Interest-free finance

Borrowing and lending money is the cornerstone of modern capitalist economy. And commercial loans virtually always involve interest. Therefore most people are unable to imagine a society without interest. However interest has several negative effects on society.

Bernard Lietaer and Jacqui Dunne mention the following negative aspects of interest:

  • It forces growth even if growth cannot be sustained
  • It enforce short-term thinking
  • it causes social erosion
  • it concentrates wealth in fewer hands

Another issue, not stated by Lietaer and Dunne, is that interest also increases the cost of production and ultimately causes an increase of prices – or cost push inflation. As pointed out by Magrit Kennedy consumer prices consist up to 45% of interest payments.

Fortunately, an interest-free economic system is possible – though it will require a substantial change of mentality among the general public.

An interest-free economy will need several building blocks. Some of these are:

A major issue with JAK banking is that saving there is primarily attractive for those who intend to borrow in the future. This because the amount one can borrow is linked to one’s (previous) savings. For other savers a zero-interest savings account is far from attractive.

In other words there is a building block still missing. A saving or investment opportunity which offers a return on investment (roi) but with a lower risk than, say, buying stocks. Of course, we want something which does not rely upon interest – not even through a “back door”.

Natural saving

Bernard Lietaer and Marek Hudon have proposed natural savings. Their idea is quite simple: people with some excess money could use this to plant a tree (or something similar). Over time the tree will grow, till it could be cut for the timber which will be sold at market prices.

The use of trees as an investment is anything but new. It used to be custom in France to plant a poplar when a girl was born. And once she would marry, the poplar was cut and the wood was sold to fund the wedding.

Natural savings have several benefits. It provides a method of inflation-proof saving without interest, as the wood price will (usually) increase with inflation. And not unimportantly it gives a positive roi for savers. The roi is pegged to the growth rate of the tree.

Of course, there are risks associated with this financial product. First of all, the price of timber might be lower than expected. And trees might fall victim wild-fire and disease. Also the price of timber might be lower than expected.

Lietaer and Hudon do not restrict themselves to trees, other organic growing systems could be the subject of a natural saving plan. They also propose to invest in different types of trees, to reduce risks.

Rather than people to buy trees themselves, Lietaer and Hudon propose the creation of Natural Saving Companies. This NSC will issue shares and use the revenue to plant trees. And upon maturity the trees will be cut and the revenue distributed to the shareholders. These companies will be strictly regulated.

For legal reasons, however, it might be advisable for a natural savings company to issue collateralized debt obligations instead. In this case the NSC will pledge the trees as security for a loan.

Forest gardens

One idea might be to combine natural saving plans with forest gardens. Forest gardens is method gardening developed by Robert Hart, which is based upon woodland ecosystems. The idea is to combine nut and fruit trees with the cultivation of herbs and shrubs and if properly designed, forest gardens have low labor requirements.

Forest gardens are interesting from the perspective of a natural saving plan, that they not only produce revenue after, say, twenty years, but has a continuous production of commodities. Fruit and nuts could be sold for reasonable prices and hence generating an annual flow of revenue for investors.

As we have pointed out earlier forest gardens can easily be integrated in urban design plans. This would allow citizens to invest their saving in their local community. And by giving ordinary people a stake in local green zones, they have a clear interest in the maintenance of public green.

Forest gardening and natural saving are a logical combination for a future sustainable economy.


Lietaer, Bernard and Jacqui Dunne. Rethinking Money. How new currencies turn scarcity into prosperity. Berrett-Koehler, San Francisco 2013.

Hudon, Marek and Bernard Lietaer. Inflationary Environments. How to Save Forests with Savings for and by the Poor, July 2006. (Visited at October 7, 2016).

3 thoughts on “Interest-free finance”

    1. Not necessarily. As long as the increase of the money supply is related to the growth of the real economy, there will be no inflation. Of course, this requires certain control mechanisms which will limit te ability of politicians to manipulate this for electoral reasons.

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