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From microcredit to impact investing to social enterprise startup funding, this blog explores money matters.

Friday, October 19, 2012

Why Should Banks Reach Out to Social Entrepreneurs? : That question will be front and center at the world's largest banking conference

By Konstanze Frischen and Felix Oldenburg

This article is part of the Financial Inclusion Special written for the G2012 Mexico Financial Inclusion competition.

Close your eyes and think of banking. You probably see men in suits, office towers, Bloomberg terminals, and maybe a cash machine – a world that is far removed from African village elders with a phone, migrant workers queuing at a cash shop, children receiving a paycheck for factory work, or doorstep lenders in poor suburbs.

Yet these are the people involved in the next chapter of banking. Suspend disbelief and look at the market potential that could be unlocked for banks by five major social innovations that are at the center of a new partnership between the Ashoka Globalizer and the creative folks at the global financial transaction cooperative, SWIFT Innotribe.

The numbers are mind boggling. There are two billion people without a bank account, and five billion without access to credit, people paying up to 4,000 percent in interest on loans, $350 billion of unsafe remittances, most small and medium enterprises in developing economies without working capital, and governments across the world unable to fund their social problems. 

On Oct. 12 and 13, in London, bankers, consultants, and experts met with Ashoka Fellows who want to work with banks to help tackle these problems, and do so at scale. Among them is Brian Richardson, whose Wizzit mobile banking service is already in seven countries, and who wants to create a one world bank account that allows for simple, safe, and affordable banking services for all. Or take Steve Rothschild, who has found a way for governments to tap into the trillion dollar bond market and fund unemployment programs or health care just like they finance roads and bridges.

They are not after CSR funds but after the bank's core business. Their social innovations lend themselves to it: The social entrepreneurs come with assets like access to new client groups, or the ability to aggregate demand from low income customers, that banks don't have yet would like to. The banks, in turn, have the systems, technology, and resources to take the social entrepreneurs' inventions to scale so they can benefit many more people.

There is a larger argument here, then, and one that needs a larger audience. On Oct. 30, in Osaka, 8,000 bankers will convene for the world's largest banking conference, SIBOS, and for the first time enter into a dialogue with social entrepreneurs about the future of their industry – based on concrete ideas for new business with social impact.

We will report back to you from Osaka, and share success or failure in three weeks time. Tune in. Our hope is that banks will be able to do again what they have done in the past. Throughout their history, banks have developed markets from social innovations, driving inclusion and development. Every customer of a cooperative bank is sign of the power of the idea of the social entrepreneur Friedrich Wilhelm Raiffeisen, and every family that has been lifted out of poverty by a microloan is a testimony to the foresight of Muhammad Yunus. 

Banks have a lot to win (see this recent blog on why talent is deserting the industry), and so do the many people who have never seen one from the inside.

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