Faith and Business 2.0 
By Tim Weinhold (originally published, May 31, 2016)
“Because the poor are plundered and the needy groan,
I will now arise,” says the Lord.
“I will protect them from those who malign them.”
Psalm 12:5 (NIV, emphasis added)
The Lord enters into judgment against the elders and leaders of his people: “It is you who have ruined my vineyard; the plunder from the pooris in your houses.
Isaiah 3:14 (NIV, emphasis added)
When I was young and naive in the ways of the world, these passages puzzled me. With respect to the verse from Psalms I thought, ‘If you’re going to plunder someone, why target the poor since, by definition, they have so little money? Wouldn’t it make more sense to target the affluent? I don’t get it.’ The Isaiah verse was equally perplexing. I thought, ‘I know there are crooks and swindlers in the world. But they’re members of the underworld, the criminal class, the mafia. Yet here God says it is the elders and leaders of Israel who live in luxury from plundering the poor. How can they rob the poor and still hold positions of status and leadership? I don’t get it.’
Of course that was before I embarked on the ‘real world’ education provided by a career in business. Now I fully understand what was making God so angry — it was business people. And, almost certainly, it’s worse today than ever. Consider, for example, the lucrative business of payday loans…
Payday Loans
Here’s the purported business model. A poor working person, suddenly facing an emergency financial need, takes out a small loan from one of the ubiquitous payday lenders (there are more payday lender storefronts in the U.S. than all the McDonalds and Starbucks outlets combined). Let’s say the loan is for a typical amount — $375. For that loan the borrower agrees to pay $60 or so in upfront fees, and an interest rate that, annualized, routinely comes in at 500 percent or more, i.e., about 30 times the interest rate on a typical credit card (in the UK, the interest rate can run to 5000 percent). Oh, there’s just one more thing — the borrower agrees to fully repay the loan — principal and interest — in two weeks (the rationale being that, in the interim, he or she will get a paycheck making repayment possible).
Sometimes it actually works out that way. A poor worker has a crisis need for cash, takes out a small but expensive short-term loan, fully repays the loan from the next paycheck, and is out of (at least payday) debt within two weeks. Sometimes — but not often. Borrowers taking out a single loan per year account for only two percent of total payday loan volume.
Instead, here is the typical scenario, i.e., the actual payday loans business model. First off, the large majority of payday borrowers are not, in the way we would normally use the term, facing an unexpected financial emergency. Instead, they’ve gotten meaningfully behind on their bills — rent, utilities, car payments, and the like. They turn to payday lenders not to deal with a one-off financial calamity, but because they’re being swamped by the ordinary and ongoing expenses of life. A payday loan, in other words, is one more desperate effort to keep their economic nose above water.
Which means that for most borrowers the two-week deadline comes and they can’t repay their loan. So the payday company issues them another two-week loan, with another $60 origination fee, and the same triple-digit interest rate. But because of the fees and interest, the principal amount is now a little larger. For many borrowers, this process keeps up for months, or longer. The result is repayments that cumulatively total many times the amount originally borrowed, while a still-owed balance grows ever larger. By just the fifth month, for instance, someone who borrowed $375 will already have paid over $500 in interest, a similar amount in fees — and still owe more than they originally borrowed. For many borrowers it is an escalating spiral of debt that gradually, and then suddenly,1 wreaks financial havoc.
According to the Center for Responsible Lending, “this ‘churning’ of existing borrowers’ loans every two weeks accounts for three-fourths of all payday loan volume” and the bulk of profits. The true payday loans business model, in other words, purposefully targets those who are most vulnerable and consciously, even intentionally, sucks them dry. And, in general, it’s all perfectly legal (though, often, some of the debt collection practices are not).
Unfortunately, this is big business, in both senses of the word. According to the New York Times, about 12 million borrowers turn to payday lenders each year, generating $27 billion in revenue. In many cases, our biggest banks and investment funds are directly involved — owning stakes in the largest payday lenders.2 Adding insult to injury, many large banks make it easy for payday lenders to directly debit the bank accounts of borrowers, thereby ringing up plenty of additional overdraft fees for the banks. When someone figures out a lucrative way to siphon money from the most vulnerable, clearly there is no shortage of those who want to share the spoils. Unfortunately, this is just one of many ways the financial industry has learned to fleece the poor.
Auto Financing
“Turn your car title into holiday cash.” With a Christmas stocking overflowing with money as background, this was the television pitch from TitleMax, one of many large lenders in the burgeoning arena of auto title loans. In fact, the New York Times reports that:
The automobile is at the center of the biggest boom in subprime lending since the mortgage crisis … And similar to how a red-hot mortgage market once coaxed millions of borrowers into recklessly tapping the equity in their homes, the new boom is also leading people to take out risky lines of credit known as title loans.
This is big business as well — more than 1.1 million U.S. households used auto title loans in 2013. Including fees, borrowers pay effective interest rates ranging from nearly 80 percent to over 500 percent (for a loan with secured collateral). 39-year-old Army veteran Ken Chicosky represents a typical borrower. Living in Austin, he needed his car to attend work and school, but couldn’t come up with the money for repairs. So he took out a $4000 title loan from Cash America. He said he knew the loan was a bad idea when he got his first bill and learned that the total he now owed for principal, interest and fees was nearly $9500.
As a result of such exorbitant costs, roughly one out of every six borrowers ends up losing their car. The reason the figure isn’t considerably higher is because most borrowers will do whatever they can to keep their car. As one investor in this sector callously notes, “You can sleep in your car, but you can’t drive your house to work.” The result, according to Diane Standaert, the director of state policy at the Center for Responsible Lending, is that “the threat of repossession turns the borrower into an annuity for the lenders.” Robert Swearingen, a lawyer with Legal Services of Eastern Missouri, puts it more pointedly: “It is a form of indenture — because of the threat of repossession, [the lender] can string you along for the rest of your life.”
Not surprisingly, the lucrative returns on auto title loans, and on subprime auto loans made to those with impaired credit, have enticed an influx of Wall Street money. Major investment banks are now bundling thousands of these loans and selling them as securities to mutual funds, insurance companies, and hedge funds. According to Thomson Reuters, such securitizations have grown by more than 300 percent since 2010. In addition, private equity firms are investing directly in auto title lenders, and some big banks are now ramping up their own high-margin auto lending to people with blemished credit.
But regardless of the growing involvement of big name financial institutions and their big money, it’s hard to argue with the conclusion of Scott A. Surovell, a Virginia lawmaker who has proposed bills to rein in such lenders: “This is nothing but government-authorized loan sharking.” In fact, this sort of predatory lending is increasingly being cited as one of the biggest challenges facing poor and minority communities — right up there with drugs and crime. Nevertheless, as in Bible times, so today — plunder from the poor continues to fill the houses of the powerful.
From Plunder to Protection
Sometimes business, and business people, plunder the poor intentionally. Other times, however, business takes advantage of the poor and vulnerable carelessly, i.e., without really thinking about it. Consider, for example, how differently the auto industry sells to consumers versus most other industries. If I want a new television, or a new tube of toothpaste, I simply go to the store and buy it for a clearly-established price. There’s no haggling, no elaborate negotiating ploys. If I am poorly educated, or lack self- confidence, or don’t speak English well, I don’t have to worry that I may end up paying more for my toothpaste or television than someone with a fancy degree or a big checkbook. But not so with automobiles (which, by the way, is the most expensive purchase most of the poor will ever make). No, to buy an automobile, one has to negotiate with a savvy, well-coached salesperson whose objective is to sell a car at the highest price possible. That puts the poor at a big disadvantage — with predictable results.
“We did a study and found that the people who typically paid the least for the cars were the most able to pay. Those least able to pay, paid the most.” That’s Don Flow, owner of Flow Automotive, a chain of 36 auto dealerships in the North Carolina region. A devoted believer, Flow concluded, “For me, it was wrong to take advantage of those least able to pay.” The objective, he says, should be just the opposite: “We must treat every single person who walks into the showroom, the service lane, the parts department, like a valued friend, like a guest in our home — regardless of their station in life.”
So Flow totally reinvented the way they sell cars. “We don’t have the traditional run-back-and-forth negotiating process; we have a pricing structure that’s set. You don’t have to be a tough negotiator, or more educated, to get a fair price. If you’ve got a Ph.D. or if you’re a janitor, you’ll pay the same price for the vehicle.”
As quoted in Ethix magazine, here’s another way in which Flow ensures that all their customers are on an equal footing:
We want to be transparent to our customers. We share all of our information with them. In our appraisal process of a car, we go online together with the customer, pull up all the auction reports, Kelley Blue Book, NADA Black Book. We have kiosks in our showroom floors so people can go online. So we try to accommodate the customer at every step, in the way they’d like to buy a car. In our operating principle, the customer is in control of the process, and our job is to help the customer in that process.
In an industry where taking advantage of the poor, even if inadvertent, is standard operating procedure, Flow Automotive has taken a very different path. They reengineered their entire business model to protect, rather than plunder, the poor and vulnerable.3 This reflects God’s own heart:
You evildoers frustrate the plans of the poor, but the Lord is their refuge.
Psalm 14:6 (NIV)The Lord secures justice for the poor and upholds the cause of the needy.
Psalm 140:12 (NIV)He [king Josiah] defended the cause of the poor and needy, so all went well. Is that not what it means to know me?” declares the Lord.
Jeremiah 22:16 (NIV)
In these passages (and many more), God makes clear that he is a protector of the poor and needy …
and that anyone else who protects the poor is his cherished partner. And yet God’s heart hopes for even more — especially from business.
Provision for the Poor
At the establishment of the nation of Israel, God gave this command to the agricultural business owners of that day:
When you reap the harvest of your land, do not reap to the very edges of your field or gather the gleanings of your harvest. Do not go over your vineyard a second time or pick up the grapes that have fallen. Leave them for the poor and the foreigner. I am the Lord your God.
Leviticus 19:9-10 (NIV)
Then for emphasis, God repeats the same command in Leviticus 22. Two especially noteworthy implications flow from this gleanings command, one of which we’ll touch on now, and the other at the end. Commercial farms were the primary business engines — the principal creators of wealth — in ancient times. With gleanings, therefore, God was addressing not only farmers but business people. He was forging a direct connection between the needs of the poor and the predominant businesses of that day. His larger intent was to lay down an enduring principle — not merely for agricultural business, but for business of every sort — that providing for the poor is a divinely-intended part of the very purpose of business.4 Meaning God’s heart is not merely that business protects the poor from exploitation, but even more that it provides for the poor.
Importantly, in the way God structured his gleanings principle, he wasn’t directing business people to donate money to the poor (not that, in the right circumstances, such charity might not be appropriate). But that’s not what God was doing with gleanings. Rather, he was intentionally connecting the business operations of commercial farmers (i.e., their business model itself) to the provision needs of the poor. In effect, God was saying to these agricultural business owners (and, by implication, to all other business owners as well), ‘I am pleased to bless your business. In return, I want you to use your business (in part) to bless those with whom I am especially concerned — the poor and needy and vulnerable.’
Let’s consider, therefore, a few examples of what a business that intentionally blesses the poor looks like in our contemporary business context. Aravind Eye Hospitals (now Aravind Eye Care System) was founded in 1976 by Dr. Govindappa Venkataswamy. He was deeply concerned about the escalating levels of avoidable blindness in India, especially among the poor. He also knew that the government lacked adequate resources to address the problem. So he conceived a unique business solution. He founded Aravind to provide excellent eye care, especially eye surgery, on a for-profit basis to all who could afford first-class treatment, and then to use those profits to provide the same first-class treatment to the destitute. As a result, Aravind has now cared for over 32 million patients and performed 4 million eye surgeries, the majority of them at little or no charge. Aravind is a shining example, therefore, of a business dedicated not merely to protecting, but to providing for and prospering, the poor and needy — exactly God’s gleanings intention for business.
Homes for Hope
Jeff Rutt is the founder and owner of Keystone Custom Homes in Lancaster, Pennsylvania. Because of his heart for the needy, in 1997 Rutt founded HOPE International, a non-profit focused on assisting the poor through microfinance. To help capitalize HOPE, Rutt decided that Keystone would build one house each year whose sale proceeds would be donated to HOPE. To maximize the proceeds, he asked various subcontractors if they would consider joining Keystone in working on the house and donating their services.
This proved immensely popular with Keystone’s employees and subcontractors — primarily because it was an opportunity to directly use their vocational skills, i.e., what they did for a living, as a means to bless the poor. As a result, Rutt invited other local home builders to consider doing the same thing — donating the profits from one house each year to directly enlarge the microfinance capacity of Hope International.
“Instead of asking for a check, I asked them if they would donate their profit on a job,” he explains. Rutt admits he was both surprised and excited by their enthusiastic response …
and out of that enthusiasm the Homes for Hope program was born. “People really want to help, and this is a great way, because these guys are doing what they are talented at doing: running front-end loaders, putting up drywall, designing a structure, or choosing the right appliances. They feel really great about the fact that they’re able to help transform somebody’s life on the other side of the world by doing what they do for a living right here.”
Since Homes for Hope’s start in 1998, more than 70 homes have been built, generating over $10 million in revenue and tens of thousands of microfinance loans to help families break the cycle of poverty. The program continues to grow, and Homes for Hope now operates in nine states across the country.
And one last example. The Tata Group conglomerate in India deeply and creatively connects their business operations with efforts to care for and prosper the poor. Tata Steel, for example, runs a broad range of community programs — encompassing health, education, sports and culture — out of its Centre for Excellence. And its AIDS awareness program works in more than 700 villages around its home city of Jamshedpur. Tata Consultancy Services has developed an innovative computer-aided adult literacy program through which more than 120,000 individuals have learned to read. Tata Motors has cured and rehabilitated more than 8000 leprosy patients. Taj Hotels provides vocational training to the underprivileged and differently-abled. And the list truly does go on and on.5
Aravind and Keystone and Tata are creative and compelling examples of how business can provide for and prosper the poor — exactly what God had in mind with gleanings. But remember I said earlier that there were two interesting implications from God’s gleanings mandate? Well, here’s the second. God went to all the trouble to command — twice — that Israel’s agricultural business people allocate a portion of their harvest for the poor …
and then didn’t specify any amounts whatsoever. Should the farmers leave unharvested a six-inch border around their fields? A six foot border? Sixty feet? God didn’t say.
Sort of strange, right? Why go to all the trouble to institute this whole gleanings concept and then provide no specifics whatsoever for actual implementation? Seems like a big and surprising oversight. Well, no, not really — because with gleanings God was revealing his heart for business, not his dictate for business. In other words, gleanings was meant for business people eager to see their business please God and further his good work in the world. An important part of that good work is to provide for the poor and needy — a work for which God knows business, as the only wealth-creating arena of human endeavor, to be especially well suited. Gleanings was meant, therefore, for business people with ‘ears to hear.’ And for those business people, God didn’t need to dictate terms. Rather, he could trust their compassion and their creativity.
How about for you? Is your own business plundering … or protecting … or prospering the poor? God really cares about the answer. He hopes you do too.
Notes:
- “‘How did you go bankrupt?’ ‘Two ways, gradually and then suddenly.’” The Sun Also Rises, Ernest Hemingway
- Various investment funds (including some mutual funds) have stakes in payday loan companies. As a result, many investors are, often unwittingly, complicit in this particular means of plundering the poor. Which can prove awkward. In 2013 the Most Reverend Justin Welby, Archbishop of Canterbury, launched a high-profile campaign against payday lenders — only to be forced shortly thereafter into the red-faced acknowledgement that managers of its investment portfolio had put some of the church’s money into Wonga, the largest payday lender in the UK.
- This is, as well, an important inference of Deuteronomy 8:17-18, one of Scripture’s most important ‘theology of business’ passages.
- Flow Automotive is an extraordinary business in other ways as well, especially as reflected in the range of its commitments to customers, employees, and host communities. For more of their story, see this interview with Don Flow in the journal, Ethix.
- For a much fuller description of the good work of Tata, see the column, “The Black Swan of Business Purpose” at www.eventidefunds.com.
Unless otherwise noted, Eventide is not an investor in companies discussed in this or other of our ‘faith and business’ columns, nor is there meant to be an endorsement, explicit or implied, of the entirety of any company’s business model, much less of all of a company’s business practices. Rather, aspects of the business model or practices of particular companies are discussed only to help illustrate contemporary examples of larger ‘faith and business’ topics.
The material provided herein has been provided by Eventide Asset Management, LLC and is for informational purposes only. Eventide Asset Management, LLC serves as investment adviser to one or more mutual funds distributed through Northern Lights Distributors, LLC, member FINRA. Northern Lights Distributors, LLC and Eventide Asset Management are not affiliated entities.
4307-NLD-4/25/2016
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