Finance for a sustainable world

The INAISE annual meeting at the new, environmentally friendly headquarters of Banque Populaire du Haut Rhin,[1] drew over 100 social bankers, advocates, policymakers, practitioners and other interested parties from around the world. What they had in common was their commitment to a more just and inclusive financial system.

INAISE draws its membership from a diverse array of social finance institutions that come together in a shared philosophy that a financial system should reflect values of social justice, equality and the environment and that financial tools can be effective in meeting the needs of  communities that  are often excluded by the mainstream financial institutions. No matter how small many of the members may be, they demonstrate that it is possible to use financial tools to assist the smallest and most marginalized groups in society.

Yet, in a global financial market, social financiers have to compete to make their voice heard and they face a number of challenges from different quarters.

A number of strands ran through the meeting, which were then brought to the INAISE AGM for action.

Ekobank, Sweden and Charity Bank, UK are the newest social banking members of INAISE, demonstrating that in an increasingly regulated marketplace there is still room for niche organizations. However, the capital adequacy proposals (Basel II[2]) do not recognize the characteristics of such banks or, indeed, the historic quality of their lending portfolios. Precipitate regulatory action could make access to credit by their customers more difficult and more expensive. It was agreed that a working party should take forward the issues raised by Basel II to make the case for social banks.

Members had also participated in the World Economic Forum and its counterpart event in Porto Allegre. It was agreed that social finance had a key contribution to make to the agenda of the next social summit and INAISE would seek to contribute to the planning event in Italy this autumn. Recent developments in a market or markets for social investment were also explored, and it was recognized that measures were needed to encourage a new generation of social investors. INAISE members have a lot of experience and case histories to contribute, so INAISE itself perhaps needed to develop a higher profile of what it meant to be a member. Contacts with charitable trusts could develop a wider appreciation of a social capital market.

1 The whole design is environmentally friendly: it uses recycled and renewable materials, includes water recycling, solar panels, etc.
2 Basel II is the revised capital accord of the Basel Committee for Banking Supervision. It is planned to be finalized in late 2003 and implemented in 2006. It will have important implications for capital adequacy regulation of banks and building societies. The regulators may require social banks to allocate more capital to credit and operational risk, which would increase their lending costs and in some
cases could price a loan out of the market.

Malcolm Hayday is Chief Executive, The Charity Bank Limited. He can be contacted at Mhayday@charitybank.org

For more information see www.inaise.org

Event INAISE annual meeting
Date 23-24 May
Venue  Mulhouse, France
Theme Finance for a Sustainable World