The Scottish Community Banking Trust (SCBT)

The Scottish Community Banking Trust (SCBT)
July 2013

Executive Summary

The starting point for these proposals is that the third sector has a ‘public good’ role in society which is informed by different values than the mainstream economy – and as such it requires a financial infrastructure that understands its needs, shares its principles and operates specifically in the service of its mission. 

Although there have been a number of advancements in the field of third sector investment and financing in the UK in recent years, there are a variety of concerns about the design of these investments – the values that underpin them and in particular the focus on investor return.

This Report proposes the creation of a new Scottish institution, leading eventually to a bank for the Scottish third sector that will pool our resources for our own investment needs – a philosophy of mutuality – that will use the collective impact of our own money to create financial products consistent with the needs, mission and values of our sector. 

Specifically, it is intended to create the Scottish Community Banking Trust (SCBT) as The sector’s own agency – to design and put in place financial services – including investment – appropriate to our needs.   As such this report is based on research carried out to test the sector’s response and support for the concept of a Scottish Community Banking Trust.

Given its considerable turnover and reserves – The sector has disappointing financial influence.  One of SCBT’s primary objectives will be to encourage the accumulation of sector reserves into an Anchor Fund – to demonstrate the scale of its collective impact.

As an interim measure, it is proposed to develop a community bank account relationship with another existing bank such as the French LaNef model where LaNef established a community banking relationship with Credit cooperative until it attains its own banking licence.

The Anchor Fund is intended, therefore, as the precursor of a new Scottish Community Bank or equivalent.  One of the most critical decisions in this process will be the choice of the interim banking partner.

While the growth of The Anchor Fund – and the raising of capital for a new bank will take some time – the formalisation of SCBT can happen without delay; it is intended that the Trust will raise its profile and credibility through some early initiatives.

The report researches and itemises existing gaps in financial provision for the sector.  Normally in partnership with existing providers – SCBT will bring forward different products and services to meet these needs.  The report details some specific proposals – mostly around smaller/riskier lending.

In the interim period and until SCBT is legally constituted, Senscot will bring together an extended working group to oversee its development.  Part of the remit of this interim working group will be to consider and decide the correct legal format and model for the organisation.  In addition, its remit will be to draw up the necessary criteria for choosing the correct banking tie up.

In order to gauge wider reactions to these proposals Senscot spoke with approximately 80 organisations and individuals across the Scottish third sector with a view to determining the interest in and support for the SCBT.   In general, the feedback was overwhelmingly supportive.   Consultees like the self-reliance of a finance body that works for the sector and provides for the sector by utilising the resources of the sector.  

There is a marked difference in approach to the proposal depending on the size and scale of organisations interviewed.  Smaller organisations have a clear interest in Crowdfunding; Peer to Peer lending; and the Anchor Fund. Large charities showed more interest in the idea of an institution that could provide, either directly or indirectly, full banking services.  That, to them would be the ‘game-changer’

This report reflects in more detail on these interviews and concludes that the proposal should proceed to the next stage of development – Stage 2 – which is to secure the necessary monies to work up a full business case for SCBT and its related products and services.

See full report here