Globalization is under fire. Globalization means an increasingly integrated global economy, made possible in part by rapid communication. These changes affect not just our economy but our society.
Critics say that international trade creates a homogenous, impersonal, unequal world. They urge us to shop locally, eat local produce, and work for our communities — in short, to resist globalization.
In her study of the Australian banking industry, researcher Leanne Cutcher (University of Sydney) identifies the appeal and power of thinking locally — and why we can’t truly break away from global dynamics. Her work has lessons for companies and communities.
Banks Behaving Badly
In the late 1990s, online banking in Australia led to wide closure of bank branches. Closures happened especially in rural settlements, so that many bank customers had to travel hundreds of kilometres to their nearest branch.
Australians were angry. Cutcher reports: “A book entitled Banks Behaving Badly (Prendergast, 2001), recounting stories about poor banking experiences, became a bestseller. In the same year, an Australian movie called The Bank was a box office success with audiences applauding and cheering at the end of the film as the greedy bank executives were forced to confront the consequences of their actions.”
Bendigo Sets Itself Apart
Bendigo Bank provided a way for local communities to bring back their banks. Bendigo offered communities banks if communities did the pre-establishment work. Communities had to fund and conduct feasibility studies and gather pledges of support (to a minimum of AUD$250,000).
When the bank begins operation, a local management committee sets up a franchise company which is responsible for operating costs, employs the local manager and branch staff and pays Bendigo 50% of its gross income. Bendigo bears prudential and credit risk; the local committee bears business and operational risks.
The model has been popular, with 313 Bendigo Community Banks throughout Australia.
Cutcher studied materials produced by Bendigo and local banks, visited banks, and interviewed bank managers and volunteer Directors. Here’s what she found:
Unpacking the Appeal of Local
What motivated people in local communities to take on the huge effort of establishing a bank? They made significant personal sacrifices. For example, the volunteer Director of a community bank explained that she worked six hours a day on “bank business” at the same time as running her own small business—a guitar shop. “People said I was crazy and I guess in some ways I was because I ended up having to close down the guitar shop.”
Some incentives are economic. Franchise effort leaders are generally small businesses, who suffer without a local bank. A leader in a community that had lost its bank explained that “people just tend to shop where the bank is, and people don’t get off the bus anymore. They just go straight home.”
Research shows that without a local bank, small businesses see many negative effects: less passing trade, loss of access to middle class and higher income consumers, higher retail tenancy vacancy rates, less investment, higher cash handling costs, higher insurance premiums, and increased risk of crime
But bringing back the bank also has emotional value. People are striking a blow against globalization. They get back a sense of control over a world that can seem complex and overwhelming. They are “locals” fighting the big city bankers and global forces of change. They are also united as a “tribe,” “insiders “against “outsiders.”
Lessons for Companies
These emotions are powerful. Bendigo Bank uses them as a core theme in its marketing. Bendigo’s CEO, Rob Hunt, tells communities that the bank will “put you back in control of your destiny.” Bendigo also emphasizes the local tribe, the insiders banding together. For example, the current webpage asks “Are you one of us?” It describes decisions being “made by locals and for locals.”
Cutcher adds: Offering localized solutions can differentiate a business, but it will be more costly. Bendigo Bank has had success but it doesn’t seek to service the poorer communities. In Australia, often this work is done by not-for-profit financial cooperatives or credit unions.
Is Anything Local Anymore?
Even the local has limits.
Bendigo is a national bank, so the community banks are actually part of Bendigo’s wider banking network. And Bendigo retains a high degree of central control. A community bank manager explained, “We don’t approve anything locally. All loan applications go to Bendigo Bank, and like any other major bank, they review it and they approve it or not.”
Cutcher sees this kind of connection to global systems in virtually all forms of local organization or social movement. Micro-finance schemes (small local loans) rely on finance from outside. Local organizations often push for legislative reform to aid their causes.
Keeping activities purely local is difficult — and maybe that’s not a bad thing. A local focus can be a positive – finding local solutions that meet the specific needs of communities. But it also has a darker side when people become more tribal and want to exclude the other. Far right parties that campaign on issues of race and racial exclusion represent this darker side.
Lessons for Communities
Communities can balance the local and the global, developing local strength and connection while recognizing commonalities with those elsewhere.
Cutcher also encourages them to be careful in choosing their partners. Many organizations, even huge global corporations, are appealing to concepts of ‘local’ as a way to win market share. Communities should engage with companies with a real commitment to the local, not just a top down view of what being local means.
Cutcher, L. 2013. "Bringing Back the Bank: Local Renewal and Agency through Community Banking." Organization Studies. 35.1: 103-119.