The Genius of Savings Banks

'Tis the season to be jolly. Or is it? According to the debt counselling agency, Christians Against Poverty (CAP), 91% of UK residents are worried about the cost of Christmas. But CAP also reports that almost 1500 of its clients are looking forward to the festivities because they can fund them from their savings, CAP having operated as a savings bank.

The term 'savings bank' conjures up antiquated images of piggy banks and National Savings Certificates. But globally the rapid rise of microfinance, which relies on savings habits, is a development success story. And in many low-income countries, the chief lenders to small- and medium-sized enterprises are members of the World Savings Bank Institute (WSBI).

At a summit held earlier this year to celebrate the bicentenary of the global savings bank movement, senior banking figures, including representatives of the WSBI, paid respect to the person they revere as the movement's founder: Henry Duncan (1774-1846), a church minister in a remote Scottish village.

On arriving in Ruthwell parish, Duncan was so shocked by the poverty he encountered that he imported Indian corn to sell at cost price. But realising this was only a temporary solution, he added 'social entrepreneurship' to his pastoral duties, convinced that the poor are best served when they are helped to help themselves. He created jobs for women by importing flax for spinning and weaving. And in 1810, in a tiny cottage, he founded of a savings bank.

The scheme caught on in other villages as Duncan, who was gaining a reputation as a creative genius, used a newspaper he had founded to promote it. Spreading rapidly throughout the UK and beyond, it triggered a locally-based financial revolution. Its impact is reflected in the name of the Grameen Bank, the world's largest microfinance institution, which was launched in Bangladesh by the Nobel Prize-winning economist Muhammad Yunus: Grameen means 'village'.

In the wake of a financial crisis caused, in part, by the rich encouraging the poor to borrow beyond their means, Duncan's vision has renewed appeal. In his discovery that the most effective way to tackle poverty is from the bottom up, using a local, relational, people-orientated strategy, lies the genius of savings banks. Perhaps his scheme can suggest alternative banking and development models for our time. If so, they will eventually do much more than put the sparkle back into Christmas.

Peter Heslam
Director, Transforming Business, Cambridge University

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Peter Heslam is an Associate of LICC and Director of Transforming Business, a project at Cambridge University that analyses and catalyses enterprise solutions to poverty. His new booklet Transforming Business: Entrepreneurship and the Renewal of Thrift has become a best-seller and has already been re-printed in partnership with LICC.

Surprisingly, there is no modern biography of Henry Duncan. But the small Savings Bank Museum housed in the Ruthwell cottage in which Duncan founded his bank gives a good overview of his life and work.

Christians Against Poverty provides advise and help to anyone concerned about their long-term financial wellbeing, regardless of religious belief. It is dedicated to encouraging saving and the avoidance of debt.

Duncan's initiative helped elevate thrift as an essential ingredient in the fight against poverty. The impact on Scottish culture has been profound, reflected, for instance, in the fact that:

• In Glasgow, one in five residents belongs to a credit union - the highest proportion of any British city in the UK. The city is also home to the largest credit union in the UK. For more information, see the Association of British Credit Unions;
• A deprived region of North Lanarkshire to the east of Glasgow hosts the UK's only fully fledged savings bank, the Airdrie Savings Bank. To mark its 175th anniversary, Prof Charles Munn has recently published a book on its history.
• Glasgow Caledonian University houses the Grameen Caledonian Creative Lab and the Yunus Centre, both with direct involvement from Professor Muhammad Yunus.
• The Chartered Institute of Bankers in Scotland is the world's oldest banking institute and is creating a unique Professional Standards Board in response to the recent financial crisis.

The World Savings Banks Institute and the European Savings Banks Group are the global face of the savings banks movement today. All member banks are rooted in their local communities and seek to contribute to them positively.

Many large commercial banks, such as Barclays and Lloyds, have roots in the Christian faith of their founders. But the UK's Kingdom Bank, founded half a century ago, is still based on explicitly Christian principles and provides a range of financial services.

Five Talents International is a microfinance organization representing the worldwide Anglican church. Click here for its UK subsidiary.

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