NSL Blog

The transformation of financial systems

February 13, 2013

As part of the work in No Straight Lines, and looking at our challenges from a systems perspective it is obvious that unless our financial systems evolve we are stuck in a bad place, as Hazel Henderson observes finance is a part of the global commons, to serve real economies not dominate them. This process is underway, Hazel argues that $1 trillion is going every year into what is called the green economy and that by 2020 our fossil age will be left behind, Oakland Solar crowdfunding startup Mosaic is one example, yet this information is not reported as well as it should be to the general public.

The need therefore according to ethical markets is to describe a new system that does the following:

• Supporting a financial transaction tax, being implemented in many countries.
• Protecting the commons and public infrastructure from privatization.
• Building a new financial system that includes:
• Restoring a public banking system.
• Directing investments to undercapitalized communities through Community Development Financial Institutions and microfinance.
• Creating the enabling conditions to support local living economies.
• Investing democratically through crowdfunding.
• Continuing to involve mainstream financial institutions which demonstrably share our goals, values and ethics.
• Restoring democracy and our collective capacity to regulate, tax and invest in public priorities by limiting money in politics, amending “corporate personhood” and the “money is speech” doctrines, and promoting public financing of elections.

Via ethical markets.

As head of vision for the Grow Venture Community (GrowVC), my small contribution was arguing that the next silicon valley is not a place its a platform:

It wont be the banks, and it wont be the VC’s – so WHAT’S NEXT for the funding of innovative and entrepreneurial companies – that small spark which fires nascent, embryonic companies into life? How do we fast track those companies to maturity? As right now faced with the increasing speed it seems of the decay of an old industrial system all countries need more startups.

Part of the solution lies within what has been an emerging trend the evolution of the funding of startup’s via micro-funding, in fact the regulation development in the US, is a clear indicator of the scale and growth of this emerging trend. More importantly micro-funding has been proven to be beneficial in many ways – mitigating risk, but also democratising the power of financial capital. And of course it comes down to power – who has it and who does not. I am not saying “away with the banks or VC’s”, but what I am saying is that there exists other highly viable models, which should become part of the overall financial eco-system.

The rise of the crowdfunding eco-system is not confined only to North America it is more an international movement. To date $1.5 billion has been raised fund a multiplicity of projects. It may seem small beer, but it is a significant signifier. Because when institutions fail people learn to get what they need from each other.

The transformative power of mobile money: Another example we see how mobile communication networks are transformative for emerging economies. In this piece the transformative power of mobile money. I explored the potential and possibilities that are now presented to us.

Micro-finance for the unbanked: Maria Nowak has been working for nearly 20 years in France to develop what the European Commission argues is perhaps the most successful microcredit organisation in Europe focusing on helping people out of exclusion. ADIE, the organisation she created, is the ‘association for the right to economic initiative’. Rather than using the benefits system that supports those that fall out of the market economy, the ADIE model looks at how the excluded are enabled to return and contribute to society, not as dependants but as wealth creators themselves. I like the idea that you treat people not as victims of society, but with the potential to give something back.

In 2003 ADIE had 5,000 clients, which by 2006 had grown to over 9,000, and as of 2007 it has 22 regional offices, 119 branches across metropolitan France, 350 staff members and 1,100 volunteer mentors. This rapid growth has been achieved without compromise on who they serve and why, if anything, ADIE has gone deeper into the needs of the socially excluded. For ADIE, microcredit develops human capital by building self-confidence and entrepreneurship. Now what high street bank claims to do that? (excerpt from No Straight Lines).

These are just a few examples.

The need for education and dialogue

There is a need to offer a real alternative, and also to engage in dialogue of how to get to a new destination, a new paradigm offers greater value to us all.