Mutuals and community banks
Community banks are an alternative to traditional, commercial banks.
The UK banking sector is failing to meet the needs of our communities, both individuals and Small and Medium-sized Enterprises (SMEs). It focuses on global markets rather than local investment and economic development, and has led to a stagnation of lending to small businesses and the closing of many local branches. This has reduced the connection between lenders, their local communities and personal banking services, and contributed to a significant lending gap for SMEs who often struggle to access the affordable long-term credit offered by high street lenders.
Access to credit is the life blood of an effective recirculation of wealth and development of innovation. Without access to affordable credit, many small businesses struggle to operate and compete with larger firms to provide goods and services.
Community banks are an alternative to traditional, commercial banks. With a specific focus on their locality, community banks can address the financial needs of SMEs, ordinary people and community groups. Community banks also have a remit to invest more ethically than commercial banks, being regional anchor institutions held in trust for the benefit of their members.
Community Savings Bank Association
A group of innovators, led by RSA Fellow James Moore, and a team with over 150 years banking experience between them have set up the Community Savings Bank Association (CSBA) to facilitate the development of a network of independent, customer owned, local banks across the UK.
Work led by the Royal Society of Arts, Manufactures and Commerce (RSA) is promoting this regionally focused, mission-led model of community banks to advance the banking sector and put sustainable development, people and planet, back at the heart of the UK investment sector.
Case study – Avon Mutual
The first of the Community Savings Bank Association will be Avon Mutual, which will take local savings and use them to create local loans. Avon Mutual aims to serve the everyday financial needs of ordinary citizens, local community groups, and small and medium sized companies. It will also work closely with community development corporations, community development finance institutions, local social investment funds, revolving loan funds and others. It aims to become a key anchor institution focused on shifting the region’s economy to promote sustainable and equitable prosperity.
Case study – North West Community Bank
Wirral Council, Preston City Council, Liverpool City Council and the Community Savings Bank Association are collaborating to create a council-led regional community bank. It will provide capital to help grow local SMEs, help low earners to acquire mortgages and tackle financial exclusion by having a physical presence on local high streets.
The North West Community Bank is hoped to keep wealth locked into the region and significantly increase the proportion of bank lending to the “real” economy, building regional economic resilience.