Banks For A Better World?

It has been a year since SWIFT launched an initiative called Banks For A Better World. And it still sounds like an oxymoron. The past 12 months have been wracked by banking scandals involving greed, corruption and mismanagement. As if that was not bad enough, millions of people, in both the developed and emerging markets, are still not being served at all by banks.

As Nobel Prize winner Muhammad Yunus, a scheduled speaker at Sibos, points out in the guest essay he wrote for Informilo, there is a growing disconnect between the original mission of credit markets — to serve human needs by providing businesses with capital to start or expand and enabling families to buy homes — and the goals of many banks today, which center primarily on maximizing profits. Global financial services provider SWIFT set out a year ago to help address this issue, launching “Banks For a Better World,” led by Martine De Weirdt, a member of Innotribe, the innovation arm of SWIFT. The idea behind the initiative is to explore how the core skills and accumulated experience of banks might be leveraged to better serve their existing customers and to significantly enlarge the number of people served. This year Innotribe is proposing specific projects created by social entrepreneurs that could help the banks do just that (see the story on pages 5 and 6).

At the moment there are two distinct financial systems: the mainstream one, which includes financial institutions, commercial banks, investment banks, regulators, stock exchanges and SWIFT, and the alternative social financial system, with ethical and alternative banks, their federations and associations, social stock exchanges and social investment funds.

There are few connections between the mainstream and alternative financial systems, leading to gaps in current offerings. For example, there are no funding instruments between microcredits and big loans, and access to finance is still a big issue for a large proportion of the world population.

Why should traditional banks care? They risk being disintermediated if they do not expand financial instruments to include services such as mobile payments for the unconnected and unbanked. What’s more, the opportunity to service customers that have no connection with mainstream banks is huge – in terms of both bringing in new sources of revenue and in doing good.

Indeed, the Ashoka projects that will be presented at Sibos “are not nice-to-have extras; they point to the emergence of very large markets — not today’s – but tomorrow’s,” says Felix Oldenburg, Europe leader for Ashoka, a global organization that identities and invests in social entrepreneurs.

One big underserved market is children. “There are 350 million economically-active children in the world – one in four – and that is not going to change,” says Oldenburg. “We can keep these children unbanked, which means they will not be able to save or will be forced to rely on adults to make decisions and they will start life as financial dependents as opposed to being economically active and financially responsible.”

Enter Ashoka project Children & Youth Finance International (http://childfinanceinternational.org), a year-old organization which aims to help children rise out of poverty by teaching them financial awareness and giving them access to financial services. Almost 20 million children have been reached by Child & Youth Finance International, and the goal is to increase that number to 100 million in 100 countries by 2015.

Other Ashoka projects that will be presented at Sibos include financing the debt of cities through human capital performance bonds and connecting SMEs to capital. A few center on bringing banking to the unbanked, both in emerging and developed markets.

What is needed is to think outside the box, says Julius Akinyemi, the initiator of a project called Unleashing the Wealth of Nations and a resident entrepreneur at the MIT Media Lab in Cambridge, Massachusetts. Akinyemi, a native of Nigeria, is exploring the commercialization of technology innovation to empower people in developing nations, so that they may invent new opportunities for themselves and their societies.

Akinyemi, a scheduled speaker at Sibos, is proposing leveraging new technology to create a local and nationwide “eRegistry” of all assets such as land, real property, farms and even cows and goats, that could be converted into a globally-understood and -accepted common currency. The convergence of new technologies has the potential to enable asset owners, regardless of location or type of asset, to partake in an artificial nervous systems that can begin to sense, capture, record, transmit and even value an asset in nanoseconds via the eRegistry, he says. Such a registry could be used by governments to track revenue generation and population growth, and for disease control. It could also be used to predict future pricing of assets and local market behaviors and to allow another, more global perspective of individual and communal wealth to emerge.

The hope is that the eRegistry could enable the building of an Entrepreneurial Information Exchange Platform that could be analogous to a real-time global commerce commodities trading floor. Akinyemi envisions the exchange platform being used to allow for various “match ups” between small businesses and micro lenders and as an open platform for virtual doctors and health care services, local commodities trading and as a quantitative tool for microcredit lending efficiency.

Bringing about financial inclusion through new tools will go a long way towards improving the world and establishing creditability and viability for the banking sector, says Ashoka’s Oldenburg. But first banks need to stop focusing just on maximizing profits and “help more people to do more with their lives,” he says. “That is the conversation we would like to get started.” If that conversation turns to concrete action maybe next year “banks for a better world” will sound more credible.

 

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