A review of some of the alternatives available on the market
Choosing a bank in accordance with the type of society it supports is not easy. Ethical banking means the entity is only involved in activities that it considers add positive social, ecological or cultural value. In conventional banking, no ecological or social criteria are applied to decision making. There is, however, a wide range of approaches (from the major banks to small savings banks) with notably different impacts on society.
Apart from their regular activities, many conventional banking entities are involved in ‘added social value’ initiatives. These fall into three main areas:
- So-called ethical instruments (bank books, accounts, deposits, etc.). The bank matches the money paid into such accounts each year with loans offered under preferential terms to projects linked to the social economy (the amount loaned may be less if it does not receive enough loan applications).
- Save and donate accounts: money deposited in the account is managed in the same way as any other account, but the customer donates part of the interest earned to social welfare activities.
- Social welfare funds for which the entity earmarks part of its profits. Some of the money in these funds may be used to support the social economy, e.g. many savings banks offer microloans to people who would not be able to obtain conventional financing.
The returns on ethical instruments are derived from activities the entity considers positive for society. Acts of solidarity on the part of the bank or activities that give back to the community, meanwhile, may support truly useful initiatives, but we do not know anything about the economic model that has generated the funds. The former are therefore the most interesting from the viewpoint of smart consumption.
However, these initiatives may be marginal to the entity’s regular activities, and in some cases may be undertaken merely to clear consciences or clean up the entity’s image. We believe the key factor to consider when choosing between banking entities is the social model supported by their regular activities. Unfortunately, this is very difficult to judge. The most interesting choices would be those designed to support an alternative economic model with broader criteria than financial profits alone.
This is currently found mainly in the field of ethical banking and also outside the banking sector, in the area known as alternative financing: initiatives that offer a subset of banking services to the social economy, specifically investment and borrowing opportunities.
To get to know some of them a little better, we present a brief ‘snapshot’ of some banking entities that operate in Spain, and discuss some of their more interesting features.
Triodos Bank was founded in Holland in 1980. It was a pioneer of ethical banking in Europe and today has over 100,000 customers.
Of the 2,918 projects and companies it gave loans to in 2003 (€467,000 in total), 45% were of a cultural nature, 32% environmental (renewable energy, ecological agriculture, bicycles, etc.), 20% related to the social economy and 3% to cooperation projects in the Southern hemisphere. It does not offer consumer loans or mortgages.
The bank also offers a number of investment funds. These generally invest in companies in the ecological and social sectors, except for two funds which are invested in listed companies. It has a research division that collects and analyses information on these companies and selects those it considers make the most positive contributions. In autumn 2003, the bank lifted its ban on including car companies and oil and gas field operators in these funds, causing controversy among some of its customers.
Within the company, the highest salary may not be more than five times greater than the lowest.
It opened its Spanish branch in September 2004. It offers the usual banking services, except for cards and investment funds. An account can be managed by telephone, online or regular mail. To deposit or withdraw cash, customers must have an account with another entity and move funds via transfers, cheques or direct debits.
In just the first few months of operation alone, it financed around fifty projects, including a mini hydro-electric plant, a programme to help the disabled enter work and a free school of education.
This Bilbao-based entity opened in 2005. It operates as an agency of Italian ethical bank Banca Popolare Etica, but it is in fact owned by the Fiare Foundation. It initially offered a subset of the usual banking services. From the start, its plan was to expand throughout Spain supported by local social economy networks with an interest in promoting ethical financing alternatives, and to become an independent credit cooperative within four to six years.
The Fiare Foundation (Fundación Inversión y Ahorro Responsible) was created in 2003 to meet growing demand for saving and investment solutions based on ethical criteria. It has formed an association with Oikocredit to facilitate investments in social projects in the Southern hemisphere. It currently has 2,618 members, most of them Christian organisations.