Mitigating Social Problem Through Impact Investing: A Case Study On Piraeus Bank Essay.

What is the social problem, unmet need, or gap (market failure) that your venture will address?

Describe the context of the problem and driving forces.

How will your organization address, manage, solve or capitalize on the issue described above?

What alternatives do/ does your target group currently have? How is your solution different/better than what's already out there? Clearly state the intended social impact to the customers/ beneficiaries.

What is the long-term vision and mission of the organization?

Describe and justify the business model with a particular focus on partnerships/ collaboration and the revenue model

What resources do you need in the short term and long-term and how will you access them? How will your organization be funded?

You are not required to provide a financial plan as such. However, you do need to address how the venture would be financed and explain the revenue model.

You need to specify the expected social impact using appropriate indicators How do you plan to make the organization sustainable? What scaling strategy may be used?

What will drive your organisation's success? (Key Success Factors) What might be your barriers or risks? How might you mitigate the risks?

Clearly state key assumptions are you making about your clients/beneficiaries, funding sources, competitive environment and operations.

Company Background

This is a report on the Piraeus Bank who provides financial services to customers and is based in Greece. There are many opportunities outside the current market, which the company can capitalize on by allocating impact investing. The report shows how the company can create a double bottom and earn profits from the gaps, which is being initially neglected by the company. The report shows the perspective of an intrapreneur who is trying to mitigate a social problem by adding it as a bottom line of the venture. The report describes the background of the company and the present bottom line. The next part of the report provides the information and evidence about the opportunities in the market that can be utilized to mitigate the need of the society.  

The head quarter of Piraeus bank is at Athens in Greece and the company specializes in the array of the products related to the financial services. The company has been founded in the year of 1916 and had worked as a private organization for decades. However, the company was owned by the state during the time period of 1975-1991 (Group 2017). The company gain was turned into a private organization by the end of the year 1991. The activities and the growth of the company has been rapid from that point onwards and is the market leaders in the sector of banking in Greece. The market share of the company is 30% when the loans are considered and is 29% when the deposits are being considered (Group 2017).

The company has made huge amount of growth between the year of 1990 and 2000 and was involved in acquisitions and mergers so that they grab a strong hold in the local market. The company made series of mergers and acquisitions in the year of 1998. Piraeus bank took control over companies such as Thrace Bank (Macedonia), Chase Manhattan (Greece) and Credit Lyonnais Hellas (Group 2017).  The company wanted to expand their business to eastern Mediterranean and Southeastern Europe and they accomplished their goal by acquiring the Bank named Pater Credit located in the country of Romania. The company continued its policy of expansion and established a wide area of network in various parts of the world. The company is leading other companies in the market to provide financial services of different types.   

The company consists of employees who are experienced and properly trained. The vision of the company is to develop the organization and the human resources at a continuous level. The company wants add value to all the products they offer by capitalizing on the diversity and inspiring people at the personal level. The company believes in providing equal opportunities to all employees and provides them with the respect they deserve. The employees are in a continuous training process, which helps them to grow (Group 2017). The working environment of the company encourages innovation, creativity and team spirit. The performance of the employees are evaluated so that the company can make sure that the employees are working according to the goals of the organization. The company acknowledges employees who have made exceptional contribution to the organization by providing them with rewards and recognition at an individual and group level. The mode of communication for the organization is open which helps in enhancing the difference aspects of life. Thus, the company is able to maintain an environment that is dynamic and has human element in it.  The company is able to combine the development of business and the social responsibility by maintaining an organized relationship with its social partners. The company mainly focuses on the protection of ecological environment and conservation of the heritage of the culture of the country. The company has its share in the market by providing the customers with dedicated products in the field of the green banking.  The company maintains the corporate social activities by operating in the museums, which are thematic. The preservation of the museums helps the company to portray the cultural standards of the rural region in an effective manner.

Market failure and the opportunities

Greece is going through a very bad phase in terms of economy and is going through a phase of crisis. The economic crisis faced by the country is the worst after the World War II and is been going on for a period of nine years. The crisis in the economy has caused the rise of the non-performing loans (NPL) (Karanikolos et al. 2013). These loans are known as red loans and they belong to the category in which the principal or the interest has not been paid for period of at least 90 days .  This has affected not only the individuals but also the large-scale companies in the country. The level of unemployment has increased and the people are spending less amount of money as they are getting lesser compensation package.  The amount of tax paid by the people of the country have increased significantly and there are lots of businesses which are forced to shut down because they are unable to pay the loan amount they have taken for running the businesses (Simou and Koutsogeorgou 2014). The attrition rate of the businesses has increased because the companies had to curtail the cost to maintain their sustainability. The employees working in various companies are getting a lower compensation package than they used to get. This clearly shows the economic condition of the country and can be stated that they are going through a phase of recession (Tchuigoua,  Durrieu and Kouao 2017). There has been significant drop in the amount of the sales in the country and companies are not ready to take new loans. The value of the collateral given out for the loans have diminished significantly and the banks are focused on restructuring the existing loans rather than providing new to clients (Economou et al. 2013). The banks are willing to provide loans to the clients if the outstanding loans are paid in full. However, this scenario is completely impossible for the people of the country and the legal procedures for clearing out the NPLs are running late. This has made the people more reluctant and they are not willing to pay the loan amount.   Moreover, the banks are facing problems with the liquidity and the capital ratios of the banks are higher than the averages in the other countries in the European Union. There has been a control on the capital of the country and the people are not allowed to withdraw more than the specified amount.  However, if the control is released the banks will be at risk but the current scenario shows that there is an improvement in the industry (Knight 2015).

The above-mentioned points show how the country is being affected due to the economic crisis and no bank is willing to take the risk as there are lot of uncertainties involved in the economy of the country. There is no one in Greece who can predict the upcoming trends so the condition of the market is diminishing and something has to be done to improve the economy of the country (Κ?τσιος 2015). Piraeus bank is involved in a lot of CSR activities and focuses on protecting the heritage and culture of the country. The company has a single bottom line and it is very difficult to obtain the desired result in the current market scenario so the execution of the double bottom line will be even more difficult for the country (Group 2017). The company aims to achieve profits and provide the shareholders with additional returns but one of the top-level employees of the company wants to implement double bottom. The second bottom line will include the implementation of microfinance so that the company can reduce the number of unemployment and also to guide the customers to make proper utilization of the available resources so that they add value to their hard earn money (Zhao and Wry 2016).  

A structural market gap has been developed in the country and this is because of the shortage in the demand and the supply.  The interest rates for the banking sector is very high and it not acceptable by the clients. The cost of monitoring and transaction is very high when compared to the size of the loan. Therefore, even if the size of the loan is small the cost of transaction is comparatively high. The cost of coverage of risks for the companies who does not have a record or have a record, which is negative, is very high (Bermeo  2014).  The cost for handling the microfinance in the country is also relatively high. However, in the context of the demand side the small-scale companies and the individuals does not have the skills and resources to apply for loans.

The banking sector has a lot of opportunity as the company can invest in different sectors so that they can diversify their portfolios. The company will be able to generate new asset classes, which will help in increasing the returns of the company.  The scheme has a lot of potential as the market for microfinance is quite fluid and will help the company to gain social impact. The economy of the country has been in a very bad situation for the past few years and the unemployed, farmers and the people under the poverty line need help so that they can improve their disposable income (Vigani et al. 2015). The company will report both the financial and the social activities. These activities will be managed in such a way that the company will be considering it as a double bottom line and microfinance will be used as a solution. Micro finance is the most efficient way of achieving double bottom line, as it is one of the fields, which strongly focuses on the social and economic development. However, it is quite to measure and report the social impact on the society and the information gathered from measuring the social impact can be used as a source of knowledge in various areas. The information can be used in marketing, academic research, management choices and decision making for the investors. The application of the microfinance in the company will provide a competitive advantage over the other companies in the market (Moss, Neubaum and Meyskens 2015). The measurement of the social gain will have to be calculated precisely and the company will have to standardize method so that it can be used for aggregation and comparison with the other companies in the banking sector.

The usage of the double bottom line is still in its initial phase and so the usage of the terms has not been standardized all over the world. The company will be including a financial bottom line along with a bottom, which has a social element in it. This means that the evaluation of the social activities will have to done in the same degree as that of the financial activities of the company (Wilburn and Wilburn 2014).  The tools that will used for the evaluation of the double bottom line will include management devices, monetized results, qualitative reporting, statistics and indices. Social investing has a lot of divisions but can be divided mainly in to two parts. Social screening and community investing are the two parts of the social investing and microfinance is a part in the community investing.  However, the implementation of the double bottom line should be oriented towards the managers of the company so that they can implement tools, which are easy to understand, and execute to bring improvements in the social impact of the company (Gold, Hahn and Seuring 2013).  Micro finance is still in its emerging phase so the managers may develop tools, which will improve their ease of work and will help in adding value to the organization.  The company will require capital for investing in microfinance and the funds will be gathered from savings, donations and investments. The company will be collaborating with nonprofit organizations so that they can contribute to the society. The European Union (EU) has already initiated programs for improvement of the society and the employment. EU has increase the funding of micro financing so that it can reduce the vulnerability of the groups in the society who are in distress (Belz and Binder  2017).  EU has been instrumental in providing funds to the intermediary group in the country and so partnership with the EU will help in adding funds for the micro financing. The capital that will be acquired will be used to provide loans to the small-scale businesses, farmers and the unemployed people so that they can make a living out of it. This will help in increasing the disposable income of the people in the country and in turn will help the bank to improve the non-performing assets. The red of the company has to be restricted and the values of the collaterals of the customers have diminished significantly (Germak and Robinson 2014). The company will be able to restructure these loans by accommodating the micro finance and increasing the base of their customers in all parts of the country. The initial investment will be high but the returns from these loans will cover up the non-performing assets in the country.  There is a lot of opportunity in this market and the company can use it for the benefit of the institutions. The company is one of the market leaders and can increase their share in the market by diversifying the portfolio of the company (Shahriar, Schwarz and Newman 2016).

The implementation of the micro finance in the company will help to improve the economic condition of the country and will add value to the country by reducing the number of the unemployment (Kamal  2016). The company will finance the farmers in the country and will provide them with guidance so that the farmers can make a proper utilization of the resources available to them. The company can implement the micro finance in various ways and Piraeus bank can take guarantees in different forms. The company will also monitor the client so that they can avoid any risk.  The risk in the micro financing is very high but the chances of the default are low because the bank will provide support to help the small-scale businesses and the individuals to flourish in their businesses (Golja, Dean and Morena 2016).  The company will be providing advice and counseling to the customers on a regular basis so that the close monitoring of the clients can be maintained. Microcredit is a term, which is used to define the financial services of smaller size (Cozarenco 2015). There are lots of individuals who have been socially excluded and are not considered as a part of the banking sector. Micro credit system will help these people to earn a living for themselves by staring up their own small-scale businesses and investing their amount in a proper way.  The amount of loan provided to the clients will be comparatively less in amount and the amount per loan will not exceed 25000 Euros (Cobb, Wry and Zhao 2016). The company will provide support and mentoring to the clients so that the knowledge of the borrower increases and a relationship can be established with the borrower. The process of micro credit is cost effective and the report shows that there is a 60% chance in the survival rate of the client’s businesses (Njiraini 2015).   

European Union (EU) has taken measures to establish micro finance in Europe and have helped provide funding for a lot of small-scale businesses in Greece. EU constantly monitors the level of development of the loans provided to find out the effectiveness of the programs (ΓΑΛΑΝΗ 2016). The common problems faced by the small-scale companies and entrepreneurs are funding. Therefore, EU has identified these issues so that they can mitigate these problems. Greece has been in economic turmoil for a long time and the company is trying to bring an improvement in the overall growth of the country.  Social impact initiatives are one of the most common phenomenon in the EU and it is seen that the social activities has helped in improving the economy of the country (Forcella and Hudon 2016). There are lot of nonprofit organizations and other enterprises, which mainly focus on social financing. The investment they make have a particular social aim and they aim at providing the society with some impact, which will be a overall benefit for the company. However, there are lots of social activities in which these investors are involved in but in this scenario the main focus will be on the entrepreneurship and empowerment (Lagoa and Suleman 2014). The company will form a partnership with the social enterprises and will try to implement a scheme in which these enterprises are considered to be the borrowers.  The collateral of the loans provided by these enterprises will be high and the risk associated with the loans is minimized (Khachatryan, Hartarska and Grigoryan 2017).  

However, there are lot of complications in incorporation of the dual bottom ofr the company because of the uncertainty in the market in Greece.  There are lot of barriers when the legal framework is considered. The restriction that has been posed on the market has caused the allowance of the organizations who are working in the social field to implement the microfinance activities. The company will have to create a new market instrument, which will facilitate the involvement of the social enterprises (Kar 2017). Moreover, the organizations that are involved in activities of micro financing are involved with European Union. The government of the country is uncertain about the implementation of the various policies and so there are lots of companies who do not know what to predict from the market situation. The risk of losing amount and converting these investments in to red loans is also high and restructure of all the assets, which are non performing, is risky and time consuming. The implementation and measurement of the double bottom line will be tough for the company and setting standards of measurement for the program is complicated. Piraeus bank is considered to be market leader and change in the bottom may reduce the market share of the company if the plan is not executed in a proper way. The availability of finance is a problem in the country; if the company is unable to acquire the amount required for the commencement of the project then there will be a problem for maintaining their sustainability (Evgenidis, Tsagkanos and Siriopoulos 2017).

Conclusion

The report is a depiction of the proposal given by an employee in the company who wants to implement double bottom line for the company. The market economy of Greece is in a terrible state and is going through a phase of crisis for the past 9 years. The economy of the country is deteriorating and the banking sector is facing a lot of issues. The disposable income for the people in the country has decreased significantly and there are lot non performing loans in the loans. The bank is not able to provide new loans and they are more focused on the restructuring of the existing loans so that the bank can minimize the loss they have incurred. The proposal provides with the market gap and the opportunities, which the bank can capitalize to improve on their market share. The bank is involved in a lot of social activities but the inclusion of the social impact as a second bottom line has not been done yet. The company can very well capitalize on the issue so that they can increase their market base and include more clients in these times of recession. However, EU has taken initiatives to make improvement in this field. The company is trying reducing the unemployment rate and providing opportunities to the small-scale industries, which are not in a position to take more loans at such higher rate of interests.

The proposal gives in debt analysis of the procedures that will have to be followed by the company to achieve the double bottom line. The report also provides the knowledge about the risks involved in the market and the barriers the company will have to face to incorporate this proposal. Thus, it can be concluded form the above report that the implementation of the double bottom could be beneficial for the company but there are lot risks and barriers involved in it. The economy of Greece is in a terrible condition so convincing the shareholders to incorporate second bottom line will be tough job. The implementation of the social impact will be done by incorporation of microfinance and statistics show that even though the risk is high but the chances of default are less. The company will be able to create temporary jobs for the people who are socially excluded and are under the poverty line. These measures will also help the farmers to sustain their business. However, as the social impact of the double bottom line is huge the company should take the risk to incorporate the proposal, as it will be prove to be beneficial for the company in the long run.

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