Social Banks and the Future of Sustainable Finance

Just to let every one know that the source of this information is world financial review by Olef Weber and Sven Semer.

What is social banking?

The term ‘social banking’ is used in a very heterogeneous way. First, since recently, the term social banking (2.0) is increasingly used to refer to banking based on new ‘social’ media, such as the Internet and related software. In this context, the ‘social’ part mainly comprises of establishing a direct connection between lenders and borrowers – without necessarily aiming for a social impact. Second, particularly in developing countries, social banking is often understood as (subsidised) government or development banking. Third, and usually also with respect to developing countries, social banking is very commonly associated with microfinance or microcredit. Fourth, the term is used for banks that mainly or exclusively serve socially oriented or charitable clients. Finally, especially in the Northern hemisphere, the term social banking is used for banks that strive for only doing business with a “positive impact”. In this sense, ‘social banking’ often is used interchangeably with ‘sustainable’, ‘ethical’ or ‘alternative’ banking.

“We define social banking as banking that aims to have a positive impact on people and the environment by means of banking.”

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How did social banks develop?

Contemporary social banking stands in the tradition of two early predecessors. On the one hand, these were the ‘Montes di Pietá’, an early type of social bank initiated by religious orders of the Dominicans and Franciscans in 15th century Italy to provide credit to the poor and combat usury. On the other hand, these were the savings and cooperative banks that developed in the 18th century, first in Germany and Austria. These banks were founded to serve clients who did not have access to basic banking services such as credit or saving facilities. They also had a strong focus on supporting the local community and economy.

Social banking today largely builds upon the philosophy of these banks that, in their respective times, were able to create a cultural change in the financial business, away from usury-driven money-lending towards mutually beneficial financial intermediation between depositors and borrowers.

Products and Services of Social Banks

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Lot more to share but in next post … Asta la Vista …. This is Shwetal Sigining off  for now.

Shwetal – An Aspiring writer…

The best style is the style you don’t notice.

Somerset Maugham

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