Banks - Mutual Banks - Finbond

Banks - Mutual Banks - FINBOND

JOHANNESBURG ( 21 Jan 2013 ) – South Africa’s newest bank pays up to 10 % on Deposits. This generous return has helped it to attract R85m in deposits since it opened its doors, a mere four months ago.  Website : 

What  is  a  Mutual  Bank  ?

A “Mutual Bank” also known as a “Mutual Savings Bank” is a bank which is operated on a mutual bank model, with the specific goal of encouraging savings and providing benefits to its depositors. When someone deposits funds in a “Mutual Bank”, she or he essentially buys an ownership stake in the bank and are entitled to vote at shareholder and member meetings.

A mutual savings bank is set up specifically to be operated for the benefit of the depositors. The purpose of the mutual bank is to stimulate savings by creating a safe place to deposit money and to offer benefits such as interest on deposits and dividends on mutual bank shares, and to invest conservatively for the purpose of generating profits.
The institution most frequently identified as the first modern mutual savings bank was the “Savings and Friendly Society” organized by the Reverend Henry Duncan (1774-1846), the local minister in 1810, in Ruthwell, Scotland. Rev. Duncan established the Mutual Bank in order to encourage his working class congregation to develop thrift. These first mutual savings banks were designed to uplift the poor and working classes to teach low income individuals the virtues of thrift, and self-reliance by encouraging them to save and allowing them the security to save their money.
Mutual Banks have historically been characteristically conservative in their approach. This conservatism is what allowed mutual savings banks to remain stable throughout the turbulent period of the Great Depression, despite the failing of some commercial banks. Because mutual savings banks are run very conservatively, they tend to be insulated from some of the volatility of the market. Unlike other banks, they weather financial crises much better, and may continue to return a profit when other institutions are failing.
Some of the first mutual savings banks still operate today, and numerous others have been established since.   See  Website :

SA's  Newest  Bank  Pays  10 %  on  Deposits

JOHANNESBURG ( 21 Jan 2013 ) – South Africa’s newest bank pays up to 10% on deposits. This generous return has helped it to attract R85m in deposits since it opened its doors, a mere four months ago.

Finbond is a Micro-lender with 170 branches nationwide. It offers small, short-term loans of between R100 to R7 000. The deposits it accepts via its Mutual Bank are used to fund the Micro-loan Business.

Finbond Mutual Bank is one of only three Mutual Banks in the country. The other two are: GBS Mutual Bank and VBS Mutual Bank. These are old institutions; GBS was established in 1877 and VBS in 1982. A mutual bank is owned by its depositors, and they are entitled to vote at shareholder meetings.

A Mutual Bank does not require as much capital as an ordinary bank in order to obtain a licence. But Finbond CEO Willie van Aardt insists that in all other aspects, the application process is as onerous as it would be for an ordinary bank.

Finbond’s interest rates are significantly more generous than other banks. For example, Capitec, which has long been known for above-average interest rates, pays 8.5% on a R100 000 fixed-term deposit of 49-60 months. An equivalent deposit with one of the big-four banks would not earn more than 7%.   As at 21 Jan 2013.

Finbond pays depositors between 8.75% and 10% a year, depending on the term of the deposit. Fixed-term deposits of 6-11 months earn interest of 8.75%. Those of 49-60 months earn 10%.

Galileo Capital CEO Theo Vorster says a few of his clients have asked him about Finbond’s savings products. Vorster notes that the 10% paid by Finbond is three percentage points higher than the return offered by the equivalent government retail bond. “Investors need to ask themselves whether the extra three percentage points are adequate compensation for the extra risk,” says Vorster.

Finbond’s Banking Licence should certainly provide comfort to investors. The Reserve Bank does not guarantee deposits of any bank. But it monitors banks on a monthly basis to ensure that they adhere to all laws and regulations, including minimum regulatory capital and liquidity requirements. Further, the Reserve Bank places strong emphasis on the protection of depositors’ funds, which is important to maintain faith in the banking system. When Saambou collapsed in 2002, the Reserve Bank helped to negotiate a deal that saw FirstRand rescue depositors.
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