Of all the memorable incidents he has lived through in his illustrious banking career, Upendra Prasad Poudyal narrates a particularly empowering story that strums through the listener's emotional heartstrings. He recalls his visit to Nepal's rural east a significant number of years ago when he saw confident women giving elegant speeches. These women took great pride in being able to sign a document instead of taking help from a bank subordinate for a thumbprint. This was when Poudyal saw first-hand the magic that banking brought in these rural areas, how it financed their micro-businesses, and how it let their kids attend school.
Poudyal currently serves as the Chairman of Nabil Bank, Nepal's banking industry leader. With 14 years of working experience in Standard Chartered Bank Nepal and 17 years in NMB Bank, there was only one thing that could bring Poudyal back from retirement: the desire to contribute and give back to the nation.
"The success of a financial institution should be assessed by the positive impact it creates on the lives of people," Poudyal states. "After all, Banking is about people, the planet, and prosperity."
This will to do responsible banking is what led Poudyal and his team to an entirely new discipline: Sustainable Banking. Poudyal likes to view Sustainable Banking not just as another product in the banking industry's arsenal but as an approach to a new banking culture altogether.
Sustainable Banking 101
Sustainable finance refers to the process of taking environmental, social, and governance (ESG) considerations into account when making investment decisions in the financial sector, leading to more long-term investments in sustainable economic activities and projects. Environmental considerations might include climate change mitigation and adaptation, as well as the environment more broadly, for instance, the preservation of biodiversity, pollution prevention, and the circular economy. Social considerations could refer to issues of inequality, inclusiveness, labor relations, investment in human capital and communities, as well as human rights issues. The governance of public and private institutions – including management structures, employee relations
Sustainable Banking is a business model integrated with the people and the environment. It is a value-based approach that takes responsibility for the wellbeing of the people, community, and the planet. Sustainable Banking stems from the realization that the prosperity of the banking industry is closely intertwined with the prosperity of the customers it serves and the longevity of the resources it exploits.
"The way our country does banking is not error-proof," Poudyal states. "The system we follow has been proved to be flawed by the multiple economic crises in the international economic stage, most notable being the 2008 financial crisis. Banking should be transparent. It should contribute to the real economy. Profit-driven compromises hamper the resiliency of a financial institution. If the banking industry does not adapt and reshift its focus on the people, the industry as a whole may face the threat of substitution, if not extinction."
Poudyal opines that the mission of the banking industry is not only to collect deposits, forward loans, and expand branches, only to repeat the same performance loop. A financial institution should illuminate the lives of the people it touches, and positively impact the economy of the region where it operates. Sustainable Banking takes its foundation from this very idea, that the banking industry should also take responsibility in empowering the people, teaching them entrepreneurship, which the people of rural areas lack, and training them to be responsible citizens, sensible community members, and a significant spoke of the greater economic wheel.
And it does seem like the Chairman lives by his words. In Sharesansar's two-hour meeting with Poudyal, he manages to narrate stories after stories about how hydropower projects in Nepal should consider the impact of stream alteration on the habitat of aquatic species, how the banking industry should properly study the impact created not only by its investment but also the impacts created by the investment of the businesses and sectors that it funds.
For someone who takes a quick, shallow look around things, the concept of sustainability feels the least likely to take root from the banking industry, an industry that appears to be the epitome of capitalism. However, the zeal with which the Chairman pitches the idea is persuasive enough to make one believe that the concept is really here to revolutionize the banking culture and that it is only a handful number of determined steps away.
Mr. Poudyal is inspired by the Values-Based Banking Movement globally as taken forward by Global Alliance for Banking on Values (GABV) wherein he represents the Asia Pacific Region. GABV, headquartered in Amsterdam, Netherlands, is a network of banking leaders from around the world committed to advancing positive change in the banking sector. The collective goal of the Alliance is to promote a banking system that is more transparent, supports economic, social, and environmental sustainability, and is composed of a diverse range of banking institutions serving the real economy.
Nabil Bank’s approach to Sustainable Banking
1) Integration of environmental and social considerations into the decision-making process relating to business activities to avoid, minimize, or offset negative impacts.
2) Avoid, minimize, or offset the negative impacts of business operations of the Bank as well as its clients on the environment and local communities.
3) Serving the Real Economy that supports the generation of goods and services.
4) Respect human rights in business operations and business activities.
5) Promote women's economic empowerment through capacity-building initiatives, promoting entrepreneurship and positive workplace culture.
6) Promote financial inclusion chiefly from the branches in rural Nepal, seeking to provide financial services to individuals and communities that traditionally have had limited or no access to the formal financial sector.
7) Implement robust and transparent Environmental, Social, and & Governance (ESG) practices and assess the ESG practices of clients.
8) Develop individual, institutional, and sector capacity necessary to identify, assess, and manage the environmental and social risks and opportunities associated with business operations. Align the Bank with the regulations and guidelines issued by the NRB and other regulatory authorities.
9) Seek Collaboration across sectors and leverage international partnerships including Partnership for Carbon Accounting Financials (PCAF) to accelerate collective progress and move the sector as one.
10) Developing a Values-Based Banking culture in the Bank.
11) Regularly review and report on the Bank’s progress in meeting these principles at the individual and sector levels and also attempt to relate it against the UN Sustainable Development Goals or any other sustainability benchmarks that may be specified by the country.
Nabil Bank's Leap Into Sustainable Banking
Through Nabil Sustainable Banking (NSB), the bank aims at extending financial access to the unbanked while promoting entrepreneurship in the most remote corners of the country. Aligned with the UN Sustainable Development Goals, Nabil Sustainable Banking seeks to intervene across geographic, demographic, and economic strata to facilitate the creation of sustainable micro-enterprises for a better Nepal. This is a focused banking approach to support the real economy at the grassroots level.
With the time-tested experience of the bank's Chairman, Mr. Poudyal, and the execution of the company CEO Mr. Anil Keshary Shah, Nabil Bank has brought the concept of sustainability into its strategic direction. The Bank has already been working toward Green Banking, Carbon Accounting in its lending portfolios, and lending to create a sustainable impact on rural and backward people.
Nabil Bank has launched two products: Nabil Kisan Karza and Nabil Udhyamsil Karza targeting entrepreneurship development and commercialization of agriculture for the people of rural areas among people having low access to finance. Though these products have been rolled out through all the branches across the nation, the bank will initially focus on 17 selected rural branches to concentrate its sustainable activities for creating a sustainable impact on the backward population.
For Nabil Bank to incorporate sustainable banking into its banking culture, the idea should be institutionalized. When a Nabil Bank employee walks into the office in the morning and clocks in, he/she should believe in the core idea that she is responsible to bring sustainable banking into play for the very day. When asked how Nabil Bank as an institution can personify this buzzing idea, Chairman Poudyal explained how the bank has established a dedicated Sustainable Banking Department. With the realization that this goal can't be attained only with business-centric strategies and productivity-driven personnel, the bank is also looking around to work with people who understand what sustainability means and how it can be attained.
A Planned Step Into the Future
Working toward its sustainable priorities, the bank has also signed an MOU with the Council for Technical Education and Vocational Training (CTEVT) for bridging the gap of access to finance to the trained graduate of CTEVT. Through this MOU, the bank will provide its sustainable and other microfinance/ deprived sector products to students/ graduates of CTEVT and its affiliates across the nation. The bank believes this will help promote entrepreneurship development in these trained resources.
The MOU was signed by the CEO of the Bank, Mr. Anil Keshary Shah, and Member Secretary of CTEVT, Mr. Jeeb Narayan Kafle. "The MOU between CTEVT and Nabil is a milestone way forward to the entrepreneur development and sustainable development goals of the nation," Kafle stated.
The Bank seeks to establish a social entrepreneurship school along the journey to take the initiation to a grander level. The Bank has also taken initiatives in developing collaborations with various institutions for capacity building for entrepreneurship development of the people as well as training its own employee in the area.
The Bank also aims to focus its CSR activities on developing entrepreneurship amongst the people in the country as it believes in equipping people in providing skills for income-generating activities and providing needed financing support to make it happen.
Furthermore, Nabil Bank Chairman Poudyal recently echoed with the Central Bank authorities on the need for developing a Sustainable Banking Roadmap for the country. Poudyal believes his vision, and the vision of bankers like him will be materialized faster if reinforced by the regulatory authorities. He echoed that sooner or later, we need to “Change Finance to Finance Change’.
Sustainable Banking is not a deviation from core banking, Poudyal believes; as a matter of fact, it is its future.
Chairman's Concluding Message to the Reader:
The financial system determines and defines our future. Since banking touches the lives of all, every investment decision by the financial institution, whether we approve or decline a funding proposal, determines the financial ecosystem and the country. We hear the criticism on our financial system, however, we do not seem to have done much in terms of presenting viable, alternative models.
As such, it is time for us to explore how to rethink banking and how to use finance as a tool for social change. We must see how banking can make a difference in communities and what it takes to run a bank from a mission-based objective. Going forward, banking should focus on social transformation, as such mission-based banking that considers its impact on an individual, society, environment, is a need of the hour.
Interview led by Rachit Agrawal, Executive Chairman, Sharesansar.
Article crafted and compiled by Samin Gurung, Media Officer, Sharesansar.
Technical support from Samyak Shakya.