It is a concept that invites bemused skepticism from those who regard banking as a profit-making pursuit that leaves no room for the interests and welfare of the poor. A typical comment goes: “Social banking? Isn’t that a contradiction in terms?”  The image of banks as “heartless” institutions dates back to biblical times when money-lending was considered a greater evil than slavery. Remember Jesus giving a tongue- and whip-lashing to money-lenders at the Temple?

It persists in modern times on account of the stereotypical story of banks foreclosing on the properties of people driven to penury and indebtedness by force majeure; the plight of Depression-era farmers of the American Midwest, whose stories were mined by the likes of John Steinbeck, comes easily to mind.

It is an image that is stronger in countries like the Philippines, where banks have traditionally been regarded in either of two lights: as entities that aid in the perpetuation of landlord rule in rural areas or as institutions that care to serve only the financing needs of the rich who represent low-risk and high-yielding business and investment propositions.

The advent of the concept and practice of social banking is as much an indication of the growing social conscience in the corporate sector in general and the banking industry in particular, as it is a response to the growing preference of business establishments to cater to the needs of poorer, albeit more numerous, segments of the market and population.

‘Tubong-lugaw’

For many businesses these days, selling to the poor—the so-called bottom of the pyramid—is turning out to be a better proposition than selling to the moneyed, albeit smaller, segments of the market that have traditionally been the object of intense  competition.

An Asian Institute of Management (AIM) paper has tracked a number of examples of such businesses, which have gone the way of the time-tested Chinese-Filipino business approach of tubong-lugaw, or selling low and earning high on volume turnover, in establishing and sustaining market presence.

Written by AIM Prof. Tomas B. Lopez Jr., the paper cites the now classic case of the single-use shampoo sachet that local shampoo manufacturers had designed and marketed to capture the more numerous lower-income-class consumers who could not afford the costlier bottled shampoo products. It also pointed to the case of the prepaid cellular-phone card, which affordability has made it the most preferred telco product for the poor majority of Filipinos, thus also making the Philippines the texting capital of the world, and the local telco industry the most lucrative in the country.

In the area of banking, the paper also cited the case of a multinational bank in India, which has developed a system, using information technology and offering low interest rates, to encourage employees of small and medium enterprises in particular to avail themselves of financing services. The practice has enabled the bank to develop a market and a business in a country where it has less of its usual high-end individual and corporate clients.

The paper provides an argument supportive of the advocacy for and practice of social banking as advanced particularly by the Association of Development Financing Institutions in Asia and the Pacific (ADFIAP), a regional grouping of 82 state and privately owned banks across 37 countries engaged in the mission of “financing sustainable development.”

Headquartered in Makati City, the ADFIAP has for its Philippine members the following: Development Bank of the Philippines, Land Bank of the Philippines, Planters Development Bank, Philippine Export-Import Credit Agency (PhilExim), RCBC Savings, Queen City Development Bank of Iloilo and World Trade and Development Institute.

Poorest of the poor

Social banking or banking oriented toward the needs of the poorest of the poor is one of the three components of the ADFIAP’s framework for sustainable development financing. The two other components are environmental governance or “green” banking and financing for small and medium enterprises, the so-called engines of economic growth in developing countries like the Philippines.

As part of its social-banking commitment, the ADFIAP is exerting efforts to raise the standards of financial services for microentrepreneurs and smaller businesses, according to ADFIAP secretary general Octavio B. Peralta.

One initiative in this regard is Microhouse Plus, a training program that the ADFIAP is advocating for its member-banks to undergo so that they’ll be able to provide house financing at rates and packages that make them affordable to the poor while still allowing a certain return that would allow the service to continue on a sustained basis. The program also aims to train banks to provide microcredit to enable the poor to build microenterprises, which can be their sustainable source for funds for daily needs, as well as for repayment of their house and other microfinancing loans. If implemented, the program is calculated to increase the business of development banks in terms of lending and providing services to their main target clientele: the lower-income classes.

The initiative is a fitting response to the call for institutions and establishments with products and ideas to sell to regard the poor as a lucrative or responsive market to tap into if only they are provided with the wherewithal, such as financing services to enable them to access products and services, as well as be responsive to ideas being pushed that are especially aimed at poverty alleviation.

“The microfinance institutions [MFIs] are one of the first groups to get into the ‘poor’ market and have strengthened their distribution network [or clientele reach] over the years,” the AIM paper acknowledges. “The MFIs, however, need to intensify product development to meet the various growing needs of their customers while tapping their existing channels to scale up operations and strengthening their financial services to enable the customers to consume.”

The paper adds that private companies and MFIs can benefit from each other’s experience: while the corporations can learn from the vast network and financing schemes of the MFIs, the latter can learn from the former’s experience in product development and service delivery. Combining MFIs’ heartset and the corporations’ mindset would expand the both entities’ understanding of the value chain innovations required by the emerging market, the paper states.

“Revolutionary marketing concepts that revolutionize development management do not require new sets of skills nor competencies; rather they require a change in mindset and heartset: the poor is not just a beneficiary, but also a customer with particular needs that can be addressed by the for-profit companies,” the paper further explained.

Niche market

Direct Hit Communications (DHC), a direct marketing outfit based in San Juan, Metro Manila, is one company that is aligned with the AIM paper’s call for a “change in mindset on the poor.” DHC’s business is providing ground marketing solutions to companies wanting to raise awareness, as well as sales, for their products in specific grassroots areas and niche sectors, e.g., wet markets, neighborhoods, etc. Specifically, it assists companies in “selling to the poor,” that is, through the conduct of trade promotion activities designed to entice grassroots consumers to buy the products of client companies.

DHC also taps into “naturally occurring communities” within specific geographic areas to come up with a distribution network through which client companies can move their products,

But DHC does not stop there. The company has an NGO counterpart, called Magna Kultura Foundation, that provides grassroots people with livelihood skills that do not only increase their capacity to pay for the products being sold to them but also make them good citizens responsive to calls and initiatives for positive social change in their communities.

“We are not only building distribution networks. We are actually building an ecosystem of information for societal transformation at the grassroots level,” according to Ricardo Miguel Aguado, concurrently managing director of DHC and executive director of Magna Kultura Foundation.

Magna Kultura Foundation is currently developing social marketing programs aimed at increasing participation and membership of government employees in public-sector union activities and increasing the stake of grassroots communities in tourism enterprises by providing them with tourism-oriented livelihood skills.

When companies do good

HO CHI MINH CITY—Alongside the march of globalization is the swelling grudge of people who are being affected by this sweeping trend have against private businesses, which they blame for exacerbating their plight.  “First, a company is a predator to be shot.

Future of business

Apollo Enriquez isn’t one to stand in the way of development.

In fact, when a restaurant he partly owns in Cebu had to be torn down to give way to an Ayala Corp. real-estate project, he even led the operation.

SAVE ME

TWO pillars of the country’s financial safety net are rigorously working to increase the amount of savings derived from remittances from overseas Filipino workers (OFWs). 

Banking on the poor

It is a concept that invites bemused skepticism from those who regard banking as a profit-making pursuit that leaves no room for the interests and welfare of the poor. A typical comment goes: “Social banking? Isn’t that a contradiction in terms?” 

Winning: Generation Why Not

Q: As a baby-boomer executive with 30 years of experience, I encounter many young people entering the business world today pretty sure they know it all. What is your opinion about Gen Y’s sense of entitlement? Chris Perkins, Vandalia, Ohio                 

A: We don’t get it. That is, we don’t get why everyone is so down on Gen Y.

iCLONES

SHANGHAI—At the end of an alley in Taiwan’s most violent city, a black Mercedes-Benz sedan blocks a sliding- glass door that opens only from within. Inside, technophiles can buy iPhone knockoffs for two-thirds the legitimate price.

Fake iPhones reach Filipinos

EVEN before genuine iPhones reach Asian shores in 2008, knockoff units from China are already being sold in online auction and shopping web sites, including the Philippines.

The quotable Marxists

THERE are two quotable Marxes or Marxians, one of whom, Karl,  the prophetic economist and philosopher, would not call himself a Marxist, while the other one, Groucho (of the Marx brothers fame), wouldn’t have minded very much what you call him as long as you pronounced his name right.

The generals who would be kings

To understand the unrest wracking Burma, consider a new town built in the lush hills northeast of Mandalay. It’s near the British-built hill station of Maymyo, where Burma’s old colonial masters went to escape the heat and dust of the plain. Maymyo still boasts red-brick mansions covered in ivy and pleasant gardens with roses, which flourish in the almost alpine climate of the hills.

Leading Change in Latin America

While it may be tempting for companies in developing countries to focus on growth and profits before they even begin to address climate change, our organization is finding that sustainability actually confers competitive advantage. At Masisa, the $886-million forestry and wood manufacturing company in Chile where I oversee social and environmental responsibility, a key part of our strategy is to engage business-to-business customers in our efforts to become greener.

CONVERSATION:  Alyson Slater, Global Reporting Initiative’s director of strategy, on how disclosing emissions benefits companies

Carbon-emissions reporting is a laborious undertaking that publicly exposes potentially serious liabilities and risks facing your business—and it’s voluntary. So why do it? We explored that question with Alyson Slater, the director of strategy at Global Reporting Initiative, an Amsterdam-based organization that has developed the most widely used framework of reporting principles, guidance and standard disclosures on environmental, social and economic performance.

UPS at 1OO

On the occasion of United Parcel Service’s (UPS) 100th birthday, many people have asked me how a company that began as a small US messenger service evolved to become a world leader in transportation and logistics.

Winning: The long road from public sector to private business

Q: I have a master’s degree in Public Administration and have worked in government for 13 years, but I am thinking about making the leap to the private sector. Any advice? Cynthia Whitbred-Spanoulis, Virginia Beach, Virginia                 

A: Forget everything you know.

Crackdown

BANGKOK—Myanmar’s military rulers imposed a nighttime curfew and banned assemblies Tuesday after thousands of Buddhist monks defied their warnings and mounted another day of prodemocracy protests to the cheers of crowds in the streets of Yangon.

Lawfare doctrine

MAJOR General Charles J. Dunlap Jr., the US Air Force’s deputy advocate general, defined lawfare as “the strategy of using or misusing law as a substitute for traditional military means to achieve an operational objective.” 

48 hours in China with Tony Meloto

I am writing this article on a Philippine Airlines (PAL) flight from Beijing to Manila after a two-day whirlwind trip to Shanghai and Beijing with Antonio Meloto, the moving spirit behind the Gawad Kalinga (GK) movement.

Meloto Reflections

Tony Meloto’s moment of truth occurred in 1999, as he was agonizing on whether he had reached a point when he was denying his family precious time as he dedicated increasingly more of his life to Gawad Kalinga (GK).

Innovate faster by melding design and strategy

If they’re to do their job most effectively, designers should be brought into the innovation process at the very earliest stages. Too many companies still make the mistake of keeping business strategy and design activities separate.

CONVERSATION:  Outdoor-apparel start-up Ceo Chris Van Dyke on new ways to feed customers’ passions

Nau, a fledgling US retailer of high-performance outdoor apparel, does everything backward. It designed its web site before building a single store; it encourages customers to buy less; and it markets by not talking about itself.

Best practices Green Bag it

The bayong became relevant once more when SM and Unilever Philippines recently joined hands to introduce to the public a reusable shopping bag as part of their campaign to promote environmentalism in the country.

Winning: Creative employees need creative management

Q: What’s the best approach for leading creative people, and does it really differ from leading everyone else? Joe Burke, Los Angeles                 

A: In a word, yes.

Entrepreneur: The dish on Rai Rai Ken

Rai Rai Ken Ramen House and Sushi Bar has come a long way from its humble beginnings as a small and modest tea house in Makati City. It now boasts of 30 outlets all over the Philippines, and still growing. It takes pride in its tradition of serving authentic Japanese food, especially ramen or Japanese noodles, which is really its specialty.

SOS CHILDREN’S VILLAGES PHILIPPINES

Tommy was just a day old when he was found at the entrance of a town church in Batangas, wrapped in newspapers and placed in a box. His finder could tell he was newly born from the fresh umbilical cord dangling from his tiny body.

Confessions of a Sociopath

The author of the above quotation is either a physician who doesn’t want to be suspected of professional jealousy or a cynic who doesn’t want to be taken to a mental institution.

The grace of being Lean Alejandro

How does one write about a man whom one hardly knew beyond the official and professional? How does one tell his story especially to a generation 20 years removed from the time he walked this earth? How does one even venture to share what and how he thought of a world that changes so much and yet remains ever so the same? 

Block that defense: how to make sure your constructive criticism works

Why do top executives have difficulty receiving and responding to constructive criticism? Because so many high-fliers have received little criticism in their careers. As Chris Argyris, director emeritus of the Monitor Group (Cambridge, Massachusetts) and the James Bryant Conant Professor of Education and Organizational Behavior Emeritus at Harvard Business School, writes in “Teaching Smart People How to Learn,” a 1991 Harvard Business Review article, “Because they have rarely failed, they have never learned how to learn from failure.”

How they did it: charge what your products are worth

In a world with too many choices, aligning a product’s price with its perceived benefits is critical—but many companies seem to miss this simple point. A good question for any company to ask itself is “What would Goldilocks think?” Instead of offering too few benefits—or too many—for a stated price, they must perfectly align benefits and price across the product category and the brand portfolio, finding the combination that is “just right.”

Brain gain

(Last of five parts)

It’s easy for Filipinos to decide to leave the country to seek greener pastures. It’s much harder for these Filipinos, used to working abroad and earning sizeable sums, to come back.

Talent Search

(Fourth of five parts) 

Today’s companies face five critical business challenges: globalization, technology, the quest for profitability through growth, intellectual capital constraints and the exigencies of continuous change. Regardless of their industry, size or location, these challenges require these organizations to continuously build new capabilities—a responsibility which, University of Michigan School of Business professor Dave Ulrich writes, human resources (HR) should embrace for these organizations to last.

Civil Servants No More

(Third of five parts)

Jenny Balatbat left for the United States to teach kindergarten pupils, leaving behind her job as a teacher at the San Gabriel Elementary School in Bulacan.

Employee-Retention Strategies

(Second of five parts)

MANAGING talent has become more essential to the private sector than it used to be. Companies are now beginning to dig up insights into managing talent that should allow them to deal with brain drain in a more organized way. What is bold, they say, is to make lemonades when life gives you lemons.

THE WAR FOR TALENT

(First of five parts)

When the management of Fairchild Semiconductors, a global electronics firm, offered industrial engineer Manuel Villa, 32, a management job in Singapore three years ago, he didn’t hesitate to grab the offer.