four banks account for 85 per cent of SME current accounts.

So though Wonga are playing on a very real problem in the state of play in the financial sector, the real issue lies in the failure of banks to lend to small and medium businesses – surely a vital element in our economic recovery.

But what is in our armoury? What tools can we use? It certainly didn't go unnoticed this week that Ed Miliband used the opportunity at the Co-operative Bank HQ to talk up the merits of a British Investment Bank – on the day that the Labour party published a report by Nicholas Tott, a former city lawyer, to make that very case.

Although, this case has been made again and again – why should it have taken this long? One of its most active proponents is Lord (Robert) Skideslsky. In one of his many cases for a national investment bank he exemplifies the European Investment Bank (the European Union's public development bank).

EU governments that own the EIB, in contributing an equivalent sum of £32bn, alongside the bank itself borrowing a further equivalent to £271bn from private capital markets, the EU governments were able to finance investments worth more than the equivalent of £304bn including for ports from Barcelona to Warsaw, the TGV network in France and the world-leading offshore wind industry here in Britain, creating jobs along the way.

Another example, in Germany, is the Kreditanstalt fur Wiederafbau (KfW), a second tier bank, provides cheap loans (liquidity loans at low rates and long maturities) to SMEs using the commercial banks as intermediaries. In 2010, KfW financed loans worth a record €28.5bn for SMEs, creating 66,000 jobs in addition to the 1.3m jobs it helped maintain (which has been on Labour's mind since Lord Mandelson made it the model de jour).

Why has it been most pertinant that Miliband raise the spectre of a British Investment Bank at the time he did (even though he, and others, commissioned the report by Nicholas Tott in December 2011)? Because as Skideslsky notes:

“The financial crisis has left the impression that the main purpose of the banking sector is to enrich a tiny elite at the expense of taxpayers.”

We may all understand in principle that a functioning financial system is crucial to the national economy, but we can hardly attest to this happening in practice (consider, if you will, the NEF calculation that for every £1 paid to “elite” city bankers £7 of social value is destroyed, as well as the damning verdict of Adair Turner, the chairman of the UK Financial Services Authority, who views the past decade of financial innovation as mostly "socially useless").

In short, a British Investment Bank is something that could gain cross-party consensus, provide a real solution to the lending shortfall, build up SMEs, jobs and growth – and allow entrepreneurs to avoid the lending freeze or risking it all with expensive business loans from Wonga.

As a parting shot the Wonga spokesperson told me that we can expect to see “more products from us before the end of the year, but I can't give you any hints I'm afraid”. Perhaps if we are diligent enough we can spot the financial shortfalls before Wonga get there first.  

A payday lender. Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.
 

Pexels
Show Hide image

Relive your worst experiences for $15 an hour: how confessional journalism exploits women writers

The women’s website Bustle asks its writers to fill out a checklist covering every possible personal angle; it puts a low-market value on their most intimate truths.

Let me tell you about the worst thing that ever happened to me, the most terrible thing I’ve ever done. Let me tell you everything there is to know about me, all the buried markers of self that live under my skin. OK not that one, and I’ll keep that one too. I have to have something left over, after all. Even so, I’ve written about being the May Queen at school, and the time I got flashed in an underpass; about having depression as a teenager, and the unplanned pregnancy that became my son.

Actually, I’ve written about that last one twice: my first successful pitch for a comment piece was a response to anti-abortion comments by the then-influential semi-thinker Phillip Blond. It was a kind of pitch I now refer to now as the “what I think about X as a Y”: what I think about abortion as a woman who had and chose to continue an unplanned pregnancy. Experience is capital, and in 2009, I used it to buy my way into writing.

It’s a standard route for women writers, but not usually as formalised as it is at women’s website Bustle, which (as Gawker reported last week) asks its writers to fill out a checklist covering every possible personal angle: “I see a therapist”, “I’ve had group sex (more than three)”, “I used to have a Fitbit but I don’t now”.

Every bit of what you are, granulated and packaged for easy dispersal through a range of stories. It’s an editorial approach that gives rise to a weird, impersonally-personal tone. “Five Reasons I’m Grateful For My Parents’ Divorce”, chirrups a listicle; “that’s why I tried anal sex in the first place”, trills a gif-heavy piece about the benefits of bumming.

That’s just the shallow end of the confessional genre. The ideal online women’s interest story combines a huge, life-changing disclosure with an empowering message. Like this, from xoJane: “I'm Finally Revealing My Name and Face As the Duke Porn Star” (the last line of that one is: “My name is Belle Knox, and I wear my Scarlet Letter with pride”). Or this, from Jezebel: “On Falling In and Out of Love With My Dad” (which concludes like this: “And to the victims of their abuse, I want to say what I have finally been able to understand myself: that my attraction, and what it led to, was not my fault”).

It’s tempting to think of this blend of prurience and uplift as a peculiar product of the internet, but it’s been a staple of women’s publishing forever: the covers of women’s magazines are full of lines like “Raped for 50p and a biscuit!” and “The groom who went ZOOM!” about a jilted bride, exactly as they were when I used to sneak them from my aunt’s magazine rack to read them as a child. The difference is that, in the trashy weeklies, there’s no pretence that trauma is the overture for a career. You get paid for your story, and someone else writes it up. The end.

At Bustle, the rate apparently runs to $90 for a six-hour shift. That feels like a low market value to put on your most intimate truths, especially when the follow-up success you’re investing in might never materialise. The author of the father-daughter incest story for Jezebel told a Slate writer that, despite the huge web traffic her confessional received, her subsequent pitches were ignored. Her journalistic career currently begins and ends with her very grimmest experience.

“Everything is copy” is the Nora Ephron line. But when she said it, she didn’t intend the disclosure economy we live in now. For Ephron, “everything is copy” meant claiming control: “When you slip on the banana peel, people laugh at you. But when you tell people you slipped on the banana peel, it’s your laugh. So you become the hero, rather than the victim of the joke.”

Does the aspiring writer plucked from an editor’s checklist to retail her own Worst Thing Ever get to call the banana skin her own?

The Bustle checklist suggests not. “Don’t put anything on here you don’t want to write about,” it stresses, before adding, “that said, you can always say ‘no’ . . . You might be too busy when an editor approaches you about possibly writing an identity post, or simply not interested, and that’s okay! We won’t be mad!”

Ticking the box basically puts you in a position of assumed consent, but which hopeful young woman would dare to set her boundaries too close when an editor tells her this could be good for her career? (Yes, I know this sounds a bit like a story of sexual harassment. Funny, that.)

So many confessionalist pieces of writing tell stories about women having their limits overridden. Rape and coercion. Abuse and assault. Being talked over and ignored. But the logic of the perpetual confession journalism machine is the same: everything about a woman should be available to use, nothing a woman has to say is valid without a personal claim to authority, repackage their guts as shiny sausages and call it an “identity piece”.

Women writers shouldn’t be waiting for permission to say no. We need to tell our stories on our own terms, and we need to set better terms than $15 an hour and the hope of some exposure. The worst thing that ever happened to me? It’s mine. I’m keeping it.

Sarah Ditum is a journalist who writes regularly for the Guardian, New Statesman and others. Her website is here.