Banks are under huge political and social pressure to demonstrate their role in the wider economic progress of nations and their citizens. Unless banks adopt active policies to rebalance the negative economic and social consequences for the segments they currently exclude from their normal course of business, governments will intervene still further in the financial services industry. And they will do so by public demand.
Around the world, there is a clear message to banks: “Help me fulfill my dreams”.
But what can be done to motivate banks to change and to address neglected economic segments? Is there a way to involve banks in delivering both a social good and a profit? And how do the low income and other ‘marginalised’ segments of the world population move away from relying solely on charitable intervention and towards accessible banking provision?
There is a mechanism that lies outside the traditional bank parameters. One which collaborates with multi-national companies to link in a newly ‘bankable’ group of customers, connected to commercial sources of credit and funding? Let’s call this mechanism a Hybrid Value Chain. Social Enterprises ensure this mechanism makes it easy for banks to be partners in this social change. Who would benefit?
Everybody would benefit. Banks would acquire a sales and distribution channel to originate volume for lending on sound commercial and operational grounds. Cost and technical complexity would be minimal because the Social Enterprise has evolved its own, very low-cost, business model. Nor do banks need to significantly re-engineer their business processes to accommodate their new partners.
It is refreshing to know that such partnerships already exist. For example, proven branchless banking is already being extended to communities who access banking services simply through a mobile phone. Customers open accounts through fully trained field agents, who were previously unemployed and who now earn commission. Unproductive days spent walking from rural villages to a banking branch to pay bills or collect wages are avoided and millions of Economic Citizens - who were previously excluded from affordable access to financial services - are created.
Let’s hope that by 2020 new business models such as this will be globally the norm. Banks co-creating solutions to address and include today’s economically excluded citizens. Return on Equity continuing to be delivered - but in a more equitable world.