Money has a purpose


Relational Finance starts from the assumption that finance is a means, not an end. A better society is not, in the first instance, just one with more resources, but one in which relationships work well.


  • The financial system creates a set of powerful connections between people, between organizations, and between nations.
  • It controls the percolation of monetary value through society in the form of earning, investing and borrowing. Using its labyrinthine channels, governments and central banks attempt to stimulate or rein in economic growth by manipulating interest rates and money supply.
  • Individuals, families, companies and governments need money like they need oxygen: if earnings fall, they are forced to reduce costs, seek injections of capital in the form of loans or, in effect, beg.  These processes are constantly visible in the working of the economy.
  • Lending has become a key financial issue, with the widespread acceptance of borrowing in the form of consumer credit and national debt, and an increasing nervous dependence on current prosperity and hoped-for future growth.
  • The financial crisis of 2008 was precipitated by the realization that yesterday’s borrowers in many cases were unlikely to be able to pay their debts.


Structural injustice

The relationship between lenders and borrowers, at any level, is inherently unequal.  When unexpected events leave the borrower unable to service the loan, calamity often ensues.  Homes put up as mortgage security are lost.  Companies unable to repay loans may wind up in administration and have their assets seized (in fact a number of company takeovers occur in precisely this situation).  Nations are subjected to austerity regimes that all too easily slide into political instability and the emergence of violent extremism.


The role of money in securing individual and family wellbeing makes financial difficulty a major cause of stress.  A Barclays survey showed that money was the most frequently cited reason for arguments between partners.  The psychological pressure resulting from personal debt is linked directly with child abuse and physical violence between adults in households.

Slack lending practice

Debt finance also does little to reduce relational distance between corporate borrowers and corporate lenders. It is seldom associated with close involvement by the lender in the affairs of the borrowing company because the security provided for the loan acts as a convenient substitute for close monitoring.  The lack of transparency associated with derivatives trading and packaging and selling on of debt has exacerbated this trend.


It is significant that an individualized economy removes financial responsibility from the lower levels of social organization. In most cases, families and small communities, as entities in their own right, are held together more by choice or custom than by finance;  they are merely collections of individuals who are financially connected to forces that operate at a much higher level.  This loss of financial overlap in relationships means that money weakens rather than strengthens social cohesion.

Living off future generations

Financial decisions by Government can also impact on relationships between generations. Increases in national debt in effect constitute a promise that future generations will meet the cost of the interest payments and eventually repay the debt.  What would be considered a grossly unfair transaction between contemporaries is waved through because future generations have no voice.




The massive impact of finance on society means we should pay attention to the kinds of connections created by financial institutions.

Finance with participation

The potential of finance to build relational capital suggests that a private sector based on equity rather than debt would be stronger and more accountable. Investors are motivated to take an interest in company affairs – which could benefit stakeholders. Similarly, companies can build relationships with clients by extending payment terms, and foreign direct investment can build relationships across national boundaries.

Re-evaluating debt

It is worth asking whether debt finance is a sustainable way to run either national or household budgets. When Western societies are having to make painful decisions on public expenditure, and where a global economic crisis could be triggered by large scale debt default, it makes good sense to undertake wide ranging reforms that disincentivize further borrowing, whether by governments, by companies, or by individuals.


Follow the IIRC

To change the culture of companies so that they attach greater importance to relational issues, government can follow the proposals of IIRC (International Integrated Reporting Council). South Africa has already successfully changed its corporate governance code, requiring companies to report annually on the quality of stakeholder relationships.

Prefer shared equity

Shared equity as a form of home ownership would reduce household debt. In this financial arrangement, ownership of the house is transferred gradually between the bank and buyer. Government can promote and incentivize shared equity forms of home ownership debt by changing the accounting rules governing banks, building societies and pension funds.

Promote SMEs

SMEs are small and medium-sized enterprises (under 200 employees). Government can incentivize investment into these through FDI (Foreign Direct Investment), by removing Capital Gains Tax for investors who show that they attend company AGMs, and by establishing regional information hubs to make investment opportunities known at a regional level.

Explore family syndicates

Giving more financial powers and responsibilities to families provides a way both to strengthen family relationships and to reduce national welfare budgets. Government would support Family Welfare Syndicates through tax incentives for shared saving schemes and relocating closer to elderly relatives. Funds could be used to cover medical bills, care, and higher education.



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