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Banking on Values

Why banks must 'think bolder'

Shafiqur Rahman Bhuiyan | November 26, 2023 00:00:00

The Global Alliance for Banking on Values (GABV) celebrates the 'Banking on Values Day' on November 8 every year. The GABV comprises 70 independent banks, credit unions and microfinance institutions from 43 countries. BRAC Bank is one of the founders and the only member from Bangladesh in the network.

Banks play critical roles as financial intermediaries in the economic development of nations worldwide. However, with growing awareness about corporate social responsibility and stakeholders' concerns about societal and environmental issues, such as climate change, the banking business now plays a more prominent role than just banking.

From a layman's perspective, banks are society's primary credit suppliers. They provide people (retail) funds to purchase daily necessities, cars, homes, and businesses (wholesale/corporate/SME) to purchase equipment, grow operations, and meet payrolls. However, the financial industry has far more potential to go above and beyond and be an incredible force for good.

The Banking on Values Day 2023 was celebrated, marking a bolder and better way to bank. It encouraged the industry to adapt its working processes for a more sustainable and inclusive future. A 'Bolder' approach to banking means finding innovative approaches towards a suitable transition to a low-carbon and inclusive economy.

From societal injustice to the effects of climate change, the financial services sector has a choice: ignore and worsen these challenges or collaborate to help overcome them. Banking can be used as a force for good, pooling its immense resources to effect extensive, long-term reforms that meet the world's present global and local hardship.

Banking is not neutral; by investing in socially-inequitable organisations or funding environmentally risky projects, banks may continue supporting practices that jeopardise the health of humans and the environment. However, things don't have to happen this way. Banks may choose to 'Think Bolder', instead.

Financial institutions' investment decisions and policies greatly influence society and the environment. Banking operations affect general concerns, including social justice, inequality, climate change, clean energy and economics. Thus, understanding and dedication to sustainable banking practices are necessary to lower the adverse environmental effects and advance a more equitable global financial landscape.

BRAC Bank took the more courageous step of providing collateral-free low-ticket financing opportunities for Small and Medium Enterprises (SMEs) at its inception. SMEs, commonly known as the "missing middle of the economy," struggled to access conventional banking services at the time since they were not considered profitable. BRAC Bank focuses on advancing CMSMEs (cottage and micro enterprises and SMEs), with over 50 per cent of its funds invested in this domain.

As a GABV member, the bank actively promotes values-based banking. It highlights the importance of a bold, collaborative approach, through sustainable and real-economy financing, to achieving sustainability goals.

At BRAC Bank, our sustainability approach focuses on balancing profits with sustainability, creating positive impacts beyond just banking and utilising values-based banking practices. We actively assess how resilient our business model is against sustainability risks. Our bolder approach is to expand the Environmental, Social, and Governance (ESG) agenda, which has necessitated the establishment of a substantial data warehouse and the implementation of proactive business continuity management to identify risks and specify mitigation plans. Our innovative efforts include digitising products and services that consider environmental and societal impacts and ensure their "product as a service" for the entire organisation.

The key to future business success is sustainable banking. We perceive sustainable banking as a pivotal element in generating future business growth. Our commitment to sustainable and green finance emerged in 2022 with disbursements of BDT 105,230 million and BDT 11,943 million, respectively, higher than regulatory standards and industry averages. We have expanded low-cost sustainable lending through several refinance initiatives in collaboration with the Bangladesh Bank.

The observance of Banking on Values Day provides a platform to amplify our message and sow the seeds of a sustainable and values-based banking movement in Bangladesh. Let us collectively embrace a vision for banking that secures economic growth alongside planetary protection and social equality.

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