For generations, banks have been an integral part of our socio-economic fabric by acting as custodians of our wealth and financial assets. Moreover, as credit creators, they have consistently powered economic activity. However, as economic dynamics worldwide change, even the role of banks has moved beyond mere credit creation and wealth stimulation.
The world has woken up to challenges such as climate change, widening inequality, and accelerating technological disruption. Society today expects banks to play a more inclusive role in the economy. Banks are expected to enable sustainable and inclusive growth to drive real change across economies and communities.
Evolving from task to transformation
Historically, banks followed a transactional model, where profitability was the primary compass, and capital naturally gravitated towards models offering the safest and quickest returns. Often, the model was found to be wanting in terms of serving the segments that needed credit the most. Built on volumes, margins, and efficiency, this model is reaching its saturation, and there is widespread opinion that a different model — one that enables sustainable and inclusive growth is needed.
Traditional credit frameworks, anchored in historical cash flows and collateral, tend to exclude small entrepreneurs, farmers, women-led enterprises, and startups that drive innovation and local employment. Apart from disallowing the bridging of the gap in society between income levels, it also stifles innovation and ingenuity. Banks need to move beyond their traditional roles as passive intermediaries and focus on funding segments with potential but that need more financial support.
Secondly, banks have to reimagine how they define and manage risk. Environmental, social, and governance (ESG) considerations must move to the core of risk assessment from the current periphery. Climate resilience, social inclusion, and ethical governance are not “soft” factors — they are material to long-term value creation. Integrating ESG analytics, stress-testing for climate risk, and evaluating the social impact of lending can help banks build portfolios that are both resilient and forward-looking.
Also, banks must rethink their products and business models to serve a broader developmental agenda. For instance, about $2,570 million has been committed by various banks and financial institutions to renewable energy projects. More such initiatives, especially through innovative structures, including blended finance, outcome-linked loans, and green bonds, can redirect private capital into projects that yield social and environmental dividends. Likewise, digital credit and alternative data analytics can open access for micro- and nano-enterprises that remain invisible to traditional banking systems.
Finally, banks must reinvest in relationships with communities, local ecosystems, and partners across the financial and development landscape. Beyond delivering financial services, branch networks, local correspondents, and technology platforms can empower communities when utilised strategically. By working with government agencies, fintech firms, cooperatives, and impact investors, banks can help co-create local solutions—from climate adaptation in rural areas to skill development and entrepreneurship financing in urban clusters.
The shift to a more inclusive model of banking also makes strategic and financial sense. Climate and social vulnerabilities are now financial risks — ignoring them exposes banks to asset write-downs, credit losses, and regulatory penalties. Likewise, since trust is a key aspect in financial transactions, purpose-driven banking can spawn brand loyalty and create a loyal customer base. It can also unlock access to new markets and give rise to diversified revenue streams. Regulators and investors are already rewarding those institutions that prioritise governance and sustainability.
By deploying capital with conscience and vision, banks can drive economic resilience, social mobility, and environmental stewardship — creating value that endures beyond quarterly earnings. Banks have been trusted partners to societies, communities and economies when it comes to safeguarding wealth and deploying collective capital. Now, more than ever, banks have to adopt a transformative role that keeps them at the centre of societal change. They need to utilise their expertise in managing collective capital to deploy it for a wide-reaching and positive impact. When banks embrace this transformative role, they not only strengthen their own foundations but also lay the groundwork for a more equitable and resilient economy.