Helping the Poor to Save: How Henry Duncan Pioneered Ethical Banking
‘Ethical banking‘ is increasingly under discussion in the West, as greed and fraud undermine public confidence in existing systems.
There are those who believe Savings Bank idea is well suited to the new world of “microfinance”. It is a system that would allow people in developing countries to save some of their earnings for future needs. All of which takes the Savings Bank a full circle, away from national financial institutions and back to its local, small-scale roots. It all goes back to a largely unsung Scottish pastor, who became a giant of Christian social entrepreneurship.
Henry Duncan (1774-1846) had some experience in banking as a young man, but saw his future as a minister. In 1799 he accepted a pastorate in Ruthwell, a village on the Solway Firth in Scotland.
They were hard times. War with France had brought rampant inflation. The cost of grain went up by over 300% in 15 months, while a farm labourer might earn 5 pence a day. Rural communities were devastated, whole families destitute. Duncan preached faithfully, but he also acted. He bought consignments of Indian corn from the docks and sold it to the poor at cost price. He provided the flax needed for local women to start a cottage industry. He employed the men to turn the land adjoining the manse into a garden which, in time, people would come from miles around to admire.
But Duncan saw that something had to be done longer term. He picked up an idea once touted by Daniel Defoe, author of Robinson Crusoe, but which few had tried so far: the Savings Bank. It would be run on sound business principles, offering secure investment with a fair interest rate. His model would meet a desperate need and, if successful, could be rolled out in other places.
In 1810 he opened his books in a formerly derelict cottage at Ruthwell which he had persuaded an Earl to release to him. Today it houses the Savings Bank Museum. After one year, funds stood at £151 – a considerable achievement in those impoverished days. Duncan’s other forte being publicity, he founded a local newspaper and with characteristic gusto spread the word about the Savings Bank. The idea caught on, and within five years there were banks around the United Kingdom.
Much came down to Duncan’s personal vision and energy. He underwrote the expenses himself (with much travelling to London to secure legislation), taking no expenses from the bank. He had to be a diplomat, agitator and defender, which at times exhausted him. He became friends with many of the great and good of the day, including the socialist pioneer and benefactor Robert Owen. He became something of a celebrity, but did all he could to escape this, saying his prime duty was to save souls.
The enormity of Duncan’s achievement is that this was no city enterprise, no work of high financiers. Duncan did it all on a church minister’s stipend! Its genius is the sheer ‘portability’ of the initiative. What began in a remote village backwater in Scotland became one of the formative impulses behind the Co-operative Bank, the first UK bank to introduce an Ethical Policy back in 1992, and many other micro-finance enterprises around the world.