Eleven banks have joined to form a new alliance called The Global Alliance for Banking on Values in a move to build a positive alternative to the current crisis in the global financial system. According to a press release on the Netherlands based Triodos Bank’s website, this new partnership plans to develop new ways of building organizations better suited to long-term sustainable thinking and also to develop new forms of ownership and economic cooperation. The alliance was launched at an event held in The Netherlands from March 2-4, 2009. The event was also attended by Her Royal Highness Princess Máxima of The Netherlands, a former banker and former member of the United Nations Group on Inclusive Financial Sectors, and Achim Steiner, Executive Director of the United Nations Environment Program. The eleven member alliance was founded by the Bangladesh Rural Advancement Committee (BRAC) Bank based in Bangladesh, ShoreBank Corporation the United States based community development and environment bank and Triodos Bank in The Netherlands. Other member banks of the alliance include Alternative Bank ABS in Switzerland, Banca Popolare Etica in Italy, Banex, Banco del Exito in Nicaragua, the GLS Bank in Germany, Mekur Bank in Denmark, Mibanco, Banco de la Microempresa in Peru, New Resource Bank in the United States and the XacBank in Mongolia.
The member banks, with assets worth over USD 10 billion and serving over seven million customers in 20 countries, also came together for their first meeting during the event. Given the current financial crisis and its profound influence on the global economy, the members believe the timing of the alliance’s launch is crucial. Speaking at the launch, Mr Peter Blom, the CEO of Triodos Bank described the leaders of the 11 member banks as ‘forces of change’ who stuck to simple, core banking services that balance ‘people, planet and profit’. He brought to attention the fact that these banks were still profitable and crisis resistant, unlike their mainstream contemporaries and stated that the leaders of these 11 banks held some of the solutions to the global financial crisis. Ms Mary Houghton, President of the Shorebank Corporation stated that the establishment of such an alliance was very important given the current crisis and the need for a healthier, more sustainable economy. Ms Houghton said the alliance would focus on promoting ‘responsible’ finance, supporting existing banks in this regard and also helping develop new ones. Speaking at the event, Her Royal Highness Princess Máxima of The Netherlands called for banks to ‘go back to [the] basics’ and follow the traditional banking activity of acting as an intermediary between the saver and the borrower in addition to building a strong relationship with customers. She also stressed on the need for banks to thoroughly assess how much each customer could really handle as a loan. No further information on the alliance’s plan of action or the outcome of the meeting is publicly available.
To qualify for membership to the alliance, each institution had to meet the following three criteria:
- Should be an independent and licensed bank with a focus on retail customers.
- Should have a minimum balance of USD 100 million.
- Should be committed to responsible financing and the triple bottom line of people, planet and profit.
As of now, no information is publicly available as to whether the alliance is open for new membership.
The resilience of the microfinance industry to the global financial crisis has been much discussed about and has also been covered extensively by MicroCapital. Several key microfinance practitioners and advocates have publicly voiced their support for microfinance as a stable alternative investment. Dr. Muhammad Yunus of the Grameen Bank, referring to the fact that the microfinance sector was quite insulated from the financial crisis, said: ‘in the middle of all these bad news: microfinance still works’. The TIME Magazine featured an interview with Ms. Mary Ellen Iskenderian, the CEO of Women’s World Banking in December 2008, where Ms. Iskenderian acknowledged that there was evidence backing the resilience of the microfinance industry to the global market movements. Citing the still high repayment rates in the range of nearly 97- 98 percent, Ms. Iskenderian stated that equity did still seem to be available for microfinance. Former US President Bill Clinton, in his speech at the 2008 Clinton Global Initiative, called for investors to consider the poor of developing nations as viable investment alternatives to today’s turbulent markets. As reported in this MicroCapital story, Mr. Clinton lauded international microfinance investors as ‘smart people’ earning money the ‘old-fashioned way’ in a ‘real economy based on real people doing real things for a real rate of return.’ A MicroCapital story quotes the CEO and Managing Director of Sri Lanka’s Hatton National Bank, Rajendra Theagarajah, as stating that investment in microfinance, as opposed to focusing on subsidies, is one of the reasons Asia has been able to better withstand shocks of the global financial crisis. A 2008 study by the international management consulting firm, Arthur D. Little (ADL), strongly predicts that microfinance is poised to become a new asset class for traditional investors. Further, many countries have also witnessed slow but steady growth in their microfinance sector despite the financial crisis. MicroCapital has covered such steady growth of the sector in several regions including Latin America, Bosnia and Herzegovina, Cambodia and China.
By Bharathi Ram, Research Assistant
March 12, 2009: Expanding Microfinancing in Latin America
Jan 9, 2009: Push and Pull of China’s Microfinance Expansion
Nov 27, 2008: Microfinance on the Rise
Oct 2, 2008: Bill Clinton extols Microfinance