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.
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