Community banking: How it works

With over 2,000 bank branches closing down over the last decade, community banking is stepping in to fill the gaps in rural, regional and city suburban areas. By mid 2007 there were 200 community banks around Australia bringing conventional branch service to 410,000 customers on the main streets of their town or suburb. Each community bank is a joint-venture between Bendigo Bank and a local community. These enterprises are publicly-owned companies with Bendigo and local people the shareholders. Around $400,000 to $500,000 start-up capital is required from a community before Bendigo will come to the party and establish a branch. The branches have the full range of banking services with Bendigo supplying the banking licence and infrastructure. There is strong support from small businesses in the area, especially shopkeepers and local tradespeople. But a community bank doesn't offer better banking terms to its shareholders. There are generally 300 to 400 shareholders from the community investing an average of $1000 to $2000. The community and the bank share any profits and Bendigo says it takes a couple of years before a branch can expect to reach profitability. For a local community to be considered for a Community Bank franchise, the following steps must be taken:

• form a steering committee;
• raise awareness and begin taking pledges for start-up capital;
• continue raising pledges to reach the target of up to $500,000;
• hold a public meeting at which Bendigo Bank outlines procedures;
• get a consultant to do a feasibility study;
• get support from residents;
• feed results into the Community Bank model to produce a business plan;
• hold a community vote on whether to proceed;
• if affirmative, release prospectus to invite share subscriptions;
• once capital is raised, Bendigo fits out the premises;
• open your local branch.