As the Central Illinois 9/12 Project has briefly written about in the past, one form of banking in which Shorebank is engaged is microfinance, especially in foreign countries. As this is not a type of finance that is well known to the general public, we will discuss briefly what microfinancing is, how it is used in conjunction with green initiatives and Sharia law, and how Shorebank is using this type of financing in their banking processes.

The Consultive Group to Assist the Poor (CGAP) defines microfinance as simply “the  supply of loans, savings, and other basic financial services to the poor.”  These loans are generally relatively small, but carry with them a high interest rate due to costs incurred by defaulting on loans and the transaction costs that are disproportionate to the size of the loan.  (The cost of manpower and other factors needed to make the loan are the same regardless of the size of the loan – thus for smaller loans, the  percentage of these costs in relation to the amount of the loan is greater.)  Specifically, the microfinancing industry enables people to receive loans when they would not otherwise be able to do so, whether due to poverty, lack of a bank account, inability to provide collateral, and/or inability to prove employment. In 2007, there were 873 microfinance institutions worldwide serving more than 133 million loan recipients.

Microfinance was initially, and oftentimes still is, aimed at providing loans and opportunities to those who otherwise may not have the funds to get a business off of the ground, but microfinance is sometimes tied into other things such as green initiatives. Shorebank, a community development bank whose practices the Central Illinois 912 Project has highlighted before, is a partner in an eco entrepreneurship through a project called “Yurtcozy.” This initiative allows individuals to “offset their carbon footprint” by buying carbon credits which enable a microfinance loan recipient to receive funding  for things such as energy efficient appliances and solar lighting. It may also finance education on clean energy for microfianance recipients and partnerships in green initiatives. Yurtcozy asserts that if the carbon credit purchases were made for all microfinance loan recipients worldwide, then loan recipients could decrease their carbon emissions by 260 million tons, and thirty percent of their income would be unlocked.

One of Shorebank’s first forays into microfinance was through the establishment of Grameen Bank in Bangladesh in 1983. Grameen Bank was founded by Mohammed Yumus, a Noble Peace Prize Recipient in 2006 and 2009 recipient of the Congressional Medal of Freedom from President Obama. Yumus’ description of the features of Grameencredit includes stating that “credit is a right,” and it’s built on “trust” (i.e., social justice in banking.)

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Since its founding, ShoreBank has been a progressive-minded bank focused on community development. However, it soon adopted the progressive commitment to environmentalism after founders Ron Grzywinski and Mary Houghton were approached in 1993 by Ecotrust, an environmentally-conscious firm focusing on debt for nature swaps in rainforest countries as well as environmental banking in the Pacific Northwest. The partnership of the two firms led to the establishment of ShoreTrust (now ShoreBank Enterprise Pacific) which provided financing, marketing and management assistance to small businesses in the Pacific coastal rain forest area. From there, the rest of the ShoreBank family eventually followed in adopting the green agenda.

For the entire story chronicling the founding of the bank and its move towards its environmental commitment, you may read Alka Srivastva’s dissertation for Case Western Reserve University here>>>.

From there, it did not take long for ShoreBank to incorporate environmentalism into its mission and formalize its commitment to the green agenda. In 1999, ShoreBank’s board of directors adopted a new conservation and development policy requiring the bank itself to reduce its waste and also encourage its customers to adopt more sustainable practices. The concept of environmental health then assumed its place alongside the goals of community development and profitability to form the “Triple Bottom Line” slogan that the company champions today. As evidence of its own commitment, ShoreBank has even addressed its own carbon emissions by purchasing offsets for 450 metric tons of C02 to offset emissions through 2010.

ShoreBank’s environmental advocacy is now prevalent throughout its dealings, both  in how it relates to its domestic banking customers, and in its international development objectives.

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