How a Social Bank in Cuba Might Function

The Cuba I wish for (2)

By Repatriado

HAVANA TIMES — The crisis which shook the financial world about a decade ago (the repercussions of which we continue to feel to this very day) have been explained in many different ways. Many of these involve complicated terms such as financial derivatives, subprime lending, deflation or a lack of confidence in investments, but I would rather say that what happened happened because some multimillionaires wanted to make more millions by putting everybody else’s wellbeing on the line.

It doesn’t matter what legal framework you impose on large banks, they will always find a way to go around it, but if large financial institutions were more democratic, this wouldn’t happen. However, that’s not the case. Today, a privileged ruling elite are calling the shots and are comfortable knowing that the worse thing that can happen to them is that they only earn 150 million USD and not 300 million USD… this week.

I want a Social Bank in the Cuba I hope my children live in. Private banks are like any other business: profit oriented. A Social Bank would be oriented towards converting national savings into productive investments by financing businesspeople and companies, as well as managing the resources created by large socialized services companies which I discussed in my previous article. llllllllll

A Social Bank would use the branch offices, which are currently open and running all over the island today, as a base for its operations. My proposal is to transform every commercial bank across the country into one, a National Social Bank, where national reserves and profits of large socialized services companies are deposited, as well as private individual and company deposits.

Every employee and client would be considered a beneficiary owner and as such, they will elect the Governor and Regional Governors of Cuba’s National Bank, while having constant access to the bank’s general accounts and accounts of every branch office, not disclosing clients’ names of course, but names aren’t important when inspecting bank management, numbers are.

By using Information and Communication Technologies (ICT) and having transparent accounting processes which are readily available, fees to finance maintenance costs, credit policies and pay scales which are responsibility-dependent, can be agreed democratically.

The bank’s user/owners will contribute a great deal towards spreading a financial culture which they form a part of, something which is much-needed in order for the Cuban people to make conscious and responsible decisions, a safeguard against demagogy.

This will be the institution which also manages large socialized services companies’ accounts, knowing that a part of their earnings can be put toward productive investments and also divide contributions towards public accounts for research, healthcare or education. Of course, experts employed by the bank will present the different options available to managing the bank’s resources and will argue the pros and cons because the vast majority of us won’t know enough to do this, but we know enough in order to choose one option over another, democratically.

One of the bank’s main objectives will be to invest in loans to entrepreneurs and companies and the Social Bank will be banned from using its capital for real estate, financial or any other kind of speculation. Money should go where it is needed so that the resourceful can find the right springboard they need in order to start up their businesses or, alternatively, the security net they need in order to keep going. The stock markets of today’s world rarely serve this original function.

The bank would also provide services which modern banks normally provide to companies and private individuals, including debit cards. Credit cards will exist with well-defined rules on how to apply for them and use them.

The Social Bank will compete on the financial market with continuing assets from the private bank, the difference here being that their profits won’t become dividends for share-holders or bonuses for managers, but will instead be reinvested in the bank over and over again, making it more competitive when investing and capture savings.

By not converting profits into dividends, user/owners will be motivated to invest the bank’s resources into businesses which create social benefits, not just financial profits. Soft loans or even free credits to cooperatives, projects with great added environmental value or scientific investigations, just to give three examples.

The Social Bank will always respect the principle that a project is feasible when the goods it produces are what the market wants. We are the market, we are the ones who vote every day when we decide to buy something, therefore a company which isn’t profitable, will not be sustained by the bank won’t sustain in the long term, which is what the State does today with its planned economy and distorting consumers’ real needs.

As this is just a proposal, a guide to inspire your own models and your own solutions by criticizing the ones I’ve outlined here. We need to have a responsible mentality as social beings, as individual responsibility is the only guarantee we have to create a democracy which really works. And this is the Cuba I wish for, which might be something along the lines of the Cuba you wish for.

16 thoughts on “How a Social Bank in Cuba Might Function

  • There are a lot of misconceptions in your article Repatriado. Banks in the capitalist world are in competition and are very efficient. Don’t get confused with Wall Street.
    If a private sector bank treated its customers as the banks and cadecas do in Cuba, they would be out of business. Your photograph of the banco metropolitano illustrates my point. The poor customers have to wait outside in the heat until ‘security’ allows them the privilege of entering the air conditioned interior – a few at a time. Such abuse of customers would not be tolerated in the capitalist world. Customers would simply choose another bank.
    I think that you are proposing a system similar to that of the Credit Unions – which struggle to continue to exist. As for providing “soft loans” or free credit to cooperatives, why not let them compete on a level playing field?
    In the capitalist world, a high percentage of people invest in real estate – they call it their “home” or “house” and frequently it is their largest single investment. A bank which did not offer such mortgage services would have little chance of succeeding, let alone growing.
    Credit cards already operate under very tight regulations and they monitor carefully. For example I received a call asking if I had purchased anything from a company in the US, as it was not my normal practice. It was a scam and they spotted it. I didn’t have to pay.
    Banks provide services, they are commercial businesses and need customers. I have used the same bank for 35 years because of the services they provide and I have never had to wait outside.
    The Cuba I wish for Repatriado is one in which my lovely God-daughter will be able to experience the freedoms which we in the capitalist world enjoy, able to express her own views openly without fear of the PCC, the CDR and MININT. Oh, I know there are the moaning minnies supporting the Castro regime and its repression, some of whom write here about how terrible their world (usually the US) is, but they don’t choose to move to live in Cuba.
    Freedom means that anyone can if they choose try to form a business. It can be repairing shoes. plumbing or entering the financial world. Others who form the majority, choose to work for others as employees. I know one woman who started by growing a certain vegetable in her garden some 22 years ago. Last year she had built and opened a $20 million plant in the US (not her own country). She provides employment for a lot of people. She has four children. Democracy does work. Yes, Cuba needs to be released from dictatorship and allow Cubans to pursue their dreams.

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    • I mentioned Stock market to appoint that this social bank should not invest there because stock markets right now are not the money distributor that they started being. This Social Bank in deed will compete with private banks or financial institutions that come to invest in Cuba, so it will have to give a high standard service and of course it has to provide mortgages, even I hope the conditions this bank can offers will be very competitive because “shareholders” don´t collect benefits in cash and because it manage the big accounts from the socialized large services companies.

      The bank won’t invest in real estate “as speculation”

      My socialist disposition make me in good spirit to give financial support for cooperatives, it involves many people working and with responsibilities, but also to private entrepreneurs, I defend liberalism as the best economical organization today, liberalism as Open Society from Popper.

      I do believe in money and that the one that risk the money should make the shots, so if you want to be the boss ask the money and try, if you want to split responsibilities make a cooperative and involve in your idea to others.

      For every history of success there are many more of failure, and that is ok because is the natural order, but if the people can organize and to distribute money in a more rational way companies in problem can have access to credits easier than now, or young people can start a business easily than now, that way more people will try, more will fail, but more will success.

      It is beautiful what you say about your goddaughter, it is my biggest hope that my 4 and 9 years old children do not know the Cuba I have known, I don’t want they starve as I did, or spend years far from the family to be able to go to the university, or learn to be insincere at a very short age.

      There is misery and poverty in Cuba, there is hungry, terrible housing conditions, lack of expectative and an absolutely social disaster, the grossness and the abuse for bad formal education is generalized, the infinite and constant annoyances make really hard to end a day with happiness.

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      • I rather think Repatriado that although you speak of being a Socialist, that you would be defined as a Liberal in the free western world.
        It is only because I spend the majority of my time at home in Cuba, that I know just how bad the housing conditions of which you speak, actually are. I have photographs of some of those on our block, including a direct neighbour. In the western world such housing would be described at best as “shacks”.
        Regarding food, a week ago I referred in these pages to Cubans waiting patiently for up to 40 minutes or even an hour at the panderia to buy a 200 gm loaf of bread for 5 pesos, and how some upon eventually getting that bread immediately take a large bite out of it to assuage their hunger. That is the reality of Cuba which those who write here supporting repression and dictatorship, either don’t know or don’t care to know.
        Yes Repatriado, it is concern for the children that drives me to express my views. My God-daughter also has a younger sister of 4, and daily they give me both joy and pain when I am at home by visiting and sitting for an animated chat. They are beautiful children who merit the same freedoms and aspirations as those in the free capitalist world. But that is denied by communist dictatorship.

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      • I agree with a lot of what you say repatriado. I see banks more as a service than a business and should either be nationalized or run on a not-for-profit basis but with a fair amount of autonomy. That way at least some social policy can be implemented. For example in a poor region of the country perhaps the social bank could provide micro-loans at a better rate than in more prosperous areas or with less collateral in order to increase investment and business in those areas.

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        • Exactly, there are many things a big bank could do to help economy if the profit is not the main interest. To give micro loans in depress area is one, for sure if millions of people back a bank like this they will come up with propositions of all kinds, they can picture their proposition and then democratically be accepted or not.

          A big social bank, out from politicians control can buzz free market and give opportunity to create business and to implement ideas, and not less important, keep a big amount of money away from financial speculation.

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    • Welcome back Carlyle. You give the wrong impression to readers about banks in Cuba. The vast majority don’t have security stopping you from entering and making you queue outside in the heat.

      But overall you are totally wrong on the main issue. Banks don’t go out of business in the US and Europe however badly they operate. They can behave as greedily and recklessly as they like because they gamble with other people’s money. And when it all falls down do they accept responsibility. No. They get the tax payers to bail them out. As Yanis Varoufakis pointed out – it’s socialism for the bankers and austerity for everyone else. And the bankers who caused the problems do they get reprimanded for crashing the US and the EU and causing untold damage and pain to countries like Spain and Greece who are still suffering. No. They happily retire on their 300,000 pounds pensions and their million bonuses.

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      • Firstly Dani I repeat what I said about people (customers) waiting outside Cuban banks in the heat, because that is correct and the norm. In fact the photograph in Repatriado’s article show exactly that. Thank you for welcoming me back from Cuba where I both see and sometimes am one of those people waiting in the heat, it is not a rare occurrence, but daily.
        As for banks not going out of business, you must have been ignoring the news over the last ten year – ever heard of Lehman? I don’t know how well you know Spain and Greece, but to blame the banks for the Greek dislike of hard work and the Spanish propensity for speculation in building accommodation (and even an empty airport) for holiday makers when not snoozing through their siesta, can scarcely be laid at the feet of the banks. I do however agree that the banks were foolish in lending the speculators the money. Whilst mentioning Greece, their difficulty commenced when following entering the EU, they happily thought that they could live it up on EU money. I recall one gentleman who sadly had to sell his nine (9) Porsche one by one to get by.

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        • I’ve honestly never had the experience of queuing up outside and I have been to banks in Santa Clara, Ciego and Moron a few times. These have all had cadecas which may possibly be different to other banks. I don’t recall seeing security on the doors either. There definitely isn’t in the cadeca in the artisan fair on the waterfront nor those in the airports.

          Lehman brothers was an exception. Look at Northern Rock, RBS etc. I laugh at your characterization of the Greeks and Spanish but your comment is way off the mark. These countries were doing fine until the crash and the crash affected all the countries in the Eurozone as well as the UK and the US. Though Greece suffered worse being the weakest link in the chain the crash can’t be blamed on national characteristics – it was too widespread. I don’t care about someone having to sell their 9 porches, but I do care about pension funds and benefits being raided as well as the tax hikes which have put many sectors like the tourist industry out of business. I would highly recommend Adults in the Room by Yanis Varoufakis to get the whole picture of events.

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      • Name just one bank and location in Cuba Dani that doesn’t have ‘security’ at it’s door?

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      • When did Cubans start queuing Dani. One of their national characteristics is the system of “ultimo?”

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  • Absolutely agree with your critic to banks in US and EU, it is sick to see all that money going to save a bank, but I recognize that I am not 100% sure that that was the wrong thing to do, I mean, all politicians in power all over Europe and US did the same, they protected the big Banks with public funds, are all politician wrong or part of a big conspiracy or it was absolutely necessary this rescue), I don´t know, but I don’t like and don´t like precisely cause the people responsible, the bankers, were not responsible at all.

    About Cuban banks, they all have a security guy in the door, and they do keep you out if there are too many people trying to get in, something that frequently happens because the bad and slow service they provide and because the few branch they have.

    Where Carlyle is wrong is and I quote him “The poor customers have to wait outside in the heat until ‘security’ allows them the privilege of entering the air conditioned interior – a few at a time” not always there is air conditioned in the interior, too many times your own sweat is your only acclimatization.

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    • I agree that the banks needed to be bailed out otherwise the whole financial system would have collapsed. I was making the point that they can’t be left to purely market forces. That has been proven. They need at least to be properly regulated and in my opinion taken into some kind of democratic/public ownership and control. My other criticism is that the financial crash was used as an excuse to bring in unnecessary austerity which just doesn’t work and goes against all economic logic. As Yanis Varoufakis says in his book it is a form of financial waterboarding where the victim is constantly asphyxiated and then revived before repeating the exercise.

      I honestly haven’t had the experience that Carlyle mentions though I have had to wait quite a bit to get served inside the bank.

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      • The cadecas at Cuban airports are there to serve arriving visitors and either restrict access by being within the arrival area, or take the form of serving through a hatch. Can you name a bank or cadeca providing service to Cubans, that does not have ‘security’ ie: a man who controls the door allowing in only so many at a time? Look again at the photograph above! That is typical!
        The cadeca that I use regularly (about once every two weeks) allows two people in at a time as there are two cashiers. My wife’s bank which has usually eight cashiers, provides chairs for ten people in the interior (who are given numbered tickets) and the rest have to wait outside.
        Obviously Dani, in your enthusiasm to blame others (ie: the banks), you excuse the folly of the speculators who borrowed the money. It’s always somebody else’s fault. The Credit Unions to which I referred, fulfill most of your criteria. Few have been able to succeed and many have closed. When you speak of regulations, then you bring in the responsibilities of government. The crash of 2008 had little affect upon Canada’s banks due to sound regulations. I don’t know where you live – could be the UK where there was a long term mess necessitating government (ie: public) investment, but look to your government for sound regulation. May I at this point note that the UK, prior to the Cameron government, had a prolonged period of a Labour one – so why didn’t they regulate properly? Maybe having the former Head of the Bank of Canada as Head of the Bank of England will smarten things up in the UK.

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  • Dani, do you know if some of this bailed banks returned the public money they received from governments, did they paid interest? Did they used the money to lend it to help business or they just use it to covered holes in their accounts?

    I think both of you are right, for a healthiest economy it is needed well regulated Banks, but it is also personal responsibility to know your limit to get in debt and to think that your own personal economy will be not as good as it is when you get a loan or a mortgage.

    Carlyle I love Spain, I was going to tell you that you are wrong about Spanish people, but you are not, and it is not wrong to admit that some cultural characteristic than sometime made peoples so proud have also a bad side, it is not racist to see that there are difference in cultures and that they deal differently with economy. With this said, I still believe that what happened to Spain and Greece was primary big financials fault, I still believe this people were far more irresponsible than Spanish or Greeks and that this big crisis could be eluded.

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    • The UK government is slowly selling off its share in the banks. In answer to your second question I think the answer would be both. By buying up shares in the banks they allowed the banks to not collapse and therefore could continue to help business.

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      • Yes Dani – if the UK Government had applied appropriate regulations and not allowed (for example) the Head of the Royal Bank of Scotland to run riot, the Government (ie: the taxpayer) would not have had to jump in and bail them out. The government had little option as I think you are pointing out.

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