A bank in Italy accepts cheese as loan collateral
It might sound unbelievable to some but this is a valuable cheese...
Nowadays, living without tackling your savings or taking out a loan is hard.
Many businesses rely on loans to stay afloat. Sometimes, it is only through a loan that a company can see the light and see its vision come to fruition. But with loans come high repayments due to the interest rates, so, of course, if you can avoid taking out a loan, then it is advisable.
Not to mention the effect on your credit score if you cannot repay the money.
In saying all of that, it was interesting for us to hear about an Italian bank that accepted a weird form of collateral, it seemed like a cheesy idea, but, hey, it's been working for them since 1953.
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"Since 1953, the regional bank Credito Emiliano has accepted curious collateral for small-business loans: giant wheels of Parmigiano-Reggiano cheese." (IOB)
This might sound absurd to us, but it makes sense. You see, the banks accept these wheels of cheese that are known to cure for long periods of time and are priced according to their curing time. So, they are valuable to dairy farmers in the Emilia Romagna region in Northern Italy.
An article in Forbes in 2015 said, "Besides holding the cheese as insurance, Credem (the bank) stores and ages the wheels in climate-controlled vaults for the duration of the loan. The farmers save on operating costs. And in turn, the bank gains some expertise about a risky industry."
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The value of an 80-pound (36kg) cheese wheel is roughly between $900 (R16,000) and $1,500 (R26,674).
Now, you can understand why it made sense for the banks and the dairy farmers to work together. It wasn't as simple as it first sounds; a lot of investing occurs between both parties.
It also takes some maturity to work with a bank like this.
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