If there's any industry in need of a facelift, it's banking. The image of financial fat cats riding the high times and pleading bail-outs in the low is proving tough to shake off. Could that change if the City's pinstripe brigade demonstrate wider benefits to society, not just fatter wallets for themselves?
Maybe. Attempts to muster such arguments are not without precedent. Every year, the City of London Corporation makes a hefty song and dance about the financial sector's tax contributions. At £65bn, banks contributed 11.7% of total UK government tax receipts in 2012/2013. Large corporates, meanwhile, will testify to how banks' liquidity help their invest-to-grow models.
Yet for the little guys, (ie the rest of us), such benefits feel distant and diffuse. What do commercial banks do for us? 'Nothing' comes the very likely reply.
Not so fast. Standard Chartered is brandishing some impressive sounding statistics that could shift that perspective. One of Africa's largest providers of finance and lending services, the UK-listed bank claims to help bring around $10.7bn into the local economy of Sub-Saharan Africa per year (equivalent to 1.2% of annual GDP). Total employment deriving from its banking services amount to a noteworthy 1.9m jobs.
The findings appear in an independent study published last month. The 84-page report, which was commissioned by Standard Chartered, reveals it as a conventional bank in many ways. Wholesale banking services for multinational clients and sovereign states make up a good chunk of its balance sheet.
Where the bank differs from its peers is its focus on the small and medium sized enterprise (SMEs) sector. SMEs are the dynamo of any healthy economy. Nowhere is that more true than in Africa, which posted the world's fastest economic growth rate last year. The faster that SMEs can grow, most analysts agree, the faster Africa will develop.
The study bears that out. For every $1m lent to small businesses in Ghana and Zambia, for example, $3m is created in salaries, taxes and profits. Interestingly, the performance of Standard Chartered's SME clients spikes in countries where the banking sector is least developed.
"In markets where credit is difficult to find, once SMEs do have access, they increase their productivity significantly", notes Marianne Mwaniki, the bank's head of social and economic impact.
But do sufficient opportunities exist for small business in Africa to grow? Standard Chartered's share price has struggled of late, mostly in response to investor concerns over flat growth in emerging markets (albeit mostly in Asia). Daniel Mobley, Standard Chartered's head of corporate affairs in Africa, remains gung-ho about Africa's future. Take South-South trade, he says. Bilateral commerce between Africa and China alone hit nearly $200bn in 2012, a year-on-year increase of 19%. The market for consumer goods and services looks promising too, Africa's "floating middle class" predicted to grow from 355 million today to an estimated 1.1 billion by 2060.
None of that will happen without capital, however. Standard Chartered recently pledged to increase its annual lending to SMEs by 45% over the next five years. That should see around $3bn finding its way to Africa's small business sector, Mobley calculates. Don't mistake such moves for charity, though: a burgeoning SME sector means more banking services for the likes of Standard Chartered. To up its stake in the SME market, the bank has been tinkering with its product portfolio.
One of the early examples is SME-specific treasury capabilities, which promise to facilitate local currency payments for those small firms doing deals overseas. The bank has also launched Straight2Bank, an award-winning online banking portal designed with SMEs in mind.
A major barrier to SME lending, however, centres around basic business management. "You're not going to get credit if you can't draw up a business plan, if you can't do bookkeeping [or] if you can't market your services", Mobley says. In response, Standard Chartered has linked up with business services firm PwC to offer a six-week management training course to SME owner-managers in Kenya and Ghana.
Lack of borrowing data gives commercial banks the jitters as well. Africa lacks the kind of credit reference agencies that large lenders rely on elsewhere. Authorities in Uganda and Kenya have both turned to Standard Chartered for advice in turning this around. The two now boast national credit bureaus of their own – a trend Mobley hopes will be picked up elsewhere.
Among the report's concluding recommendations is a call for enhanced services to SMEs in corporate supply chains, many of which cannot currently obtain financing against contracts or accounts receivable. Working closer with donor agencies to leverage private capital for Africa's small business sector also features in the suggested to-do list.
Demonstrating with facts and figures how a bank can actively encourage inclusive, bottom-up economic growth marks a welcome change of script. That story won't be told, however, if big banks don't do more to help the little guys get ahead.
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image: © Standard Chartered