Research Handbook on Law and Ethics in Banking and Finance
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Research Handbook on Law and Ethics in Banking and Finance

Edited by Costanza A. Russo, Rosa M. Lastra and William Blair

The global financial crisis evidenced the corrosive effects of unethical behaviour upon the banking industry. The recurrence of misbehaviour in the financial sector, including fraud and manipulations of market indices, suggests the need to establish a banking culture that conforms to the highest standards of ethical and professional behaviour. This Research Handbook on Law and Ethics in Banking and Finance focuses on the role that law should play and the effectiveness of newly introduced regulations and supervisory actions as a driver for ethical conduct so as to reconnect the interests of bankers and financiers with the interests of society.
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Chapter 4: Nudging inclusive banking and micro finance towards self-sustainability

Katherine Hunt, Marco Lamandini and David Ramos Muñoz

Abstract

The chapter investigates whether inclusive niche ethical banks and MFIs which build business models around serving the previously financially excluded can be helped, or ‘nudged’ into building business models that are also financially robust. We posit that they can, and that once this is achieved, the sector can tap resources that may dwarf corporate social responsibility (CSR) programmes in terms of social impact. Today, these financial institutions are still marginal, but they clearly represent one of the greatest opportunities of our times: to achieve financial inclusion (also) via the private sector. The chapter argues that regulation and self-regulation in this sector could and should bolster this shift, and that rules should be designed to help achieve this purpose. This, in turns, means, first, ‘nudging’ ethical niche banks and MFIs towards self-sustainability choices, and, secondly, helping all other banks to pilot a transition towards more socially responsible and inclusive banking.

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