Banking on the Not-for-Profit Sector

With increased funding pressure on the not-for-profit sector, Community Sector Banking supports 10,000 organisations to control their finances and generate a profit.

Community Sector Banking is a certified B Corp half owned by Community 21, a for-purpose enterprise owned and controlled by not-for-profit shareholders.

As a result, the bank has tailored products and services to the unique needs of not for profits to help them make a difference in their community.

Outside of its core business, it also supports organisations through grants and programs, with a particular focus on housing affordability.  

In this month’s Executive Insight, Community Sector Banking CEO Andrews Cairns talks about banking with a difference, the mission to end homelessness and why the private sector needs to look beyond finance to measure success.

What are Community Sector Banking’s values?

Community Sector Banking as an organisation believes you can be a good business and do good business at the same time. We think that by working in a collaborative environment you’re able to improve the prosperity of all stakeholders that you actually engage with and have the opportunity to service.

How does Community Sector Banking’s operations fit in with those values?

Community Sector Banking was established about 13 to 14 years ago, and it was a collaboration between the Bendigo and Adelaide Bank, and a group of very progressive-thinking not-for-profit organisations that established a company called Community 21. And it was set up on the basis that the industry was looking to have a high level of self determination around funding and solutions to meet the financial needs of the sector moving forward.

So over that 13 to 14 years there’s been a lot of development of products, services, solutions, conversation around the needs of the sector, which are fundamentally the same but different to the commercial sector. When the organisations got together, the realisation was that there were changes in the marketplace, and funding models and funding constraints meant that not for profits were being challenged in how they could actually get funding to actually deliver on their mission. So Community Sector Banking was all about taking an everyday expenditure, which is banking, and instead of the sector banking with someone else they actually bank with themselves, derive a profit, and then enable that profit to be invested in products and outcomes for the sector participants.

The sort of products we’ve developed over time have really suited the changing needs of the market. So whether it’s back office changes such as how banks view credit applications or how they view the support and guarantee needed for lending, through to new, innovative products like Act, which is a social impact account enabling people to use their banking to apply social impact funds against crowdfunding services, or whether it’s an investment deposit account that enables some money to go back into grants to help build the sector and solutions within the sector. All these things have been developed over time to meet the changing needs and requirements of the industry.

Along with banking products and services, Community Sector Banking supports the sector in other ways. Can you tell me about some of those initiatives?

Because I’m relatively new to the sector, having come into Community Sector Banking in April this year, there are a number of things which I’ve actually learnt very rapidly. Whilst the sector is about mission outcome and providing value add and improving the prosperity… and servicing those who are disadvantaged or disenfranchised, I found out there’s a number of different sub sectors, whether it’s the arts, sports, social services, drug and alcohol dependency etc. etc. And one of the things we’ve had a long history in is supporting organisations which provide solutions and outcomes for those who are homeless or at risk of being homeless.

I’m very passionate about that. I actually have a long-term association with a community housing provider in Central Victoria, and a lot of the activity we’re doing… is really focusing in on how to we make better solutions to address the needs of Australians who don’t know where they’re going to sleep tonight or are sitting on a waiting list for two-and-a-half years or are having difficulty in actually having safe housing on a nightly basis.

So the grant program which we’ve been undertaking has been focusing in on homeless and housing solutions, and we’ve been working with some really innovative organisations in helping them with their mission outcome. [Recently] I had the opportunity to work with Youth Projects where there was a $50,000 grant, and that was to enable them to create a dining room environment for people who are homeless to be able to learn life skills and about nutrition and diet, and also with regards to learning how to prepare meals and budget and plan. So that was a really innovative project.

We’re working with an organisation that works with the LGBTI community and particularly the transgender population of Australia who find themselves at a high risk of potentially being homeless due to community’s views and prejudices. We’re working with them to do some research in what it actually means for LGBTI, and the risks of being homeless when you express your sexual preferences.

And then also working with communities in New South Wales, which provide a farm-style environment [and] live-in training courses for people to help them have access to shelter, but also give them the confidence to learn new skills and new vocations, and try to break the cycle to enable them to be less disenfranchised and less segregated, and actually build their confidence through collaboration, communication and engagement with communities.

You mentioned a lot of partnerships with not-for-profit organisations. How important are they to your work?

Absolutely essential. If there’s a challenge I think what we actually have to do is to strengthen the partnerships between the not-for-profit sector and industry. Particularly if you look at the housing and homeless situation in Australia, and the rent affordability and ownership affordability, it’s not just about homeownership or about rental affordability, it’s about people having access to safe environments. I don’t know what it’s like not to be able to put my address on a form, but there’s quite a few people who are in that position. And I think the issue is that we’ve always thought it’s someone else’s problem to fix. It’s either the problem of a not-for-profit housing provider to fix or it’s a problem for government to fix. Whereas in fact I think we all have an obligation to improve the society in which we are a part of, and I think we’ve got to think about things differently and act differently and engage differently and build different models.

There’s a role for everyone to actually participate in developing a solution, and that role will change and it needs to change our thinking and how we’ve applied capital to solve the problem. In the past most people think capital is just, from a commercial point of view, financial dollars. But to me it’s all the elements around intellectual capital, productive capital, environmental capital, social capital and also the financial element. We need to mobilise all for those elements to address a problem which has been presenting itself to Australia for a long time.      

Does Community Sector Banking measure its social impact?

It’s really interesting, we’re holding a lot of discussions about how do you measure success. And one of the things is it’s very easy to go to a financial measure, because traditionally that’s how people measure themselves, in input and output, and increase, a gain, a loss. But to me there’s the elements around how do you measure wellbeing, how do you measure capability, how do you measure confidence.

If we’re working with organisations which actually improve the confidence and capabilities of the people that make up communities and make up our society then we’re a more productive and prosperous place –it’s not an issue of those who have and have not. So we’ve really pushing some of the boundaries and the thinking, and the board’s challenging me to figure out how to measure success differently, and how to measure success sustainably.

And I think that’s a pretty critical element when we look at why, as an organisation, we got B Corp certification. We did that because, as a values-based organisation, you have to apply a value structure around your decisions and your investments. And we’ve got to ensure that when we look at getting the outcomes, how do we actually support the industry to improve their resilience and their capability so that they can actually impart that resilience and capability onto their clients.

You’ve mentioned a number of challenges in terms of measuring success and the role of the private sector, what other challenges have you encountered?

There can be a natural tendency to be short term in thinking and planning and application. And a lot of the problems and issues, and also opportunities, which present themselves require long-term thinking and long-term application and a persistence and a determination to resolve. I believe that we’ve got to have more of a longer-term view in increasing the capability, wellbeing and productivity of ourselves, our communities and country. And I believe it’s that longer-term view and understanding what success looks like over the longer term, rather than a short termism. I think potentially we can be influenced by the last social post or the last conversation rather than staying true to the longer-term commitment to make a difference to communities and to the people which we service.

What do you think are the solutions to those challenges?

Community Sector Banking, as I said, was established for the sector to be able to have a high level of self determination about the financial products and services that it needs to drive its social impacts. So if we have a greater level of understanding of sector needs and a greater collaboration and involvement and understanding of the sector’s strategic plans and strategic issues and aspirations, then we, as an organisation, can become the trusted financial partner of choice for the not-for-profit sector.

It’s not just about price, product or access, it’s about truly understanding what’s trying to be achieved through the organisation and having a clear understanding of what success looks like… and being nimble and innovative enough to be able to understand the nuances of the… not-for-profit sector and what they’re trying to achieve.

And I think… there are a number of challenges which are presenting themselves for the not-for-profit sector. Demand is outstripping supply. Unfortunately we’re finding that more and more people are requiring the services that not-for-profit organisation provide to assist them to be more integrated with community and to have a chance to improve their wellbeing and prosperity. I think the funding models are being challenged. Whether that’s the mixture of self generation of funding, philanthropic activity, whether it’s government, or whether it’s new funding models, I think we’ve got to look at that because it’s essential that we keep providing the services so that we don’t have the haves and have nots, we actually have one Australia.

I think also it’s a very cluttered environment for not for profits at the moment. More and more organisations are presenting themselves as capable and deserving providers of services into the market. So it’s the ability for organisations to be about to differentiate and to have a clear value proposition. It needs to be clearly driven. And I think that relationship between the not-for-profit sector, which in the past has been predominantly led by the heart, and the commercial sector, which is predominantly been led by the mind… is the essential ecosystem necessary for us to be able to service the needs of the community.

What’s the future direction of Community Sector Banking?

Firstly we have a clear belief and focus that if we can actually assist organisations to get people into safe and consistent housing, then we improve immediately the prospects of people, whether it is improved health, whether it’s improved confidence, whether it’s improved social outcomes. So the focus for Community Sector Banking is to really support those who provide solutions for those who are homeless or those who are at risk of being homeless. Now whether it’s social housing, affordable housing, housing to the Indigenous population, housing supporting the disabled community, whether it’s faith-based organisations or mission-based organisations, it’s how to assist those with services and solutions that enable them to provide a greater level of service to meet the unmet demand which is out there at the moment.

So our focus is very much in supporting that sector, and also the broader sectors but that sector in particular. In addition to that, it’s about working with the not-for-profit sector to help formulate and develop new ecosystems and business models to ensure sustainability, to ensure excellence and to ensure resilience is built into the sector because [it] plays an exceptionally important part in making our communities and country as capable and prosperous as it can be.