Posted 13th June 2001

Your Own Bank

If he following notes were taken from a talk given by Anne Jennings of Western Australia at a public forum in Wellington on the 8th April 2001. >From 1993-1996, more than 1000 city and 635 country towns in Australia lost their banks. Over the past 5 years 10,000 bank jobs have been lost in Australia. In WA in 1996, 30,000 people in 47 communities were without banking facilities. These people were doing $350 million worth of banking. So there's a lot of banking being done but not locally. From 1990 - 1998 in WA, 838 city and 468 country towns lost their banks. The towns that I have been talking to have all said when they've lost their last bank they have investigated their banks closing and the banks were all running at a profit. It is not about the banks running at a loss. It's about them increasing their profits.

And most of those towns almost went cap in hand to their banks and asked them to stay open but still the doors were closed on them. A lot of communities only knew a week before the banks closed. When the banks closed they were still running a profit because they had farming business still going through their books. The banks all argue that technology would solve the problems. But there are a lot of very remote communities. Even if you had a computer to do internet banking, in some places phone lines are so bad that you can't get the internet. Sometimes people can use their fax lines, sometimes they can't. And that doesn't take account of people who can't afford any technology. All the research has shown that face to face banking facilities is what people want. I have been talking with a few rural communities and looking at what they did to get their community bank and how they've worked in the past. What has come out is that these are strong communities that have worked together in employment creation, recreation facilities, coming together to help in emergencies such as droughts and injury.

They looked around to find alternatives when their banks closed. They came back to model of community banking pioneered by Bendigo Bank over the last few years. Bendigo Bank started off as a Building Society in the 1850s during Bendigo's gold mining days. It has run at a profit ever since, even through the depressions of the 1890s and the 1930s. It became a fully-fledged bank in the 1995 following the deregulation of the banking industry in Australia. They are mainly located in Victoria. They have looked at how they could assist rural communities and came up with the community-banking model. They have joined with Community Aid Abroad and their ethical investment trust and set up Australia's first ethical bank deposit account. That gives an idea of the ethical background of this organisation. They are currently working with the Australian Council of Social Services to set up a community sector community bank. All the community organisations will have their own bank so when they get grants from the Government or philanthropic trusts or money from street appeals, they will have their bank & the profits will go back into the community. With the deregulation of telephone companies, Bendigo have developed the Bendigo Community Telco. Working with a telecommunications operator they have set up a telephone company for 15 community organisations in Bendigo.

The profits once again will go back into those organisations. Bendigo have set up community banks in Victoria, New South Wales, Western Australia, South Australia and are looking at setting up in Tasmania and Queensland. Not only are rural communities setting up branches of Bendigo, a lot of urban areas are too. So here we have situations where people have never worked together closely in the past are now coming together over their banking for the very first time. They have come to form a new community of interest within their urban areas. The community bank system is a franchise system. Bendigo provides the licence, the banking facilities and the loans. They carry the risk, not the community. The rural communities wanted 100% full time 5 days a week banking facilities, not just somewhere where they could cash a cheque and do their deposits. Farmers wanted full farming loans. Some people wanted full housing loans - everything that you could get from a bank. Bank charges are comparable to other banks. People are happy to pay them because the profits are returned to their community. A lot of farmers are on the management companies of the community banks. Communities form a management company with representatives from the communities. When they are formed people are asked to make pledges. Depending on the numbers, communities come up with total pledges of between $250,000 and $300,000. On the strength of the pledges the management group get an outside company to do a feasibility study. When the study is completed and says the bank is viable based on the banking potential in the community - and to date they all have, which is understandable given that the banks have all run at a profit before they were closed - they then call in the pledges.

The people with initial pledges become the shareholders in the bank. The Community management company own or lease the bank building depending on what facilities they have, they do all the employment of staff so they employ local people and they manage the process in conjunction with Bendigo. When somebody comes in for a loan it goes through to Bendigo. Personal details regarding loans are not revealed to the Community Bank. At the end of the 12 month period or whatever, shareholders get a dividend. There is an upper limit to how much people can put in so the bank can't be controlled by the wealthy. Then profits are split between Bendigo and the Community bank. Community Banks are professionally run and managed banks with a community return. It's ethical banking. One of the Community banks in NSW that is into its 3rd financial year is based on a population of 878 people with approximately 400 adults. At the end of the 3 year period they are going to have $100,000 in profits to put back into the community facilities employment creation. Their experience matches a remote community of similar size in WA that I have studied. After a three year period there was a profit of $100,000 that they have been able to put back into their community. If that money is doubled because Bendigo gets its share as well, we can say that previously that money was being leached out of their community by the banking industry. Bendigo Bank has their own branches as well, mainly in Victoria where they have always been. Its website at www.bendigobank.com.au states The Community Bank" branch is a franchise, with the community owning the rights to operate a Bendigo Bank branch. Community Bank" branches provide communities with an opportunity to enhance control over their community's capital, ensuring more money stays in the district for local investment. The branch also provides communities with the certainty of banking services and enables communities to bank the way they want, whether that be face to face, electronically, or over the phone. Your community can have a real say in its own future." In New Zealand, the Greens are pushing for the new bank that is being set up in New Zealand to facilitate a similar development.

When the Green Party were being asked to support the new Post Bank one of the conditions for their support was that the Bank had to be open to developing community owned banks. The Greens are not keen on supporting another state bank on the grounds that if National got in it could be sold. But if the new Post Bank had a real obligation to supply banking services to community agencies they cannot be sold off. Control in community banking is held by the community. They are not financially linked with other community banks, although there is now a formal network of the management groups of the different Community Banks. The punchline seems to be that the return is to the community rather than into the banker's pockets. For some people in rural communities in WA there were some big issues. For example some people have to travel 200 kilometres to get to a bank which raises the problem of security. If you didn't bank everyday businesses didn't have cash turnover because they weren't able to present cheques. In one town the supermarket guy is going to travel to the bank.

Everyone knows - "take mine, take mine". So here he is with a family car. There's nothing between towns over there, its barren. Hundreds of thousands of dollars in the car. In rural communities that have got a community bank, they have recommenced school banking so that children are learning a saving ethic. The other Banks are now saying that want to include community obligations. When the main banks pulled out, the Bendigo option wasn't available. They expected people to go to regional centres and do electronic banking. They forgot that seniors can't or often won't use computers. Often people with disabilities - in a wheel chair, site impaired, arthritis problems - can't use computers even if they knew how. They just ignored people basically and these communities have said we are taking back control. The WA Government facilitated the development of community banking by waiving the stamp duty that would normally have been payable on transferring a mortgage from one bank to another. A lot of the communities have lost their railroad, their courthouse their police, hospitals, schools - when they've lost all that it's been bad but when they've lost their bank it's like the straw that broke the camel's back. They've given up. It's the final thing.

They have not only lost their social services -without their bank they have lost the basis of their economic development. In one place I looked at a supermarket in NSW - they lost their last bank and the owner lost 50% of his income immediately when people had to travel for their banking. He went to one of the banks and got a savings agency in his shop. But it took 5 years to catch up the 50% he had lost. The first community bank that was set up was in a community of 400 that called a public meeting immediately on losing their bank. Over 200 attended. Within 9 months they opened their doors in a brand new building that they built. It's an inter-generational thing - they are looking at their town surviving and employment for their children and grandchildren. Anne Jennings works in community development in the south-west of Western Australia. She also lectures at the local university and has worked for the Commonwealth and local Governments. She is currently completing a Masters degree in community Banking which includes alternative micro-loan systems.