The Genius of Savings Banks
Dec 7, 2010
‘Tis the season to be jolly. Or is it? According to the debt counselling agency, Christians Against Poverty (CAP), 91% of UK residents are worried about the cost of Christmas. But CAP also reports that almost 1500 of its clients are looking forward to the festivities because they can fund them from their savings, CAP having operated as a savings bank.
The term ‘savings bank’ conjures up antiquated images of piggy banks and National Savings Certificates. But globally the rapid rise of microfinance, which relies on savings habits, is a development success story. And in many low-income countries, the chief lenders to small- and medium-sized enterprises are members of the World Savings Bank Institute (WSBI).
At a summit held earlier this year to celebrate the bicentenary of the global savings bank movement, senior banking figures, including representatives of the WSBI, paid respect to the person they revere as the movement’s founder: Henry Duncan (1774-1846), a church minister in a remote Scottish village.
On arriving in Ruthwell parish, Duncan was so shocked by the poverty he encountered that he imported Indian corn to sell at cost price. But realising this was only a temporary solution, he added ‘social entrepreneurship’ to his pastoral duties, convinced that the poor are best served when they are helped to help themselves. He created jobs for women by importing flax for spinning and weaving. And in 1810, in a tiny cottage, he founded of a savings bank.
The scheme caught on in other villages as Duncan, who was gaining a reputation as a creative genius, used a newspaper he had founded to promote it. Spreading rapidly throughout the UK and beyond, it triggered a locally-based financial revolution. Its impact is reflected in the name of the Grameen Bank, the world’s largest microfinance institution, which was launched in Bangladesh by the Nobel Prize-winning economist Muhammad Yunus: Grameen means ‘village’.
In the wake of a financial crisis caused, in part, by the rich encouraging the poor to borrow beyond their means, Duncan’s vision has renewed appeal. In his discovery that the most effective way to tackle poverty is from the bottom up, using a local, relational, people-orientated strategy, lies the genius of savings banks. Perhaps his scheme can suggest alternative banking and development models for our time. If so, they will eventually do much more than put the sparkle back into Christmas.