Costa Rica's Banco Popular Shows how Banks can be Democratic, Green -- and Financially Sustainable
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A Socialist Project e-bulletin .... No. 1496 .... October 13, 2017
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Costa Rica’s Banco Popular Shows how Banks can be Democratic, Green -- and Financially Sustainable
Thomas Marois
A decade on from the 2007-08 global financial crisis, the majority of private banks have changed very little. Most remain solely concerned with maximizing their returns, while sustainable or social goals remain subservient to this. For conventional economists, anything else remains an impossible or distant dream.
But there is hope for a different kind of bank -- one that is run democratically and with sustainable principles at its core. Costa Rica’s cooperative Banco Popular and of Communal Development (or BPDC) illustrates a viable and desirable alternative to the average private bank. While not without its own challenges, it offers a number of lessons for the rest of... the world.
Banco Popular was established in 1969 by the Costa Rican government to promote economic development. The bank emerged from a tradition of solidarity, and continues to reflect that today. Its mission is to serve the social and sustainable welfare of Costa Ricans.
BPDC is a distinctive, public-like cooperative bank that is worker-owned and controlled. Any worker holding a savings account for over a year has the right to share ownership in it. It combines commercial and developmental functions with clients that include workers, peasants, micro-, small and medium-sized enterprises, as well as communal, cooperative, and municipal development associations.
Since 2000, the bank has grown into a large financial conglomerate (Costa Rica’s third largest bank), offering the gamut of banking, pension, stock market, investment and insurance services. It has 103 branches nationwide and employs 4,300 people. Assets exceeded $5.4-billion (U.S.) in 2016 with a net income of $68-million. Its return on assets averages around 1.5 per cent, showing high returns for a retail bank.
The bank benefits from a unique form of permanent capitalization: employers contribute 0.5 per cent and workers 1 per cent of their monthly wages to it. After a year, 1.25% of these "obligatory savings" are transferred to each worker’s individual pension fund. The BPDC keeps the remaining 0.25% as a capital contribution.
The BPDC qualitatively differs from typical private banks. Its current mandate incorporates a triple bottom line: the economic; the environmental; and the social. Earning financial returns is placed on a par with serving the environmental and social good.