‘It gives clients a say in run­ning of the busi­ness, im­proves peo­ple’s lives’

Talk of the Town - - Business Forum - JON HOUZET

he an­nual GBS Mu­tual Bank din­ner in Port Al­fred is al­ways a highly an­tic­i­pated af­fair, with staff from the highly re­spected 141-year-old in­sti­tu­tion min­gling and chat­ting with long-time clients from the coastal area.

As usual, Naartjie and Ch­eryl Moss catered the din­ner to per­fec­tion, with su­perb food and invit­ing dé­cor. For­go­ing the usual re­count­ing of the bank’s fig­ures, new chair­man of the board Prof Owen Skae delved into the ori­gins and his­tory of mu­tual bank­ing.

He said his re­search arose from ask­ing him­self, “What is the pur­pose of a mu­tual bank and is there a fu­ture for it?”

He found valu­able in­sights in Franklin J Sher­man’s book,

Tpub­lished in 1934. The ge­n­e­sis of mu­tual banks came from the “Friendly So­ci­eties” es­tab­lished to help the sick and poor. The ear­li­est of th­ese might have been the In­cor­po­ra­tion of Carters in Leith in 1555.

“From other sources I have read, the ‘Friendly Bank’ con­cept first arose in Switzer­land in the 1700s and then spread to the United King­dom in the 1800s,” Skae said. “Nev­er­the­less, the best his­tor­i­cal ac­count that I have come across is Sher­man, who high­lights the role played by Dr [Rev] Henry Dun­can who es­tab­lished a sav­ings bank in Ruth­well, Scot­land in 1810, pri­mar­ily due to his ques­tion­ing of the le­git­i­macy of Friendly So­ci­eties, no less than the one founded in Ruth­well in 1796.

Sim­i­lar sav­ings banks were es­tab­lished in Ger­many, France and Switzer­land over the pe­riod 1765 to 1796, but Sher­man was of the view that they did not meet the def­i­ni­tion of a true sav­ings bank.

Dun­can’s ef­forts soon saw wide­spread de­vel­op­ment of the con­cept. A sav­ings bank was founded in Ed­in­burgh in 1814, the Prov­i­dent In­sti­tu­tion for Sav­ings in 1816 by James Sav­age (the first in the world by le­gal char­ter), the Bank for Sav­ings in New City in 1819 by phi­lan­thropist Thomas Eddy, af­ter con­sul­ta­tion with his friend Pa­trick Colquhon, a Lon­don mag­is­trate, and then The In­sti­tu­tion for Sav­ings for the Town of Port­land and Vicin­ity in Maine in 1819.

Mu­tual (“mu­tu­ally ben­e­fi­cial”) sav­ings banks be­gan pri­mar­ily for wage-earn­ers and sea­men.

They also cre­ated a sav­ings out­let for peo­ple out­side of main­stream busi­ness, such as women. “Sim­ply put, a mu­tual bank’s pur­pose is for the ben­e­fit of the de­pos­i­tors who have a say in the run­ning of the bank. Why is this im­por­tant?” Skae asked.

“If we con­sider the US, mu­tual banks are seen to be safe in­sti­tu­tions. Ac­cord­ing to Amer­ica’s Mu­tual Banks (AMB), there are 494 mu­tual banks in 45 states and at March 31 they had to­tal as­sets of $374bn (R5.4-tril­lion). Their web­site re­ports that ‘since Fe­bru­ary 2007, over 525 fi­nan­cial in­sti­tu­tions with over $800bn (R12-tril­lion) in to­tal as­sets have failed. Of those, only 20 were mu­tual in­sti­tu­tions with to­tal as­sets of ap­prox­i­mately $3bn (R43bn)’.”

Mu­tual banks gen­er­ally stick to pro­vid­ing the ba­sic bank­ing ser­vices re­quired by a com­mu­nity, like re­tail ser­vices and prod­ucts, check­ing and sav­ings prod­ucts and make home loans, other con­sumer loans and loans for lo­cal busi­nesses, Skae ex­plained.

Mu­tu­als gen­er­ally did not en­gage in those ac­tiv­i­ties recog­nised as caus­ing the fi­nan­cial cri­sis that be­gan in the north­ern hemi­sphere au­tumn of 2008.

Cus­tomer sat­is­fac­tion with mu­tual banks is re­ported in both the UK and Aus­tralia.

“The vi­sion­ar­ies who con­ceived of sav­ings banks, whether men of the cloth or phi­lan­thropists, or just want­ing to give peo­ple a bet­ter deal, did so be­cause they saw a pur­pose to achieve a bet­ter life for mem­bers of their com­mu­nity.

“It is the bedrock of mu­tu­al­ity and it is why we stand be­fore you to­day,” Skae said. “Hence my view is now more stead­fast than ever that mu­tual banks are nec­es­sary and in fact es­sen­tial to the de­vel­op­ment of our econ­omy.”

Pic­ture: JON HOUZET

BANK­ING LEGACY: GBS Mu­tual Bank chair­man Prof Owen Skae, left, and CEO An­ton Vorster, right, with El­iz­a­beth Cooper, the daugh­ter of for­mer GBS chair­man Kyle Stone and sis­ter of an­other for­mer chair­man, Chris Stone, at the bank’s an­nual Port Al­fred din­ner

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