Social Banking for a Better World Through Values-Based Banking

Social banking has the potential to create a better world by prioritizing values over profits. It's a concept that's been gaining traction globally, with many institutions adopting this approach to banking.

By focusing on social and environmental impact, social banks aim to make a positive difference in people's lives. In fact, according to a study, 70% of social banks report that their social and environmental goals are equally or more important than their financial goals.

Social banking is not just about philanthropy, but about integrating social and environmental considerations into every aspect of banking operations. This includes lending practices, investment decisions, and even the way employees are treated.

By doing so, social banks can help create a more equitable and sustainable financial system that benefits both people and the planet.

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Social banking is a type of banking that prioritizes social and environmental goals alongside financial returns. It's a movement that's gaining traction globally.

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Social banking institutions often have a strong community focus and may offer products and services that support local economic development. For example, they might provide microloans to small businesses or offer financial education to underserved populations.

The goal of social banking is to create positive social and environmental impact while still generating a return on investment. This approach can be seen in the way some social banks invest in renewable energy projects or support community-led development initiatives.

Social banking institutions often have a more flexible and inclusive approach to lending, taking into account factors like social and environmental impact alongside creditworthiness. This can be beneficial for marginalized communities or businesses that might not qualify for traditional loans.

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Social banking is a new initiative that's targeted towards young people who spend a lot of time on social media platforms.

Youngsters see social banking as a cool feature rather than a transactional channel like the bank's mobile app or website.

The young generation is comfortable accessing their own bank's mobile or website, or with third-party payment apps like Paytm or Phonepe.

These digital channels are easy to use and have a high user experience, which is why they retain existing customers.

Today's young people are more interested in the convenience and comfort of existing digital channels than in adopting new ones.

Social banking adoption is hindered by the perception that social media platforms are not suitable for banking activities.

Customers view social media as a place for sharing information with friends, whereas banking is seen as a private and secure activity.

The lack of awareness about social banking services among existing customers is a significant challenge.

Banks often market social banking as a new feature, but its recall value is very limited, as seen with two friends who were unsure if their bank offered such services despite seeing advertisements on the bank's website.

Existing customers may not recognize social banking as a valuable service, especially if they don't see its benefits or understand how it works.

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Designing a social banking experience requires a deep understanding of the customer's daily life activities, social media behaviors, and current usage of bank touchpoints.

To achieve this, banks should focus on implementing gamification and behavior change techniques to help customers feel at ease when conducting banking activities on their preferred social media platforms.

Banks may not have full control over their social banking experiences, as it is dependent on the specific social media platform's user experience, leading to a high possibility of fragmented customer experiences.

To design a better social banking experience, banks can follow these steps:

Designing a Banking Experience is all about understanding how customers interact with their daily life activities, social media behaviors, and existing banking touchpoints.

To design a better social banking experience, banks need to zoom out and learn about their customers' daily life activities, not just their banking customer journey. This means considering how customers use social media and how they currently interact with their bank's touchpoints.

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Learning about customers' social media behaviors is crucial in designing a social banking experience. Banks need to understand how their customers use social media platforms and how they can integrate their banking services into these platforms.

Implementing gamification and behavior change techniques can help customers feel more at ease when conducting banking activities on their preferred social media platforms. This can be achieved by making banking activities more engaging and rewarding.

Here are the steps to design a better social banking experience:

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For instance, if you're looking at the section on Institutional Microfinance, you can find it on pages 126-145.

The European Union's (EU) Action Plan on Financing Sustainable Growth calls for a common classification system for sustainable activities, known as the EU taxonomy. This system identifies six environmental objectives, including climate change adaptation and mitigation.

The EU taxonomy is crucial for investors to identify opportunities that enable inclusive and sustainable communities, affordable healthcare and housing, and decent jobs. The Platform on Sustainable Finance has tasked with further developing the EU taxonomy and exploring its expansion to social objectives.

A social taxonomy is necessary to define clearly what constitutes a social investment. The Global Alliance for Banking on Values (GABV) supported the proposal to integrate sustainability and social impact, but recommended embedding social impact themes in a broader approach focused on the real economy.

Members of Parliament can draw on the GABV's findings to determine best practices for the Social Taxonomy, use proven Key Performance Indicators to measure impact, and ensure effectively "do no significant harm" criteria. The Platform on Sustainable Finance has suggested as much in their Social Impact Report.

The model can serve as a basis for banks to follow the latest requirements of their internal processes, including an impact assessment over a ten-year horizon.

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The European Union's Social Taxonomy is a crucial tool for investors to identify opportunities that enable inclusive and sustainable communities, affordable healthcare and housing, and decent jobs.

A social taxonomy is necessary to clearly define what constitutes a social investment, as confirmed by the Platform on Sustainable Finance in its final report.

The Platform's report, published on 28 February 2022, highlights the importance of defining social investment clearly to support the EU's sustainable finance agenda.

The Social Taxonomy can be applied to different areas, including fund managers, banks, and insurers, as well as members of Parliament and banks.

Fund managers and banks or insurers can use a social taxonomy to integrate sustainability assessments of investees in their internal processes, as suggested by the Platform on Sustainable Finance.

Members of Parliament can draw on the Global Alliance for Banking on Values' (GABV) findings to determine best practices for the Social Taxonomy and use proven Key Performance Indicators to measure impact.

The model can serve as a basis for banks to follow the latest requirements of their internal processes, including an impact assessment over a ten-year horizon.

Here are some key applications of the social taxonomy:

Values-based banks have a clear connection between economic stability and human rights, equal opportunities, social inclusion, and access to high-quality services.

They focus their finance on the real economy, which means they invest in projects that have a tangible impact on people's lives.

Values-based banks follow a holistic approach to deliver positive social impact, which involves five stages: defining social impact objectives, designing a comprehensive approach, implementing the design, monitoring the result, and scaling up efforts in the future.

The European Commission's Platform on Sustainable Finance has been working on developing a social taxonomy to help investors identify opportunities that promote inclusive and sustainable communities.

Investors, like those from the Global Alliance for Banking on Values, have been providing expert inputs to this work and supporting the proposal to integrate sustainability and social impact.

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The Platform has confirmed that it's crucial to define clearly what constitutes a social investment, which will help create a common language and clear definition of what is sustainable.

The Social Impact Virtuous Circular Model, developed by the Global Alliance for Banking on Values, is a comprehensive approach to delivering positive social impact, which includes five stages.

By following this model, values-based banks can create lasting social impact and make a real difference in people's lives.

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Social enterprises face a significant challenge in financing their operations or implementing new projects. This is due to low equity capitalization, lack of collateral, and untested innovations.

Mezzanine financing, also known as quasi-equity, is a subordinated loan that strengthens a company's capital base without affecting its ownership structure. This makes the company more attractive to lenders.

Social impact bonds are another innovative instrument that allows the public sector to test innovative solutions for social challenges. These solutions are designed and tested by social organizations and pre-financed by impact investors.

If the contractually agreed impact targets are achieved, the public sector pays back the pre-financed investments, including a success fee, to the investors. This enables social enterprises to take risks and launch new projects without using taxpayers' money.

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Let's take a look at some real-life examples of social banking in action. In the Philippines, Bangko Sentral ng Pilipinas (BSP) launched a mobile banking app that allows users to access their accounts and make transactions using their mobile phones. This app has been a huge success, with over 10 million downloads and counting!

One notable example is the BSP's partnership with the Department of Education to provide financial education to students. The program, called "Financial Literacy Program for Students", aims to teach students about basic banking concepts and promote financial inclusion. By doing so, the BSP hopes to empower the next generation of Filipinos to make informed financial decisions.

The BSP's mobile banking app also offers a feature that allows users to save money automatically, with the option to set aside a fixed amount regularly. This feature, called "auto-save", has been a game-changer for many users who struggle to save money regularly. By automating the savings process, users can build up their savings over time without much effort.

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In another example, the BSP has launched a program called "Bayanihan sa Banko", which aims to provide financial assistance to small business owners affected by the COVID-19 pandemic. The program offers low-interest loans and financial counseling to help entrepreneurs recover from the pandemic. By providing support to small businesses, the BSP hopes to stimulate economic growth and promote financial inclusion.

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Social banking is a relatively new concept that banks are exploring to engage with younger generations. It involves using social media platforms to conduct banking activities.

Customer experience is a crucial aspect of social banking, but it can be fragmented due to the specific social media platform and the integration of the bank's service with it. This means that the experience may vary depending on the platform used.

To design a better social banking experience, banks can follow some key steps. These include learning about the customer's daily life activities, social media behaviors, and current usage of bank touchpoints.

Some banks are already implementing social banking initiatives with great success. For example, Erste Group's Social Banking supports people at risk of poverty by promoting job creation and offering special advisory and financial solutions.

Here are some key areas that social banking initiatives are focusing on:

Social banking initiatives are also making a valuable contribution to achieving the Sustainable Development Goals (SDGs) set by the United Nations.