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KÖVET (MagNet Bank) - Mentor and Sphere deposit and loan products

Added on 22-03-2013

Company

MagNet Bank

Network

KÖVET Association for Sustainable Economies

Year

2010-2011

Business challenge

The Bank recognizes that the world is built from loans. When an average customer deposits their savings with a bank, they shift the responsibility; therefore the money is ‘working’ somewhere else while the customer is waiting for their funds to build.

As long as a bank operating according to increased profit expectations considers only economic factors and does not take into account environmental and social aspects, it may easily happen that the customer’s saving, when deposited with the bank to earn interest, is serving purposes to which the saver would not necessarily invest in. The company is therefore faced with overcoming this challenge.

Description

MagNet Hungarian Community Bank has responded to this challenge through the development of its Mentor and Sphere deposit and loan products. This is a new form of conscious and responsible savings and investments

Holders of Sphere deposits can choose a loan option (spheres) that is promoted by the Bank, and can also decide the rate of interest within a certain range. Deposit holders may opt for a below-market interest rate on their deposits if they wish to make the interest rate of the loans in the area of responsible investments, (e.g. renewable energy or organic farming).

Owing to our Mentor community deposit, certain institutions and projects can receive loans with favorable terms and conditions (e.g. deposit of Óbuda Waldorf Foundation). Their savings are held in community deposits, this provides the opportunity for MagNet customers to finance local enterprises that operate according to the concept of sustainability and, at the same time, can still earn market rate interest on their savings if they choose this option. The shareholders and managers of MagNet Bank have laid down general lending principles, on the basis of which the Bank filters out both positive and negative elements in its lending practices.

Impact

It is a high priority and important task to explore possible Mentor and Sphere projects as well as to develop loan assessment procedures and best practices so that when undertaking these new types of risks, the Bank can comply with requirements, both those established to protect the interests of depositors and the more stringent client and collateral rating and risk management requirements enforced by authorities.

Challenges/Lessons learned:

  • Community services achieve economic goals, as well as delivering social and environmental benefits.
  • The Banks has the opportunity to finance projects, loans and customer needs that serve sustainable development, nature conservation, and the general conditions of human life, the protection, widening and maintenance of natural and built heritage.
  • In the case of our Sphere and Mentor deposits, the deposit holders, the Bank and the borrower, are linked to one another.
  • Promoting the implementation of important and worthwhile projects in Hungary.

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