Organic banking is a relatively new term, and applies to both banks, building societies and other financial lending schemes such as Credit Unions, and a range of banking services offered by all these.
It means that money is lent by the Institution and borrowed by the borrower and used organically; that is to benefit worthwhile social projects, instead of as traditionally used by Institutions to store and make more money, sometimes by investment in schemes that might be seen as against human wellbeing, or purely for private profit and benefit.
What is Ethical Banking?
Ethical banking is an extension of this idea. Whereas money was often invested by banks, Institutions and individuals in unethical schemes and plans, such s diamond mining run by private companies, or to prop up unstable Governments the world over in the form of stocks and bonds, those involved in so-called ‘ethical banking’ now make an explicit to show where funds are invested, and that these investments are in projects and schemes that are morally and physically worthwhile for all involved.
Examples of these are Fairtrade production of goods, like coffee, bananas or sugar cane importing, organic agriculture, and community building projects within the UK. These might include supporting new-build projects like churches, community centres, which might be financially backed by either Government or a group of private backers and funders.
How do they Operate in Practise?
While this concept of organic banking is still relatively new in the UK, there are a few banks and building societies that make this the bedrock of the way they operate. Like other financial Institutions, the main banking authorities regulate them, and the accounts and saving schemes they offer customers are not that different from mainstream banks. Rates of interest, rules of account use including overdraft charges, and different accounts for students and others are exactly the same as other banks. It is what they lend money for, and how the bank invests the money it holds that is different, and they are very transparent about this ‘organic’ difference.
What is the Benefit of Organic Banking and Ethical Finance?
The chief benefit is that money is used for good purpose, be it to help a family buy, build or renovate a property, in the case of an organic mortgage, or to build a community centre, centre for spiritual retreat, or to support small to medium scale organic agriculture.
In the case of one type of account from an ethical bank, their organic saver account can be used to donate part of the profit from the annual interest accrued on the account directly to organisations working to promote organic agricultural and support organic farmers in the UK. Other accounts that the bank operates allow this money to go directly to charities or social justice organisations. Many of the mainstream banks now offer customers credit cards with a similar option of supporting a nominated charity from the annual interest gained. This is a great means of supporting charities and organisations close to your heart, and shows that money can be used for good purpose, as well as saving and spending.