Banking

Rethinking finance: enabling sustainable development from India to Silicon Valley

The ability to fluidly connect those in a position to provide capital with those seeking it for some endeavour has been a key element of a thriving economy for centuries.

Access to finance – more to do

Banks still have a crucial role to play in bringing basic financial services and literacy to communities traditionally sitting outside their remit, unlocking vast quantities of latent human potential in the process.

The World Bank estimated that in 2017, 1.7 billion people were unbanked. That number had shrunk from 2 billion in 2014, and from 2.5bn people in 2011, meaning that more than the population of Europe and the United States combined have moved onto the financial grid in well under a decade, a staggering testament to financial progress in the modern era.

But 1.7 billion is a still an enormous number. Who are these people? Of those who remain outside the financial grid, almost all reside in emerging markets, with half of the world’s unbanked population living in one of seven countries: China, India, Pakistan, Indonesia, Nigeria, Mexico and Bangladesh.

Driving financial inclusion and education in India

One of the major remaining hotspots of financial exclusion is India, second only to China in terms of absolute number of people without a bank account (190 million). HDFC Bank is India’s largest private bank, and it has been a key player in combating financial exclusion within the country.

One of HDFC’s initiatives is the promotion of financial literacy, where its teams set out in vans to underbanked areas and provide free lessons in the rudiments of finance. The bank has focused its efforts in poorer areas, and targeted women and disenfranchised communities.

HDFC has facilitated loans to small-scale entrepreneurs, helping families who sometimes didn’t previously have enough food for regular daily meals to capitalise on their skills and ambitions to set up businesses and become more prosperous.

They have invested in individuals who have bought their first spinning machines to weave and export sarees, or loaned money to villagers who have set up small shops selling sweets, or given financial literacy programmes to tailors who have opened their first clothes shop.

Some of these people now have multiple employees, enriching their communities, or have moved out of huts and bought their first homes. The impact of this work will ripple across communities, enriching and enabling development.

Financing innovation in healthcare and environmental solutions

If providing people in India with their first-ever bank accounts or their first micro-loans is one end of the financial spectrum, then providing financial services to cutting-edge tech and healthcare start-ups in Silicon Valley may sit at the other.

The latter is the key expertise of Silicon Valley Bank (SVB). SVB is the key bank for the innovation economy in the United States, helping provide capital and other financial services to businesses in tech, life sciences and other innovation intensive sectors that are pushing innovation and finding sustainable solutions to critical challenges.

Within the healthcare space, SVB has led large deals into the oncology space, and into companies addressing neurological issues. It has supported businesses making contributions towards surgical innovation, cardiovascular treatments, orthopaedics, medical devices, and many other critical areas.

In the environmental space, it has a client that created the world’s first renewable drinking water system, using the power of the sun to extract an endless supply of reliable drinking water straight from the air. 

Another of its clients in the food security space is building advanced robotics and data-enabled greenhouses that use natural sunlight to reduce water usage by 90% in the growing of herbs, fruits and vegetables when compared to traditional farming.

These are just a handful of examples amongst hundreds of companies that SVB has supported. And many of these businesses are supported at the early developmental stage where over 90% start-ups don’t survive, meaning SVB is incurring real risk to help support the survival of businesses that could make real contributions to the world.

Enabling sustainable development for the future  

In the future, companies in the financial sector will remain key engines for enabling development in the world, whether that is through promoting the financial inclusion that permits individuals to realise their own personal ambitions, or through extending financial services to cutting-edge start-ups seeking to change the world. As investors, we want to be part of this nexus of financial improvement, putting our capital into businesses that are promoting sustainable finance.

Harry Waight is portfolio manager, global equities at BMO Global Asset Management

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