Mature Banking

A post from student Tom Hosking

Where does parmesan cheese come from? It may surprise you to know that it is most likely to have come from a bank! Banks in Northern Italy have been running a cash-for-cheese loan scheme for the past fifty years. This year, demand for the scheme has risen 15% because cheese makers are struggling in these hard times.

Parmesan cheese can take up to two years to make and mature. This means that the cheese makers have a serious cash flow problem because they have to wait so long to sell their product. Banks offer help to local parmesan makers in the form of cheap loans. However these aren’t ordinary loans, the parmesan cheese is taken as collateral. If the loan is defaulted upon- the bank will sell the cheese. The cheese is kept in air-conditioned bank vaults, kept under such high security that you would think they were storing gold. The cheese fetches £550 per wheel and some banks have as much as $200 million worth of parmesan under lock and key.

The cheese makers benefit hugely from this. They receive a loan at around 3% interest from the bank. This means that the parmesan makers can pay wages and other bills. The only collateral he can offer is his cheese, which they have no use for until it has aged; and they obtain a secure place to store the cheese for a small fee.

This is an excellent example of creative financing. Over the past five years, 100 makers of parmesan have closed down. Without this scheme, there would have been many more bankruptcies.