How Can the Banking Industry Engage in Social Innovation? Q&A with Ashoka Globalizer about Social Finance Innovations at SIBOS

Submitted by: John Converse Townsend on 11/20/12

Ashoka Globalizer is partnering with SWIFT Innotribe and a global platform of banks to identify how social innovation can connect to long-term business initiatives.

Ashoka Fellows from around the world that are working on social finance innovations presented their ideas to a global banking audience at the SIBOS conference in Osaka, Japan on Nov. 1, alongside Nobel Prize winner Muhammad Yunus. At this conference, Ashoka and SWIFT announced they are launching a collaborative challenge to showcase groups of Ashoka Fellows from around the world that will be working on social finance innovations in 2013 in partnership with a coalition of major banks.

Felix Oldenberg, Nadine Freeman, and Konstanze Frischen share their vision here for how the banking industry can engage in social innovation.

Changemakers: What is the next chapter for banking? How can social entrepreneurs change the banking industry?

Felix: The history of banking provides plenty of examples of social innovations, such as cooperative banking, savings banks, and microcredit that opens up new customer segments. Today, there are four billion people that are unbanked; micro-entrepreneurs across the world are emerging with new financial needs; and $350 billion in remittances are being transferred every year.

Banks are missing the boat in these new markets. There is business for them, but it is behind barriers that can only be unlocked by social entrepreneurs that pioneer new modes of access; that have the relationships; and that bridge the last mile at a fraction of the cost—always with the social impact in mind.

Changemakers: What future trends do you see for financial services? Where do you think we will be in five to ten years from now?

Felix: In addition to the crisis that banks are facing right now, our experience with the finance sector in developing countries is teaching us that new business opportunities, such as mobile banking, are being captured by other players like the telecom companies. Furthermore, we know from working with young talent across the world – including graduates from the world’s best universities – that they do not perceive banking as an attractive career path that helps change the world for the better.

This means that the first banks to discover changemaking as a business model will have more business, attract better talent, and have more legitimacy—all in a virtuous circle. It is bound to happen.

Changemakers: Many people have been working on financial inclusion for some time. What is the opportunity to substantially move things forward now?

Konstanze: Let’s get specific. There is no longer one developed and one developing world, but a much more complex picture. And financial inclusion means more than simply a bank account.

You also have to have the financial education to be a full economic citizen, and you need access to credit and support for microentrepreneurship. For children, Ashoka Fellow Jeroo Billimoria (ChildFinance) has a global network and a plan to involve banks for financially educating children and giving them bank accounts, anywhere.

For emerging markets, Ashoka Fellow Brian Richardson (Wizzit) has a mobile banking platform that any bank can use to target and empower new customers. For communities underserved by banks and overcharged by doorstep lenders, Ashoka Fellow Faisel Rahman (FairFinance) has a new, bespoke banking model that works.

And so on. The innovations are there—now banks should be in a race to scale them up.

Changemakers: What are the major risks and challenges?

Nadine: The challenges are multiple, and many are similar to those of other social enterprises (e.g., breaking through traditional thinking; creating the right terms for partnerships; understanding that although these are business models that will eventually be profitable, their development might move at a slower pace to ensure the social impact is embedded in the business model, etc.).

One key future challenge will be figuring out how to maintain high social impact when the push for even greater profitability ensues, as the models prove themselves to be viable. But the bigger risk, as Brian Richardson of Wizzit points out, is to do nothing at all while others enter the field and begin to cut into market share of those who do not seize the opportunities here.

Changemakers: What are your main goals after the SIBOS conference?

Felix: We now have crystal clear pitches for five major social innovations that could change banking, and the endorsement of Ashoka Global Academy memberMuhammad Yunus has helped raise interest from many banks.

What we need to do now is give these innovators more targeted audiences in 2013 and beyond. There are ongoing collaborations now with Ashoka Support Network members, Ashoka partners, including SWIFT—but the momentum will build slowly.

Changemakers: What’s your advice for aspiring innovators, especially if they are working to bridge barriers in financial access?

Nadine: Stay true to your principles and the social impact you seek, but do not close the door on traditional financial service businesses. Given their networks, capabilities, and reach, they may be the key partners that will enable you to reach the true demand for the social and financial innovation that you promote.

On the other hand, don’t expect any handouts; strive to find the common ground that will make this a winning bet for mainstream financial partners to join you.