Australia: Financial inclusion: what social licence means for Australia's big banks

When Malcolm Turnbull spoke earlier this year of a social licence under which our banks operate, he declared that it came under the auspices of the Australian people.

Two days later, at a Westpac function, he went further: "The singular pursuit of an extra dollar of profit at the expense of those values is not simply wrong but places at risk the whole social licence, the good name and reputation upon which great institutions depend." It is a theme he reiterated after the election, as he foreshadowed bank CEOs being called before a Senate Inquiry. But what does a social licence really mean?

What are the practical and legal implications for Australia's big four systemically important banks? They – like any ASX-listed public company – have an obligation to maximise returns to shareholders (the theory of shareholder primacy). Their respective boards of directors have fiduciary duties under the Corporations Act and under common law, but none of these responsibilities actually extend to creating or maintaining social licence.

While the shareholder primacy theory underpins our corporate law model, there is a clear international trend to recognise a corporation's responsibilities to all stakeholders and to civil society, even though that is not yet enshrined in law.1 How this will morph into a legal obligation as part of directors' duties remains to be seen. Shareholder primacy is not so dominant that we should ignore corporate law reform that reflects the true picture of a corporation: one that strives to be a sustainable business that represents the interests of all stakeholders other than just shareholders.2

Perhaps our PM is really focusing on the growing realisation (shared by politicians, regulators, lobby groups, and hacktivists alike) that corporations cannot be divorced from the civil society in which they operate. They are not faceless technocracies. These organisations are run by humans, for the benefit of human shareholders, with human customers, suppliers, and employees - they are all in the people business.

In time, institutional investors, research analysts and fund managers will expect that a company's stock price reflects not only short-term accretion in accounting value, but also the social and environmental externalities that arise from that company's operations. Being a good actor in any industry should therefore increase the long-term viability and profitability of a company and diminish the risk of negative externalities such as an environmental spill, or a workplace fatality.

When it comes to Australia's big banks, social licence is staring them in the face. And the reflection must seem pretty ugly. Over 60% of Australian adults are experiencing some level of financial stress/vulnerability, and almost 1 in 10 have no understanding of financial products and services.3 Half of us have limited to no savings, almost a fifth have minimal to no social connections (a key factor in financial exclusion), and mental health issues are rife (another key factor in financial exclusion). The productivity implications for this nation are immense. Drill down deeper and a couple of disturbing sub-trends emerge: Indigenous Australians and women (mostly sole female parents) are disproportionately likely to experience poverty and financial exclusion in this country. For Australia to have a truly inclusive financial system, and for the big banks to secure their social licence to operate in this country, we need to:

  • Develop an effective and universal financial capability and education system
  • Provide fair, affordable and accessible microfinance and microinsurance alternatives for people who cannot access mainstream services
  • Provide a safety net for people experiencing financial crisis that is targeted (e.g. towards Indigenous families, or women fleeing family or domestic violence)
  • Regulate the most exploitative, fringe providers out of existence.4
  • Running the dodgy pay-day lenders and loan sharks out of town is a conversation for another day. But how can we make a start in the other areas?


Financial capability is all about making informed judgements and taking effective decisions around the use and management of money. Programs, however, are often couched in the language of accountants: budgeting, spending, saving, borrowing, investing, superannuation, etc. We need to think about the people we're talking to.

While financial capability programs are written in general neutral language, and do not explicitly target women, in practice the majority of applicants and recipients are women. The dilemma for NFPs who deal with poverty and financial exclusion on a daily basis is how to operate strategies through microfinance that are meaningful and relevant to the people receiving it: mainly women.5 Women are more likely than men to feel overwhelmed by financial matters and are more likely to have a non-monetary association with financial capability such as fear, shame, hopelessness and inadequacy.6

Accordingly, the financial capability programs run by or with the support of the big banks need to be tailored to their real target audience.7 If the big banks cross-referred to the findings of the Victorian Royal Commission into Family Violence, I suspect there would be a strong correlation between women who experience financial exclusion and women who experience family or domestic violence. Financial capability and financial independence could give victims an escape option from abusive relationships.


The growing problems associated with financial exclusion have prompted a growth in microfinance initiatives in the developing and the developed worlds. Identifying the ways in which microfinance initiatives contribute to providing greater freedom and security for people, allows for a more fundamental understanding of the scope of financial inclusion in Australia.

One of the keys to expanding microfinance and microinsurance in Australia is through partnerships – a communal approach including Federal and State Governments, NFPs and businesses – using their networks to reach across the country.8 Where a big bank partners with a major NFP, they are better able to deliver a microfinance or microinsurance program that will help low-income Australians access safe and affordable financial services with dignity.

There is a growing body of evidence that the support of Indigenous businesses has an intergenerational 'halo effect' throughout a community. When Indigenous businesses are encouraged, studies have shown that there is a 90% probability that the Indigenous entrepreneurs will act as positive role models for the young people in their community.9

A recent evaluation of the Many Rivers microfinance initiative (developed via a strategic alliance with Westpac) found children of business owners were more likely to complete high school and gain employment than those whose parents were unemployed.

There are several other proven benefits to local communities:

  • Increases in household asset bases and greater stability for families
  • Increases in availability of locally provided goods and services
  • Help to build sustainable local economies and reduced dependence on welfare
  • Contribution to social outcomes such as improving health and education.


All the big banks have financial hardship support and several have financial capability initiatives and microfinance products. The point is that big profits bring with them big social responsibility. The banks can and should do more – in closer partnership with government, NFPs and other private sector businesses – to extend their scale and reach into disadvantaged communities across Australia. They must refine their measurement and reporting of the impact of their initiatives, so that this research can inform future programs. The banks can also improve the flexibility around how these products are targeted and the speed with which they are accessed: it might be entrepreneurship loans for Indigenous businesses, but it might be white goods loans for the victims of domestic and family violence.

The overall outcomes to be measured are not just P/E ratios or franked dividends: securing social licence will increase self-esteem, reduce stress and provide a more positive and confident outlook on life for so many. It will help Australians plan for a better future.

Maybe that's what our Prime Minister is getting at.


1 J.J. du Plessis, Corporate governance, corporate responsibility and law (2016) 34 C&SLJ 238 at 242.

2 B Sjåfjell, A Johnston, L Anker-Sørensen and D Millon, "Shareholder Primacy: The Main Barrier to Sustainable Companies" in B Sjåfjell and BJ Richardson (eds), Company Law and Sustainability: Legal Barriers and Opportunities (Cambridge University Press, 2016) (forthcoming) 79–147.

3 See the report published by the Centre for Social Impact and National Australia Bank Limited at

4 I. Burkett and G. Sheehan From the margins to the mainstream: The challenges for microfinance in Australia (2009) Brotherhood of St Laurence and Foresters Community Finance, p 19.

5 S. Goodwin and A.P. Voola, Framing microfinance in Australia – gender netural or gender blind? (2013) Australian Journal of Social Issues, Volume 48 No.2, p232

6 Ibid.

7 For example, National Australia Bank's "Indigenous Money Mentors" program.

8 Good Shepherd Microfinance's partnership with National Australia Bank Limited is a prime example of the uplift in GDP growth, cost savings to Government, and economic mobility that can be achieved. See the 2014 report by Strategic Project Partners at

9 M. Morrison, J. Collins, P.K. Basu, and B Krivokapic-Skoko, Determining the Factors Influencing the Success of Private and Community-owned Indigenous Businesses Across Remote, Regional and Urban Australia, Final Report prepared for the Australian Research Council and Indigenous Business Australia (Charles Sturt University and University of Technology Sydney, 2014).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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