March 8, 2012; Source: Grant and Fundraising News
What is a value-based bank? The Global Alliance for Banking on Values (GABV) says that they are banks that “base their decisions first and foremost on the needs of people and the environment.” Presumably, that is in contrast to banks that make decisions based on profitability.
According to a GABV study funded by the Rockefeller Foundation, a comparison of 17 values-based banks with 29 “Globally Systematically Important Financial Institutions” (GSIFI) (including Bank of America, Citicorp, and Deutsche Bank) between 2007 and 2010 shows that the value-based banks “are outperforming traditional mainstream banks in many areas, including financial indicators such as return on assets, growth in loans and deposits, and capital strength.” The report highlights the greater likelihood of the values-based banks to invest their assets in loans and to increase their lending during the international recession as opposed to the “too big to fail” banks.
The 17 values-based banks included the 14 members of the GABV plus three other “sustainable banks:”
ABS Bank, Switzerland
Banca Etica, Italy
Bank Integral, El Salvador
BRAC Bank, Bangladesh
Cultura Bank, Norway
GLS Bank, Germany
Merkur Bank, Denmark
New Resource Bank, California
One Pacific Coast Bank, California
Triodos Bank, The Netherlands
Vancity, British Columbia, Canada
Xac Bank, Mongolia
Other Sustainable Banks
Credit Cooperatif, France
Sunrise Community Banks, Minnesota
While outperforming the big banks on a number of important and industry-recognized benchmarks, the GABV banks are small, collectively accounting for $26 billion in assets. According to GABV, its “members play a crucial role in providing the money entrepreneurs and their enterprises need to transform lives and deliver sustainable development for unserved people, communities and the environment.” It sounds like there is a lot of microfinancing in the GABV members’ portfolios, which certainly seems to be the case for the BRAC Microfinance Programme, which has distributed $5 billion in microcredit in Bangladesh and other countries.
Values don’t always means that the programs emanating from those triple bottom line approaches are always successful. That is certainly the case with microfinancing, which received a trenchant critique in the pages of the Washington Post this past weekend by David Roodman of the Center for Global Development. Roodman shows evidence of microcredit “bubbles” of people and regions getting over their heads with microloans, leading to defaults and write-offs, though he notes that “(t)hese bubbles may be the first in history fed more by charity than by greed.” There is promise in values-based banking, much of it supported by charitable donors around the world. But the inclusion of triple bottom line values doesn’t automatically mean success in addressing intractable social and economic problems.—Rick Cohen