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Banking with a difference

Banking with a difference. Lars Pehrson CEO, Merkur Cooperative Bank Vice President, INAISE 5th African Microfinance Conference, Addis Ababa, 20th September 2011. Under banked Over banked . Poor people are un(der) banked Lack of access to adequate financial services

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Banking with a difference

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  1. Banking with a difference Lars Pehrson CEO, Merkur Cooperative Bank Vice President, INAISE 5th African Microfinance Conference, Addis Ababa, 20th September 2011

  2. Under banked Over banked Poor people are un(der) bankedLack of access to adequate financial services Rich people are over banked Spend a lot of time on artificial financial products with no benefit to society

  3. Sense of banks’ function in society diminished Shareholder value philosophy creates short term focus The bank is a business like any other business This business model promotes transactions instead of relations

  4. Banking for society Microfinance – banks and MFI’s Banking to reduce poverty and create livelihoods. Community bankingFinance for the benefit of the local community. Financing of SME’s, farmers, housing etc. Social and ethical banksA value based banking model that takes environmental sustainability, social justice and cultural freedom and plurality into account.

  5. Social and ethical banks Classical banking combined with a vision of a sustainable society. Exclusively linked to the real economy - nospeculation. Maximizing sustainability and societal impact, not maximizing profits. The banks are profitable at a fair and stable level. Average target around 7% ROE. Transparency is key. Social banks publish their loan book!

  6. Transparency works!

  7. Some important social banks v

  8. What do we finance? Organic farming and food processing Renewable energy and energy savings Cleantech production Housing and work places for marginalized groups. Culture, healthcare and education institutions Several banks have strong links to microfinance, including Triodos Bank, GLS Bank, Banca Etica, or are microfinance/SME banks themselves, like BRAC Bank and Mibanco

  9. Anexample – sustainable production Thise Dairy, Denmark • organic dairy, founded 1988 by 8 farmers • difficult market in the beginning • today leading organic dairy in Denmark • 65 farmers and a turnover of 95 m USD • created > 150 jobs in a region of Denmark with low employment rates

  10. An example – social initiative Hertha Village Community, Denmark • community integrating mentally handi-capped and ”normal” people, from 1996 • workplaces for handicapped adults, incl. organic farm, small dairy, workshops etc. • Living communities for handicapped and individual houses and flats for others. • Today > 120 people live in the village

  11. Important networks INAISE – www.inaise.org Global financial network, banks and non-banks Global Alliance for Banking on Values – www.gabv.org 13 value based banks Combined balance sheet exceeds $26 billion 7 million customers in 20 countries FEBEA – www.febea.org European network for alternative banks

  12. Triple bottom line in microfinance? • MFI’s already work with double bottom line: Social objective – access to finance + more – and financial sustainability • Developing towards SME finance and generally up-scaling poses the question: How to differentiate from conventional banking? • Environmental and climate challenges are obvious new target areas

  13. Fields to consider • Organic farmingImproves yields and protects the soil against erosion • Biogas Utilizes local resources for energy, improves energy efficiency • Renewable energy - solar and windAccess to energy is a major factor of development. Supply independent from expensive external sources (fossil energy). • Efficient stovesSave wood, reduce deforestation and improve air quality in rural homes.

  14. Challenges • These types of project often require longer term loans. Need to be funded and managed. • Technical partners and capacity building needed.

  15. Examples (1) • Solar home systems for rural villages in Senegal • Cooperation between local microfinance, SIDI and local NGO’s • Capacities built: Local technicians set up and repair installations. Capacity building is supported by a donation from Merkur Bank • The objective for the next 3 years: To reach 1,500 new customers

  16. Examples (2) • Microfinance and SME bank MiBanco (Peru) promotes organic farming actively • Triodos Microfinance Fund explore possibilities to link Tanzanian organic farmers with local MFI’s • Biogas projects, eg. Kenya Women Finance Trust (KWFT) and Prasac in Cambodia. The latter reached 4,000 clients with this product in 2010. • KixiCredito in Angola is working on a small scale solar energy project with the consultancy Triodos Facet

  17. Examples (3) Mrs. Soam Savien, Cambodian farmer: • Decided to get a 500 USD loan from Prasac • Invested in a 6 m3 biogas plant • From the few cattle in the household she produces gas for cooking and light • Can still use the manure for fertilizing • Saves firewood and work • Loan paid back within 20 months

  18. Questions? Lars Pehrson, CEO www.inaise.org www.merkur.dk

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