Become a social banker
Malcolm Hayday is an unusual kind of banker: One who is not out to make big profits, but whose main aim is to help charities succeed. He is the Founder and CEO of the Charity Bank, the UK’s only not-for-profit bank. The bank lends money to other charitable organisations who otherwise find credit hard to come by. I met Malcolm at one such charity in East London, called the Young People’s Project. It is an education centre for teenage parents and the Charity Bank lent them the money to buy their new premises in Ilford a few years ago.
Malcolm’s appearances would not set him aside from others in the banking profession. Wearing the uniform pin-stripped suit which betrays his 20 years of international banking experience, he looked a bit out of place in this run down East London borough. In the early nineties, Malcolm was “a casualty of the last recession”, and found himself looking for work. He told me he wanted a change of direction, “If I’m honest, I never felt totally comfortable in the City. There was always the feeling that there was another way of doing this, that would somehow make it easier to sleep at night.”
Malcolm took a position at the Charities Aid Foundation, CAF, to research the potential of making loans to the charitable sector. It was 1993 and he found charities needed capital, but were against the idea of borrowing money. At the same time, banks were unconvinced that charities were credit worthy. So, Malcolm started a private loan fund with donations by CAF’s trustees who agreed to take the burden of the risk on initial loans: “To everyone’s amazement we lent the money and got it back.” The Charity Bank grew out of this initial pilot project.
By the late 1990s Malcolm had a team of 6 people working with him and they decided to scale things up. They wanted to become a bank but it was a “tortuous road” to get there. The Financial Services Authority, the Charities Commission and the Inland Revenue were all very nervous about the concept of a not-for-profit bank. Nevertheless, on Valentines Day 2002, the call came to say that they had authorisation. Malcolm and his team had six weeks to start operating: “They weren’t waiting to shoot us down, but they were waiting for us to fall over. Each year that goes by, people believe in us more.”
The Bank is now based in Tonbridge with 34 full time employees. They have a balance sheet of £50 million pounds, £30 million of which is lent out and £12 million of which is “waiting to go”. Their loans are made very carefully and sometimes the best advice that the bank can give to charities is to go elsewhere. Surprisingly, Malcolm comments that, “In many ways the most satisfying part of the job is getting a thank you note from those who we turn down.”
Malcolm clearly gets great satisfaction from what he does and admits that many weekends and evenings are taken up by his work. As well as running the bank, he spends lots of time building links with similar banks overseas and with universities and colleges who will produce the social bankers of the future. “You can’t do this half-heartedly. You’ve got to completely commit yourself. You have to recognise that it’s going to demand everything.”
The Charity Bank is unique because it invests the money from savings accounts solely in charities and not-for-profit organisations. The credit crisis has led to a surge of new depositors: “There’s a desire among part of the population to do things differently or to buy things from somebody who’s doing something differently. You don’t have to go to the big provider who doesn’t actually treat you as an individual.” The credit crunch may also lead to a growth in demand for the Charity Bank’s services from borrowers. As government funding is squeezed, more and more not-for-profits will be strapped for cash. “The big challenge is still getting the bank well enough known. There are still parts of the charitable market that don’t know us well.” Hopefully you blog readers will help out there. Spread the word!