Finance has a purpose, done well it has a huge role to play in society
Over the last year, the discussion around how financial services, in particular investors, are responsible for the management of companies has grown. Activist investors, once seen as “corporate raiders” intending to radically change a company to increase stock value for short-term gains, are now viewed as possible stewards of increased diversity and better corporate governance. Mainstream investors have turned activist in areas such as weapons manufacture, climate change, excessive pay, diversity, and inappropriate behaviour by senior management.
Speaking to the OECD Global Parliamentary Network, hosted by the UK All Parliamentary Party Group (APPG) on Inclusive Growth at Parliament last month, Dr Hari Mann, Hult Business School and Visiting Fellow at Cass Business School, argued that the purpose of finance in society goes far beyond the role of investors and always has. Finance has a purpose, he said, and done well it has a huge impact and a significant role to play in society. He highlighted four defining areas where finance impacts inclusive growth.
- Safekeeping of assets – the most essential service, bank accounts, is simply not available to many people in many countries. With the growth of new technologies such as mobile money, there are opportunities to diversify into new products that alleviate this lack of access.
- Providing an effective payment system – huge strides have been made in making this area of finance more inclusive, particularly through the introduction of mobile payment services (e.g. mPesa – the mobile phone-based money transfer, financing and microfinancing service) but there is still more to be done.
- Sharing risk – from insurance against loss to pension systems to allow security in old age, financial services play a critical role in the long-term well-being of individuals. Making these products more widely available is critical to inclusive growth.
- Intermediation – the creation and distribution of assets to create growth. This is profoundly important to the development of the global economy. Increasing access to investment worldwide will support growth, as well as creating new markets and generating profits.
Dr Mann concluded that there is a significant need to encourage a broad debate – with industry, politicians and consumer stakeholders – about what the aims of inclusive growth and social mobility should be. Undoubtedly, whatever the outcome, finance will play a critical part.
For further discussion on why purpose matters in finance read David Pitt-Watson and Dr Hari Mann’s 2017 report for the Pension Insurance Corporation here
Find out more about working with A Blueprint for Better Business here or download our paper on ‘How can purpose-led businesses contribute to inclusive growth and how can policymakers help them?’