CAF Bank: taking in the bigger picture


Peter Ostacchini explains why emphasis on the long-term is key in creating impact

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19th May 2016 by TFN Guest 0 Comments

When a charity needs a loan it is either struggling to keep things ticking over or aspiring to unlock its full potential.

Perhaps its mission is being compromised, or perhaps staff are working under increasingly stressful conditions. Essentially, when a charity needs a loan, it needs help.

Charity finance is about vision and it is about people. We aim to make charities more successful and the only way to do that is through a commitment to understanding what the people in those charities are trying to do.

Short-termism is one of the main blockers preventing this process from happening.

Peter Ostacchini

Peter Ostacchini

Essentially, when a charity needs a loan, it needs help

Figures released by the Bank of England last year revealed the extent to which this short-termism continues to prevent the banking sector performing broader societal functions, such as providing SMEs with access to credit.

Weighing near-term outcomes too heavily at the expense of longer-term opportunities means valuable investment projects are lost along with the bigger picture.

Charities are viewed in the same way as SMEs - where the future is uncertain - and as a result they have found it very difficult to get funding.  Essentially, charities are unique, and the larger banks don't really understand them.

The not-for-profit sector is gradually coming to understand this themselves and the ideological fit, absent from mainstream banking, that social banks, like CAF Bank, offers. 

In Scotland hundreds of charities are now opening CAF Bank accounts each year, and across the UK charities have over £1bn of their funds deposited in over 30,000 CAF Bank accounts alone.

CAF Bank is a subsidiary of the Charities Aid Foundation (CAF), a registered charity. As a result any surplus CAF Bank makes is donated to CAF and therefore stays within the sector. The charity’s mission – to motivate society to give, connecting donors with the charities they want to support - runs through the bank’s DNA.

The reality of this is a model for banking which focuses on giving access to credit to organisations who have found it difficult to get funding elsewhere. This means we look at each charity on a case by case basis and avoid a situation where “the computer says no” because there is no time to understand the nuances of the organisation.

And we believe that there are lessons to be learned by the UK banking sector in how a bank run by a charity does business.

With 92% customer satisfaction, CAF Bank offers a model, not just for how a bank can make a bigger societal impact but also for how financial services and basic values, like charity, can combine to create a strong brand.

If more banks were part of a structure like ours - allowing any surplus from their activities to go back into charities - perhaps the banks could make a bigger impact.

And of course, charities like the concept because they know that when they bank with us, everything that comes from that process goes back into the charities sector. We want society to give more freely to charities, and charities know that we're a viable alternative for day to day banking that understands what they're trying to achieve.

Peter Ostacchini is chief executive of CAF Bank.