VA
Insights

In Taiwan, TC Bank became the most well known bank with three very philanthropic commercials. With no marketing of the bank’s name, the commercials simply tell common people’s uncommon dreams, which touched thousands of people’s hearts.

In the US, Goldman Sachs launched its “10 Thousand Women” plan to support female entrepreneurs; JP Morgan set up a “Social Finance” department to provide financial training and funding to non-profit organizations.

The cases above reveal that charity is impacting international financial institutions at both Corporate Social Responsibility and business operation levels. Banks’ commercials are telling stories of The Bottom of Pyramid people, or BOPs are becoming new, niche customers.

Speaking about domestic banks in China, VA found that the majority of them focus on disaster relief, poverty relief, or simply educative efforts on financing. The mainstream of their engagement in charity is still incident-driven, donation-driven, or education-driven. This traditional reactive model of philanthropy can no longer answer calls from a more competitive business environment, and from a more innovative philanthropy environment.

On the contrary, international banks operating in China are demonstrating a more vigorous pattern in engaging philanthropy. Despite the fact that they are relatively new comparing to domestic banks, and that their scale of investment is much smaller, their activities are very diversified, and the angle of solutions is more innovative. For example, a Singapore-based bank has focused on mobile workers’ families since 2012. Its “Entertainment Classroom” project benefited nearly ten thousand of mobile workers’ children. Also, the bank became an active sponsor of the “social enterprise” sector – its support on 4 innovative social enterprises helped over two thousand of BOPs to improve their employment status. With a total of RMB2.2 million funding in the two projects, the bank has benefited 12,000 BOP people in total. Such high efficiency is a great reference to all financial institutions in China.

So, how should Chinese financial institutions be more innovative in designing their corporate social responsibility (CSR) strategy, so that CSR becomes a more integrated piece in their daily business operations?

From the demand perspective, on the one hand, the biggest challenge facing China civil sector is public expectation on transparency and professionalism. On the other hand, among all industries, financial institutions have the highest demand for risk management, and standardized operations. Therefore, financial institutions have a great opportunity, and are very much capable to lead the future innovation in China’s civil sector.

VA believes that, in China, financial institutions have three unique opportunities to further expand and deepen their impact on the civil sector, while at the same time benefiting their business:

1) Aside from annual donation, banks can increase the scale of lending to BOPs, leveraging their existing financial management advantage;

2) Leveraging existing client relationship, and building on existing asset management expertise, financial institutions can step into the field of impact investing;

3) Financial institutions can further diversify and scale up financial products serving the BOP, e.g., financial collateral services

It is time for Chinese financial institutions to re-define their “client”: to many of them, CSR innovation is part of business innovation.