The Concept of Responsible Banking

The concept of responsible banking

Tigran Hakobyan

AWC, Summer 2011

American University of Armenia

Abstract

Socially responsible banking first received national attention in the mid-1970s when the South Shore Bank turned a poor section of Chicago into a respectable area with pleasant housing and thriving shops.

The aim of this paper is to describe what does responsible banking mean, in which way it is done, what are the outcomes of this concept and also there is an example of a bank in Armenia which tries to adopt the concept of responsible banking and use it in Armenian market.

The concept of responsible banking

Socially responsible banking first received national attention in the mid-1970s when the South Shore Bank turned a poor, decaying section of Chicago into a respectable area with pleasant housing and thriving shops. South Shore performed its "miracle" by investing in its own neighborhoods with money from its own depositors and from socially concerned savers throughout the country. It was a reversal of the illegal but still widely practiced process called "redlining" - taking depositors' money from poor areas but not lending it back to those same people.

When we talk about responsible banking we should also mention such things as transparency, good service, simple and easy-understanding products and so on. These things are making the right approach to the clients and they will feel the responsible atmosphere that is in this bank.

In our days some people don’t rely on the banks anymore and it’s difficult to deal with them. When the bank shows that it shares it’s interests with its clients interests and is not going to cheat the clients, most of them understand this and become a client of that bank. In this way bank finds the responsible approach to the clients and to their money.

During the responsible banking the bank mustn’t advertise consumer landing in aggressive way. Because of consumer lending a lot of people can be...