Ethical bank passes judgement on Third World aid

Co-operative Bank

THIS WEEK the Co-operative Bank, the financial arm of the Co-operative Wholesale Society, is expected to claim success for its "profit with principles" stance by announcing record pre-tax profits of around £23m for 1994, up from £17.7m the year before.

The figures will be unveiled by the managing director, Terry Thomas, who has recently been telling such august institutions as Christian Aid, the International Monetary Fund (IMF) and the World Bank how to help poor countries more effectively.

The Co-op Bank sponsors Christian Aid Week, and the charity, a customer of the bank, sent him to Ghana for a week in February to verify that donations were being used in accordance with donors' intentions, and to consider "the adverse effects of IMF and World Bank policies" and whether their funds could be better used.

Mr Thomas, a colourful and forthright individual, clearly had no difficulty with the terms of reference. Christian Aid has had a long-running campaign against the IMF and the World Bank. He said in his report: "Both organisations are accused, by the political right and left in many countries of bureaucracy - and their annual report and head office building clearly suggest overbearing bureaucracy.

"The paradox is that they replicate the very thing they appear to dislike most - the economic bureaucracy and administration of a command economy."

Mr Thomas commented on Friday: "The IMF and World Bank are doing good, but it only makes half a bridge. And the people in these countries are falling off the other end. They want to put these countries on a sound financial basis in terms of their exchange rates, the ability of foreigners to invest and to take out dividends, eliminating subsidies and corruption. That is all kosher.

"However, none of the plans, and neither of these institutions, were set up to concern themselves with the virtuous behaviour of the least well-off. They concentrate on macro-economics, but what is needed are micro-economic solutions."

He said tens of thousands of Ghanians had been thrown out of work because the IMF had forced the Accra government to stop subsidising the local textile industry.

"I went into a village affected by this decision and saw abject poverty because people had had their only crutch taken away. There are some wonderful entrepreneurs in Ghana, but when they wake up in the morning, their first concern is to feed themselves and find water. I went for miles and could not get a clean glass of water. Not surprisingly, the main cause of infant death over there is cholera."

But he warned that a full frontal attack on the IMF and World Bank by Christian Aid might be counter-productive and hurt the very people it is trying to help. This is because arguing that the IMF and World Bank are not achieving their objectives helps to justify a reduction in their resources by shareholder action. The US Congress is already trying to cut the funding of United Nations agencies.

However, Mr Thomas also berated Christian Aid for being too divorced from reality, arguing that it needed to move "to practical plans as to how they may, through partnership with others, achieve their vision and move away from simplistic statements like `the right economic reforms by the right people' ".

He argued that Christian Aid's resources were so stretched that they were giving only enough money to projects to ensure that they remained dependent on the charity, and not enough to give them the impetus to become independent. "In the nicest possible way, it's a form of well-intentioned economic slavery," Mr Thomas said.

His answer: World Bank support for a pyramid system of state-owned agricultural mortgage banks, dozens of rural co-operative banks and thousands of credit unions, with Christian Aid guaranteeing loans from commercial banks to approved projects.

"We don't want American or British banks coming in and creaming off the high-net-worth customers," he said. "We want local banks that will lend people money to buy a pick, a shovel, a tractor or next year's seeds. If they only had the means to bring goods to market, or were taught pricing strategies, then the micro would help the macro."

The Co-op Bank's mixture of preaching and innovative services - including a no-fee gold credit card, telephone banking and unstaffed 24-hour branches - is going down well with young professional graduates, particularly women in caring jobs. The bank has 1.5 million customers, and the number is growing at about 20 per cent a year.

"Surveys show our ethical stance is shared by 20 per cent of the adult population," said Mr Thomas, who spent 22 years with National Westminster Bank before joining the Co-op. "And as we have only a 3 per cent share of the banking market that gives us a lot of scope for growth."

Although the Co-operative movement has had a strong ethical flavour ever since it was founded in the 19th century, the bank began to re-emphasise it after Mr Thomas polled 30,000 customers three years ago. That revealed 84.2 per cent support for "a principled and responsible attitude to banking" - a figure that rose to 94 per cent when the exercise was repeated this year.

The bank appeals to caring customers with a 12-point ethical policy that covers not investing in oppressive regimes, not speculating against the pound, not financing tobacco, not investing in animal experimentation, not supporting factory farming, and trying to ensure its services are not exploited for money laundering, drug trafficking or tax evasion.

Although the Co-op Bank is linked only with Christian organisations, Mr Thomas said he would be happy to be associated with other religious and ethnic groups. "I would do so if they invited me, but they haven't," he explained.