Bankable Frontier Weblog

In the late 1980’s, philosopher Alastair McIntyre published a well known book called Whose Justice? Which Rationality? which critiqued the assumptions of post modernism.

So, too, as we discuss The Bankable Frontier today, the questions emerge: Whose banker? Which bank?. So who should define bankability?

Is this your banker? (from “It’s a Wonderful Life”)

There are at least two historic answers .

First, the state may. This has been the implication of various laws by which various states, often through central banks, directed credit into priority sectors. In this way, states forced the extension of the frontier to the limits set. There have been few examples of success in this; and there has been a trend away from this as a result. Nonetheless, it still happens: Brazil, for example, introduced a regulation in 2003 which requires banks to allocate 2% of reserves to microcredit.

Second, each individual bank may. In this way, the frontier is formed as the aggregate of the individual credit policies of the various lenders. These will differ according to market niche and credit appetite. The frontier should evolve naturally as individual lenders find new profitable credit niches; and amend or extend their policies accordingly. But for some, this way is too slow; or uncertain, since the movement of the frontier may halt on perceptions in small and uncompetitive markets.

Hence, the renewed interest in Third Ways. The Financial Sector Charter in South Africa embodies this approach. In it, the industry essentially sets its own definitions of ‘bankability’ through a process of discussion and negotiation. These are then enshrined in a public ‘Charter’. This in itself will not move the frontier forward; but by defining the present frontier, the momentum for measurable change can be created. At least, laggards are raised to the lowest acceptable standard; and as long as leaders are not constrained from further innovation, much progress can be built from this foundation.

A process of dialogue between state and sector on this core topic, supported by good research and data, can play a key role in building the common understanding and vision, on the basis of which The Bankable Frontier can truly be extended.