How does Social banking Affect Businesses?Bank.pro Sales Team
In the words of Justin Welby: “Banks need to think through their ethics very carefully, and many have done so. I don’t know any bank that dismisses the concept of ethical banking.”
True to these words, many banks have placed greater importance on ethics, values, and social responsibilities. These form the premise for social banking.
Therefore, what is social banking? What are its benefits to businesses? How does it differ from conventional banking? Let’s find out!
What is Social Banking?
Social Banking is banking carried on by ethical banks, financial cooperatives, and credit unions that aims to provide opportunities for the less privileged, support environmental, ethical, and social agendas.
Social banks are also known as “banks with a conscience“. They are more focused on investing their money into the greater good of the community and society. Social banks make sustainable investments, they are deep-rooted or grounded in communities that serve the real economy and enable new business models.
The key qualities and terms in social banking are transparency, self-sustainability, inclusion, resilience, and long-term. These core values set them apart from conventional banks. What are the differences between social banks and conventional banks?
Differences between Social and Conventional Banking
Some of the differences between social and conventional banks are:
- The key qualities mentioned earlier are principles embedded in their fundamental culture not as add ons to shareholder benefits or profit maximisation.
- Mainstream banks are focused on maximising profit while social banks focus on profit, people and the planet. This is known as the triple principle, they care for profit and equally for human and environmental welfare.
- Unlike mainstream banks that have a competitive approach, social banks are more cohesive and cooperative in their approach.
- Social banks lend money to responsible social initiatives at lower rates than mainstream banks. Imagine a bank giving monetary gifts just for the good of a community! That’s social banking, you don’t see that in the mainstream.
Social banks sound like the real deal! Well, to perform these operations social banks are more flexible than mainstream banks and they do not go public, they are usually small and operate in the background, but they do a lot of good. So what benefits do they hold for businesses?
The benefit of Social Banking to businesses
The contribution of Social banks to the community cuts across different economic situations, business levels, or financial needs. The benefits are:
- Entrepreneurs: Startup entrepreneurs usually have difficulties raising capital to bring their business ideas to life, keep it alive and develop it. Social banks offer these entrepreneurs startup loans, training and mentorships, so they can provide for themselves, their families and create job opportunities in their communities.
- Small scale businesses: Social banks provide cash flow avenues for small entrepreneurs in rural areas. They give them working capital, financial advice and investment loans to push their businesses forward.
- Social Organisations: They support the good deeds of social organisations not just financially but by helping them test the sustainability of their business models and the skills required to project these organisations. They help social organisations extend and expand their programs, facilitate their social impact and networks.
The policies and values of social banks make for the greater society, taking into consideration the needs of their customers and giving tailored solutions to those needs makes social banking more than just a financial institution. Although they cannot solve the world’s problems entirely, they make an impact one note at a time!