ShoreBank's Demise: Death of a Brand and Shot in the Arm of Social Capitalism

ShoreBankShoreBank failed last week. It represents the demise of an important brand, but also the success of a powerful idea. ShoreBank is not just one of the 100-odd banks put out of its misery by the FDIC this year, it has been a household name for those of us into social capitalism, community development, micro-lending, double- and triple-bottom line business. ShoreBank was the first and largest community development bank in the country, widely recognized and awarded as a global pioneer in providing financial services to the poor and underserved.

At the end of the day, the reason for its failure was a familiar story: record low real-estate values, incredibly high unemployment (over 20% in ShoreBank's service areas) resulting in big losses. ShoreBank's failure, and its high profile bailout attempts supposedly invoked the likes of Barack Obama, Bill Clinton, Gene Ludwig, Lloyd Blankfein, and other luminaries (not all of them accurately or fairly). The story of this tiny $3 billion bank was covered in the Wall Street Journal, The New York Times, and Fox News.

The news is quite depressing to many people across the globe, as the ShoreBank name has come to represent an enduring success of capitalism serving the needy. ShoreBank had a hand in the Nobel-winning Grameen Bank in Bangledesh. ShoreBank expanded rapidly beyond its origins in the South side of Chicago. ShoreBank was famous far beyond banking circles and its remaining founders, Mary Houghton and Ron Grzywinski inspired a generation of social entrepreneurs in all sectors of the economy, myself included.

During my time with ShoreBank I was inspired by the power of its brand as a successful, profitable do-good company. The holding company named many of its affiliates with the Shore nomenclature, in hopes to leverage this brand (ShoreCap Exchange, ShoreBank International, ShoreBank Pacific, etc). The company was constantly frustrated by its inability to leverage the tremendous halo its brand enjoyed, and I, for one, was embarrassed and mad that the brand came to its knees so publicly. I had to disassociate our fund from ShoreBank and fielded a constant flow of skepticism and concern due to our (indirect) affiliation.

While the brand failed, ostensibly in part due to its obsession with the power of its mission, ShoreBank's ideas survive and thrive in 100 ways today, and are stronger now than ever before. ShoreBank inspired the microfinance industry, which now serves millions around the globe. ShoreBank launched a dozen affiliates, all of which are realizing its mission in the U.S. and abroad. One of these organizations is the Center for Financial Services innovation, which works with the largest financial institutions to help them profitably and equitably serve the 60 million underbanked in the US. ShoreBanks successors, in banking, in farming, in retail, in travel and in venture capital (like our fund) are alive and strong. And ShoreBank's operations survive: Urban Partnership Bank, under completely new management, bought (almost) all ShoreBank's assets and intends to continue its work uninterrupted.

We can no longer invoke ShoreBank's name, but its ideas and devotees will continue under their own names: finding ways to use private capital to effect social change.

Author's note: I worked for ShoreBank's affiliate Center for Financial Services Innovation for five years and now manage Core Innovation Capital, a venture capital fund in partnership with CFSI targeting innovations for the un- and underbanked.

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