When you think of the banking industry, a social agenda to make the world a better place isn't typically the first thing that comes to mind. But for Chicago-based Shorebank, it's an integral part of the reason they exist. Today it's a thriving, if fairly small, financial institution, but as this article describes, when it was founded in 1974 expectations were anything but high.
Opening a bank aimed at improving the quality of life in poor urban areas was supposed to be a grand notion doomed for failure.
The demise of ShoreBank, which promotes everything from redevelopment to minority businesses to environmentally responsible lending, was so predictable that a university professor came running to document its beginnings for a case study on business failure.
...Thirty-four years later, the stories are about its trailblazing success.
The bank has managed to thrive in both the financial and social good arenas.
Despite its altruistic slogan -- "Let's change the world" -- this is no charity organization. The Chicago-based banking company reported net income of $5.3 million last year even after tending to its varied missions.
But its biggest impact has been in what it calls community-minded investing, not profitability.
Founded in 1974, the bank was built on an idea far before its time.
ShoreBank was founded on the '60s-era idealism of Ron Grzywinski, Houghton, Milton Davis and James Fletcher (the latter two now deceased), who together ran one of the nation's first minority small business loan programs. Intent on finding ways to reverse the decline of inner-city Chicago neighborhoods, they zeroed in on redlining -- banks' then-routine denial of credit and services to customers in poorer areas.
The four young bankers raised $800,000 in capital and obtained a $2.4 million loan to buy the failing South Shore National Bank in 1973, using it as a model for their then-novel idea that private bank capital could be used to achieve social purposes.
Last year, banking for the poor hit the mainstream awareness as Muhammad Yunus and Grameen Bank received the Nobel Peace Prize. The insights of Shorebank's founders were woven into Yunus' success.
Through its far-flung business, it can even claim a supporting role in the work honored by last year's Nobel Peace Prize. Grzywinski and Houghton, on 18 trips to Bangladesh over 10 years, advised winner Muhammad Yunus on how to start and manage his Grameen Bank for the poor specializing in very small loans called microcredits.
"They have shown that you can both promote economic opportunity in low-income communities and be a profitable, financially sustainable institution," said Andrea Levere, president of Corporate for Enterprise Development, a Washington, D.C., nonprofit that promotes economic development.
Co-founder Grywinski regrets that there haven't been more companies copying their success.
While he has no problems with ShoreBank remaining "really tiny minnows" in the banking world, Grzywinski, 71, expressed disappointment that its experience had not sparked a "broad revolution" in community development banking.
"It does seem as though a bank company holding model is a very good model to deal with things like neighborhood development, environmental conservation, et cetera," he said in an interview. "So we would like to see a lot of other people do it."