Helping to Create Sustainable Communities
A message from former Bendigo and Adelaide Bank Group Managing Director, Rob Hunt
Over a number of years now, Bendigo and Adelaide Bank has recognised and promoted that one of the reasons for decline in rural districts as well as many suburban areas is the inability of individual communities to manage the capital generated in their region. Some years ago, I put together a few simple guidelines to help establish more self-sustainable communities (listed below). Working for an organisation which is regionally-based and committed to its customer and community base in both regional and urban districts, I felt we needed to raise the issues and do something about it.
We believe it is acknowledged that most country regions and many suburban districts export capital (in fact much beyond "financial" capital) and, given we are the only regionally-based bank, we felt compelled to sit down and develop a new banking model to ensure access to essential banking services and a solution which enabled us to unite, involve and engage community in solving the problem. In effect this is using "demand side" strategy (the community's buying power in banking) to secure a co-operatively spirited venture - but using very solid commercial principles.
By involving locals as the investors and having them involve the broader community, we have been able to develop a commercial model which is proving to have the capacity to not only secure banking services but to generate local profit, regain employment and instil a "can do" attitude in many districts. For many of these towns, this would be the first publicly-owned enterprise they will have seen established at a local level in their lifetime, and this is an important process in learning how the market and economy functions.
However, this approach is not for every town - and as these issues challenge the current thinking, we knew they were never going to be easy. It requires strong leadership, a commitment to education and the development of skills necessary to establish, manage and provide appropriate governance for this new business.
Simple banking can often be returned with solutions such as in-store, electronic services or agency facilities, but Community Bank® helps in a broader understanding of the problem - as well as the progressive skill and knowledge improvement about how the system works and the responsibilities that come with a new commercial approach.
In our view, much of what we are doing is educating the locals about how to use all of their resources and skills to create a better outcome and to better understand how the economy and the investment systems work. We are convinced there is no shortage of leaders and there is no shortage of capacity in these towns to solve many of the difficulties that confront them. However, many towns and districts have stopped creating from within by using their combined buying power or resources. We have consistently found, in establishing a commercial entity and working through the education process, that this is the start of many ventures and solutions - and we are committed to provide the support to advise how best to structure the success of such projects. We believe this change of attitude and involvement is essential if we are to reverse the trend.
For example, one of the systemic difficulties for many communities is that with:
- centralised compulsory superannuation (9% of salary plus employee contribution)
- centralised collective investment products (mortgage trust, unit trust, property trust)
- centralised stock exchange (concentrating primarily on larger businesses)
- an ever-increasing centralised banking system
- much of the money produced at a local level does not come back to be utilised for productive activities
We have established a Regional Investment Fund, specifically aimed at attracting superannuation moneys back to small to medium enterprises (SMEs) in regions - and this is the first of many funds to come. We are sure others in regional and rural Australia will also follow with such initiatives once they see there are quality investments to be made.
If only 5% of our total superannuation pool was able to be attracted back into regional Australia, a substantial change could be effected. However, this is not likely to happen unless we are preparing and skilling the businesses and regions to be "investor ready" - and all that entails. Our new Regional Development Fund has a process which will assist this, as well as assist in the investment flow and management - as will the new, revitalised Bendigo (Internet) Stock Exchange.
Much of our work in this area has been to provide a project and mechanism, as well as the advice and assistance, to commence some capital flow back to these small businesses in the regions. For all of these things to occur, forward-looking, better skilled and investor-ready communities are essential. At this point our country does not have an efficient way to provide small investments of capital to the SME sector - and, as we are aware, the SME sector can be the engine room for innovation, creation and employment into the future (particularly in the regions).
We are also generating activities to help build new enterprises - such as our Community Telco Australia initiative. This project provides a corporate framework to enable individual districts to co-ordinate their technology and telco planning and utilise their combined buying power to secure improved supplier contracts and commitments. Early indications from the pilot in Bendigo clearly show the potential of this approach. Of course in time we hope this will be a new, publicly-owned enterprise - as well as an intestable vehicle for locals, superannuation funds and the capital markets generally.
The strength of this proposal lies in securing a committed buying base, thus assisting the supplier by creating the certainty to invest in the services required by the district into the future. It could also easily provide additional capital, raised locally, to undertake capital works not possible from an existing supplier (eg. discrete integrated community solutions or electronic commerce capability). By involving the locals they become part of the change process and are therefore more likely to embrace such change.
While undertaking all of these initiatives, we like to ensure involvement of youth at a local level. The Victorian State Government sponsored Lead On Youth Development Program (with which Bendigo Bank is closely involved and is an investor) enables our young people to be involved in the creation and innovation of these new ventures. It will instil a new sense of pride and encourage their commitment and involvement at a community level. It will also provide real commercial opportunities for young people to help build some of the companies that will provide the content and innovation required in the new global market - at a local level. It also establishes a sense of pride in their home region - even if they do need to leave to develop their future. These young people are the future captains of industry, future investment managers of superannuation funds, future politicians and future decision-makers.
At this point, around 2000 community representatives have made contact with Bendigo Bank about Community Bank®, and by the end of 2008 we had 225 Community Bank® branches in operation. We also hope we will be moving on further Development Funds, to help demonstrate what investments and opportunities are available. In some of our Community Bank® centres, we are already seeing the local board (often in conjunction with Bendigo Bank) develop further initiatives - previously seen as impossible.
We are often asked: Why would a bank undertake such tasks? We believe:
- It is in our interest to ensure we are banking vibrant communities that have a future - to help secure our own business. We have an obligation to assist, firmly believing that successful customers and successful communities create a successful bank.
- We have an obligation to establish structure that enables all communities across Australia to participate in the future markets and reach their potential. The future for our style of organisation is to ensure we are relevant to the customers and communities we serve.
This is what we believe will have Bendigo Bank selected on the Internet in 20 years' time (ie. we believe people will support us if we continue to support them and their district). It won't be the product, price or features (because these can be replicated). It won't be convenience (because everyone will be convenient). "Brand" will play an important part in electronic markets - and we believe what people perceive, believe and whether they "trust" will be the ingredients that secure our style of banking into the future.
By no means do we believe we have chosen an easy path, nor do we take any loyalty for granted. It is what we "do" - not what we "say" or "promote" - that will secure our customer base.
We hope this provides some background about our community developments and demonstrates our motive and commitment to provide competition and service in the banking sector and beyond - and to help establish opportunity and capacity for our customers - particularly in regional Australia.
Creating Sustainable Communities: A Few Guidelines
Improved capital management in the regions will be achieved if we:
- reduce or reverse the capital drain in regions - preserving more capital for value-adding activities and assisting local regeneration as markets move
- provide a structure (meeting regulatory requirements) which enables access to capital for small to medium enterprises throughout the region
- provide a facility to assist regions and regional business to sell themselves and their prospects to a prospective investor base (and to also become "investor ready")
- provide a mechanism to enable locals to invest "local"
- provide a framework (meeting the prudential and efficiency requirements) to make effective investment and capital raising activities.
In essence, what is required is an equity matching service and stock exchange facilities for regional SMEs to win back some of the capital moving to centralised structures - as well as catering for locals who want to invest "local". Very few options are available at the moment.
To create more self-reliant communities we will need to:
- mobilise local leadership and utilise quality information for decision making
- better utilise the region's capital (and reduce the regional capital drain)
- produce world quality product and global-equivalent efficiencies
- create environmentally sustainable enterprise and activities
- improve the marketing of the regions and individual enterprise
- be encouraged and allowed to regenerate and innovate
- ensure regions have available all infrastructure required to achieve the above
- seek to have more direct responsibility assigned within government to regional development.