Bankable Frontier Weblog

This past weekend, I attended the annual conference of the National Community Reinvestment Coalition (NCRC). This trade association of community development financial institutions and local activists across the US has a long history of engagement with US financial institutions over their record of serving the needs of local communities. The Community Reinvestment Act (CRA) has, since 1977, provided a legal framework within which these activists can press their claims to be considered on regulators and financial institutions.

The NCRC is US-based, but increasingly internationally focused: it has spawned a global fair banking initiative in part out of the recognition that banking is a increasingly a globalized industry. Speakers from Germany, UK, India, Colombia, Guatemala, Brazil and South Africa (myself) spoke of the frameworks in each of their countries. Certainly no other country has the same framework as the US for allowing the concerns of local entities to be expressed, with adequate access to data through the Home Mortgage Disclosure Act to make informed assessments. I was particularly surprised by the extent to which the integration of banking markets in European Union countries is apparently being pushed by Eurocrats with little reference to the concerns of local activists: the German speaker highlighted how the German banking system, which has very high levels of access and a long record of providing credit sustainably with various safeguards against predatory borrowing and lending, is in danger of being overturned.

However, a caution was sounded by myself and others from developing countries: it is one thing to discuss policies for addressing financial exclusion, and indeed the consequences of excessive access to credit in countries like the US and UK where levels of being banked are close to 90%; and another to discuss how to expand access in countries like SA and Brazil where it lies at under half. Sustainable expansion in the latter requires that providers can make profit by broadening access; this in turn means that there cannot be unnecessarily costly regulation. But it does not mean that the expansion of access can be left to the market along—close cooperation between governments and financial sectors are necessary to build sustainable new markets.

Maybe Roe and Peachey were right after all!