How does your bank use your money after deposit it? Most of us have no idea.
Customers of Chittenden Bank, the largest bank in the state of Vermont, can choose to put their deposits in a $92 million Socially Responsible Banking fund that invests in strengthening their communities in areas that matter such as education, affordable housing, and sustainable agriculture.
It’s unusual for a bank this size to integrate social goals into everyday transactions
While some credit unions and small privately-held banks in the U.S. have community development missions, Chittenden stands out as one of very few publicly-held, commercial banks that have such a large fund where depositors can invest in their communities, said Rian Fried, member of the advisory board of Chittenden’s Socially Responsible Banking (SRB) program and co-founder of Clean Yield, a portfolio management company for social investors. Although most large regional or national banks have charitable programs, it’s unusual for a bank this size to integrate social goals into everyday transactions, he said.
The Socially Responsible Banking program was started in the late 1980s by the Vermont National Bank that subsequently was bought by Chittenden, said Gayle McKinnon-Alexander, a business development officer with the SRB program. Originally, depositors accepted a small interest rate cut in order to participate in a program that lent money to community-minded businesses and organizations at a slightly reduced rate.
The rate differential has been discontinued over the past few years as interest rates have dropped, but the bank continues to make loans from the SRB fund to businesses that are helping the community. The bank can offer these borrowers more flexible loan terms, on a case-by-case basis, such as such allowing a longer repayment schedule.
The Grafton Village Cheese Company in Brattleboro, Vermont has used financing from the SRB Fund to expand into a new production facility and a 2,500-square-foot store that sells wine, gourmet food, and specialty artisanal cheeses from local Vermont producers. The expansion is helping the local economy by adding 35 new jobs and supports local dairy farmers, said Melissa Gulloti, a spokeswoman of the Windham Foundation, a non-profit foundation that operates Grafton Cheese.
Expansion of the Grafton Village Cheese Company helps the local economy, supporting local dairy farmers
Chittenden has also loaned funds to the Local Agricultural Community Exchange of Barre VT during the past year, another project that produces and promotes local food production. It operates a local foods market and a café, plus educational programs for the community about how to prepare sustainable foods.
Local resident can share, trade and sell locally prepared foods at the LACE market in downtown Barre and learn from one another in workshops, discussion groups, lectures. They can participate in hands-on cooking and preparation of local foods in LACE's community kitchen, and become vendors in the LACE Gallery of all Vermont-made crafts and goods.
Musician Jackson Browne and Vermont Senator Patrick Leahy visit the LACE market at last year's grand opening
Participation in the program has been strong, said McKinnon-Alexander. As of March 2008, there were more than 12,200 accounts in the SRB program totaling nearly $92 million, according to Chittenden. That’s about 10 percent of the bank’s entire portfolio, she said.
Although successful, Chittenden’s program is hard to replicate, especially for large, national banks, because socially responsible programs must reflect the priorities of communities which vary by geographical regions, Fried said. But interest in social investing is increasing as baby boomers look for a way to give back to society, said Hank Boerner, CEO of the Governance and Accountability Institute that provides research and advice to corporate and nonprofit businesses. It can make sense to work with companies that have a social mission, and are less likely to pollute or be tied up in litigation, he said.
At a time when the public may be losing confidence in banks due to financial mismanagement and a looming liquidity crisis, it is helps Chittenden to have a program that builds public trust. “It’s a very forward thinking bank that does very well,” said Fried. “And part of the reason it does very well is the SRB fund.”
Cheesey goodness in Grafton: investing in local enterprise builds public trust
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Chittenden Bank needs to be commended fot its leadership and democratization, allowing its community bank customers the opportunity to make investments in their community. The way I am reading the article, it is the customer that elects to put the money into the Socially Responsible Banking Fund. Do the customers take on any extraordinary deposit risk to have their money put in such dedicated fund?
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We (Miracleland) are about changing people's lives, one life at a time. First and foremost we want to know that they have had an opportunity to accept Jesus as their Savior, this takes care of their sin debt and gives them the blessing of the presence of the Holy Spirit to guide then. Second, they can begin the renewing of their minds through the Word of God, the Bible. It is their choice, but we do all we can to make it available. Then we begin to see how we can give then a hand up, not a hand out. The question, how can I best help this person to become all that they were created to become. God does the work, we are just the hands and feet, and this is where our heart is.
I shall be pleased to cooperate with your organisation towards development of rural areas in India financially and technically by way of providing finance against soft loans by your organisation and technical assistance by our organisation, to the cooperative farmer's associations towards developing Farming / Fisharies / Food products and packing the stuffs in an International standard and selling them in International market, thereby meeting the Food cricies in the coming years worldwide. In case interested please ask for our services against monthly retainer fees + commission against total project Finance.
Chittenden Bank needs to be commended fot its leadership and democratization, allowing its community bank customers the opportunity to make investments in their community. The way I am reading the article, it is the customer that elects to put the money into the Socially Responsible Banking Fund. Do the customers take on any extraordinary deposit risk to have their money put in such dedicated fund?
Great idea!
Steven Rabago
ZEO
ZimpleMoney.com
The project about A Bank That Puts Your Money Where Your Heart Is, is really along the lines of the most important Changeagent that I know and yes, investing in local people builds public trust, a sense of community, economic development and the building of character in people, when they are held accountable for the manner in which they do business.
We (Miracleland) are about changing people's lives, one life at a time. First and foremost we want to know that they have had an opportunity to accept Jesus as their Savior, this takes care of their sin debt and gives them the blessing of the presence of the Holy Spirit to guide then. Second, they can begin the renewing of their minds through the Word of God, the Bible. It is their choice, but we do all we can to make it available. Then we begin to see how we can give then a hand up, not a hand out. The question, how can I best help this person to become all that they were created to become. God does the work, we are just the hands and feet, and this is where our heart is.