Responsible Financial Performance: Growth and Profits
This presentation defines responsible financial performance and makes recommendations on how institutions can achieve it. It identifies uncontrolled growth as the key cause of recent problems. It emphasizes that irresponsibly high growth rates can lead to client over-indebtedness, client poaching from other institutions, careless lending methods, and a sense of mistrust among clients. The presentation urges institutions to balance the drive for profit with the need to invest profits into improving products and services, financing growth, and increasing benefits to staff, while trying to lower interest rates for clients. It suggests that institutions should not pursue efficiency gains at the expense of staff training and compensation, and quality service delivery. Conclusions include:
- Growth thresholds should consider demand;
- Extensive growth is healthier than intensive growth;
- Geographical diversification plays an important role in risk;
- Consistent inability to cover costs may drain finite resources or force customers to rely on worse options;
- Setting a cap on profits rewards institutions for poor social performance if lower profits are driven by inefficiency, high risk, or other factors;
- Institutions must focus on factors that drive profits and have a direct relation to social performance.
