Close the loop for a diverse and inclusive society
Money means power. And, if history shows us anything, it is the incredible number of individuals and communities who have been excluded from both.
Isn’t it time to close the loop between our economy and the diverse reality of our world?
On the eighth International Banking on Values Day (3 November), we intend to show how money can be the catalyst for a more diverse and inclusive society. And how every person and institution can make a difference.
Women and banking
There are still 70 countries in the world where women cannot open a bank account or get access to credit. This level of exclusion has prompted a number of key initiatives. The Women’s World Banking non-profit organization was created in 1975, after the first UN Women’s Conference, to promote financial inclusion and female entrepreneurship for instance. While at a national level, entities such as Banco Mundo Mujer (Women World Bank), in Colombia, have been established. It is a member of the Global Alliance for Banking on Values (GABV), a network of the world’s leading values-based banks and a dynamic hub for inclusive banking.
Despite deep-seated discrimination in many places, 33% of small businesses in the world are owned by women, a figure that increases to 51% in Latin America, according to The Gender Journey of the GABV in Latin America study. It reports that, while female entrepreneurs are better at repaying loans, manage risks more responsibly and invest more in education, they are still usually offered less credit than men. In Latin America, the credit gap for women-led small and medium-sized companies is 98 billion dollars and the majority do not have sufficient access to finance to meet their needs. The study concludes that fostering women’s initiatives would be a key facilitator of wider economic development. Further fundamental barriers still need to be broken down. The report shows that many women still require a husband’s signature to secure a line of credit for example.
Fortunately, more banks worldwide, including GABV members BRAC Bank in Bangladesh and Bank of Palestine, are fighting this deep-rooted discrimination with specific loan products for women entrepreneurs that transform their, and their families, lives.
Change requires leadership and representation. While there are powerful exceptions, and ample evidence of the positive impact of more diverse leadership, women remain woefully under-represented in senior positions in financial institutions. Women make up only 20% of all management board members in the finance industry worldwide.
With 50% of women on its Board, Lead Bank, a GABV member in Kansas, United States, is one such exception. “We identified long, long ago the need and the societal benefits for greater, more complete participation by women in the financial affairs and decision-making activities of their communities”, says Joshua C. Rowland, CEO.
The Rise of African American Finance
According to the US Federal Reserve, up to 45% of African American credit applicants were denied in the US in 2020, compared to 31% of Hispanic and 18% of White applicants.
Addressing this type of inequality was behind the creation of City First Bank in Washington DC in the 1990s. The bank has been focused, since its founding, on financial inclusion of low-income neighbourhoods, most with a significant African American population. In 2021, this GABV member and Broadway Federal Bank, in Los Angeles, agreed to merge to create the biggest Black-led bank in the US.
The importance of this goes far beyond a classic merger in the service of efficiencies and profit. Structural dynamics of economic discrimination mean many Black-owned banks have a relatively low asset base. In 2020, as the LA Times reports, while a mainstream bank such as Wells Fargo had 1.97 trillion dollars in assets, the Latino owned or led banks in the US had 109 billion dollars on average and the Black owned or led banks had only 4.85 billion dollars.
Increasing awareness of these issues has prompted wider action among civil society too, including initiatives like the grassroots #BankBlack movement, which calls for African Americans to deposit money into Black-owned banks in order to support their communities.
Financial access for all
Financial exclusion affects many other groups too. But values-based banks demonstrate that grounded, scalable and high impact solutions do exist because they recognise and empower diversity through a different use of money.
One out of eight people has a disability. Mindful of this, GABV’s member Finca DRC, in the Democratic Republic of the Congo, launched a programme to address discrimination against blind people. The bank sponsored blind women who were begging on the streets of the capital Kinshasa to start their own businesses. Many of these women founded small retail businesses, selling products such as cooking oil or groceries. Over many weeks, Finca staff trained these women in business management. They formed a savings group, resulting in the majority of the women building long-term businesses. They have accumulated savings to develop dignified lives and resilience in the face of life’s challenges.
Another of the many groups in need of better access to finance are migrants. Despite making up 3% of the world’s population, millions of migrants continue to suffer financial exclusion for years after migrating due to barriers in gaining full citizenship. This has wide-ranging impacts, including access to long-term housing. In Minnesota, GABV’s member Sunrise Banks has decided to act through its Open Door Mortgage. This is a specially adapted product focused on foreign-born residents who cannot obtain all the paperwork required for mainstream mortgages.
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