Module Leader, Financial Services Environment, Glasgow Caledonian University, Scotland Dr. Franklin Nnaemeka Ngwu is a Lecturer in Finance and Financial Services, Glasgow Caledonian University. He has a PhD in Law and Economics (Banking Sector Regulation), M.Sc in Economics and Post-graduate Diploma in Development Economics from University of Manchester. In addition, he also has M.Sc in Comparative Political Economy from Cardiff University and B.Sc in Sociology from University of Lagos. He worked in Barclays Bank for five years and has lectured in School of Built Environment and Business, University of Salford, Department of Economics and School of Law, University of Manchester and Newcastle Business School, Northumbria University.

2. Outline
What is Sustainable Banking?
Sustainable Banking Principles
Is African Banking Sector Currently (Un)Sustainable
(after over 120 years)
Challenges to Creating Sustainable Banking
Possible Steps to Create a Sustainable Banking Sector
(Long and Short term measures)

3. What is Sustainable Banking
Sustainable banking is meeting the needs of the
present, without compromising the ability of future
generations to meet their own needs. Sustainability
has been conceptualised as environmental, economic
and social well-being for today and tomorrow (UN
Brundland Commission, 1993)

4. What is Sustainable Banking
It is an approach that recognises the role of Banks in
driving long-term economic development in Nigeria
that is not only economically viable, but also
environmentally responsible and socially relevant
(CBN, 2012).
The 2012 Nigerian Sustainable Banking principles are
based on leading international sustainable finance
standards and established industry best practices, but
developed in line with the Nigerian context and
development needs (Not Sure!)

5. 9 Principles of Sustainable Banking
1.Our Business Activities: Environmental and Social Risk Management
2.Our Business Operations: Environment and Social Footprint
3. Human Rights
4. Women’s Economic Empowerment
5. Financial Inclusion
6. Environmental and Social Governance
7. Capacity Building
8. Collaborative Partnerships
9. Reporting

11. Neo-liberal Reasons for the
Unsustainable Outcomes
Weak legal and accounting systems
Lack of skilled regulators
Complex bureaucracy
Weak and unskilled enforcement institutions
The same reason for over 120 years!

12. h REGULATORY
QUALITY
RULE OF LAW GOVT.
EFFECTIVENESS
DEPTH OF
CREDIT
INFORMATION
1996 2008 1996 2008 1996 2008 2004 2008
Angola -1.42 -0.94 -1.51 -1.28 -1.32 -0.98 3 3
Cameroon -0.79 -0.66 -1.42 -0.99 -0.80 -1.10 1 2
Cote’
Ivoire
-0.04 -0.93 -0.70 -1.52 0.01 -1.39 1 1
Kenya -0.36 -0.07 -1.01 -0.98 -0.41 -0.60 2 2
Nigeria -1.13 -0.62 -1.42 -1.12 -1.35 -0.98 0 0
South
Africa
0.04 0.53 0.16 0.12 0.60 0.75 6 6
France 0.76 1.25 1.51 1.40 1.79 1.54 4 4
United
Kingdom
1.48 1.79 1.77 1.68 2.04 1.74 6 6

13. CBN Financial Inclusion Targets

14. Financial Inclusion: Issues
Financial Inclusion Stakeholders: Providers, Enablers
and Supporting Institutions (Key stakeholder is missing!)
Financial Inclusion Barriers- Demand-side, Supply-
side and Regulatory (Not the underlying barriers!)
40m deciding for over 100m(Democracy or
Autocracy!)
Because of Kenya, Brazil, Chile and Mexico

15. Financial Inclusion: Issues
The approach is like a team of medical experts
(stakeholders) that prescribe a medication
(financial inclusion strategy) for a patient
(financial excluded Nigerians) without
questioning the patient to understand the
nature of his specific ailment (reasons for not
using the formal banking sector) just
because the same medication was used on other
similar patients (Kenya, Brazil, Chile and
Mexico) (Ngwu, 2014)

16. Real Reasons for the Unsustainable
Outcomes
Given the peculiar nature and level of institutional
development in Sub-Saharan Africa, the economic
and legal systems are not very suitable
The adopted legal systems are not understood,
accepted, internalised and obeyed, why?
Limited benefits of the formal banking system (only
instrumental with no intrinsic benefit)
Lack of Social Capital (Trust) which cannot be
created through more regulation

17. English legal development appears as a historical
continuum. There is no obvious rupture, no wholesale
wiping out of legal wisdom of centuries and no division
of the law into a pre-and post-revolutionary era. In
English law the present is never completely shut off
from the past and its historical roots are easily
perceived (Chrimes, 1965: 8).
Out of hard and bitter experience, Englishmen had
come to learn that the remorseless, incalculable power
of the past over the present was not to be dispelled by
the strivings of a single generation. From 1660
onwards, England was never again entirely to forget
that the secret of a nation’s strength is to have the
power of the historic past behind it, not against it
(Caenegem 1986: 158)

18. Informal Banking in Africa
It is characterized by financial innovation, reciprocity
and consistent ways of reducing transaction and
information costs for the customers
• The informal finance sector should serve as a role
model to the formal financial sector in some of the
above distinct features ( Adams, 1992; Barton, 1977).
• But what regulates the informal finance sector and
how?

19. Informal Banking in Africa
Several studies have shown the pervasiveness of rural
informal financial intermediation in Nigeria despite the
tremendous energies and resources devoted to
promoting modern banking practices and government-
funded credit schemes in rural areas. This is an
indication that these informal financial intermediaries
apparently play unique roles, do unique things or do
things in unique fashion and/or use unique principles
and strategies (Siebel, 2004: 235)

20. Regulation of the Informal
Banking Sector
Informal Finance Sector is regulated by social norms
Cooter (1997:1) defines social norm as:
 A rule that is neither promulgated
by an official source, such as a court
or a legislature, nor enforced by the
threat of legal sanctions, yet is
regularly complied with (other wise
it wouldn’t be a rule).

21. Informal Regulatory
Mechanisms
Multilateral Reputation or Punishment (better rating
agencies and effective disclosure mechanism?)
Nature of informal corporate law: well understood,
accepted, internalised and obeyed. Every financial
agent is treated like sole proprietorship with
unlimited liability
Inherent training within traditional families and
society
Theoretical orientation of informal regulatory
mechanisms- New institutional economics theory

22. Social Capital: Integration and linkage in
bottom-up dilemmas of development
High Anomie Social opportunity
LINKAGE
(Extra-community networks)
Low ‘Amoral individualism’ ‘Amoral familism’
Low High
INTEGRATION
(Intra-community ties)
(Woolcock, 1998)

23. Social Capital: Organizational integrity and
synergy in top-down dilemmas of development
ORGANIZATIONAL INTEGRITY
(Corporate coherence and capacity)
Low High
Low Anarchy Inefficiency, ineffectiveness
(Collapsed states) (Weak states)
SYNERGY
(State-society relations)
High Predation, corruption Cooperation,
accountability
(Rogue states) and flexibility
(Developmental states)
(Woolcock, 1998)

24. Creating Sustainable Development/Banking
For sustained economic development, then, the
interaction between “top-down” and “bottom-up”
must therefore be a dynamic one: in case of
bottom-up development, intensive extra-
community ties(integration) must begin to coexist
with more extensive albeit “weaker” extra
community networks (linkage), while at the same
time top-down combinations of state-society
relations(synergy) must coexist with cohesive
corporate ties (integrity) (Woolcock, 1998: 180).

25. Way Forward (Long Term)
A new regulatory framework deriving from New
Institutional Economics is required
A regulation based on robust synergy of both formal
and informal Sub-Saharan African institutions
Effective integration of the African informal laws
(norms) into the adopted formal laws to create a
culturally oriented legal system
Creating intrinsic benefits for using the formal
banking sector
Development and sustenance of social capital
oriented society

26. Short Term: Micro → Macro CSR
Using Education to enrol about 1million youths into the
formal banking sector (via informal bank managers)
Using Agriculture to enrol about 1million rural farmers
into formal banking (via informal bank managers)
The banks should recruit, train and sponsor teachers
that will teach courses such Entrepreneurship,
Financial literacy, Law and human rights in primary,
secondary and tertiary institutions
Regular training of Nigerian Police and other security
agencies in Law and Human rights
Building a packaging centre near our international
airports for export of agricultural products to the rest
of the world (starting with Europe and USA)

27. Conclusion
Reliance on adopted economic/legal systems is
inadequate and unsustainable
Appreciation of the state of both formal and informal
institutions before policy adoption is pertinent
Strengthening formal prudential regulation with
informal regulatory mechanisms is advocated and
crucial
Creating a social capital oriented society
SUSTAINABLE DEVELOPMENT/BANKING!