Standard Chartered's Social and Economic Impact in Indonesia

 

By Zahid Torres-Rahman, Business Fights Poverty

 

One of the priorities for all of us interested in harnessing the power of business for development impact is to demonstrate and communicate much more precisely just what that impact is.

 

Stories and anecdotes just won’t do, when we need to demonstrate the case to sceptics in the development community, and within businesses themselves.  In short, we need robust and impartial data, combined with credible analysis.

 

Fortunately, one person – Ethan Kapstein – has been busy over recent years filling this gap.  His studies now include SABMiller (Uganda), Unilever (South Africa) and Standard Chartered (Ghana).  Now his latest report looks at Standard Chartered’s social and economic impact in Indonesia.

 

Kapstein’s latest report looks at “the value of Standard Chartered, in ways that go far beyond the provision of credit” – this in a country where there remains considerable sensitivity about the role of the banking sector since the economic crisis in 1997.  The Report concludes that the contribution that the bank makes through its core business activities is significant:

 

  • US$4.5 billion of value-added in 2009 – equivalent to around 0.8 per cent of Indonesia’s GDP, if you add together all the direct impacts (hiring workers, paying taxes, purchasing goods and services, and spending by the clients it finances), indirect impact (as the money the banks and its clients spend is re-spent by suppliers) and induced impacts (the total household expenditure that results from their activities).
  • Over 1 million jobs – or 0.9 per cent of Indonesia's workforce in 2009.  This includes around 67,000 jobs from the direct, indirect and induced effects, as well 962,000 jobs created directly and indirectly by their clients as a result of the financing the bank provided.
  • US$ 9.8 billion worth of trade transactions financed by the bank, helping connect Indonesia to world markets.

 

The value of such studies lie not just in their ability to communicate the positive impact of a business, but also in how they help drive future business strategy.

 

The Indonesia report identifies seven ways in which Standard Chartered “could deepen its impact”:

 

  • work with its Indonesian corporate borrowers to help them strengthen their competitiveness in world markets.
  • expand its small and medium-sized enterprise banking services to help foster entrepreneurship
  • actively support increased infrastructure investment.
  • engage more actively in agricultural financing.
  • continue to promote best environmental and social practice in Indonesia.
  • align its sustainability programmes more closely with its financial expertise.
  • continue to provide its Indonesian employees with extensive training opportunities.

 

Studies like this one – alongside pioneering efforts by others such as the World Business Council on Sustainable Development (Measuring Impact Framework), Anglo American (Socio-Economic Assessment Toolbox), Oxfam and Unilever (Unilever Indonesia) – have raised the bar in terms of how companies tell their story and think more deeply about the impact of their core business.

 

As such studies become more common – as they surely need to – the next frontier is developing multi-company, comparable studies that track impacts over time.  Those interested in the telling the story of how business can fight poverty need to rely less of powerful stories and more on powerful data. 

 

Click here to download Ethan Kapstein's report on “The Social and Economic Impact of Standard Chartered in Indonesia”.

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Tags: #asia-wp, #featimpact, Indonesia, Kapstein, Standard Chartered

Comment by Daphne Halkias on March 14, 2011 at 6:15
The next step is scaling social impact.  We now must begin to focus on quantitative measures now to back up the impact and sustainability of business efforts in fighting poverty that have been expressed thru so much qualitataive literature. Epstein's reports are comprehensive and an invaluable addition to the literature on sustainable entrepreneurship in the fight against poverty.
Comment by David Bosomworth on March 17, 2011 at 15:16

We estimate that a $4.5bn boost to the economy of Indonesia would lift a million people out of poverty. 

 

Taking the figure of $4.5bn from the report, we estimate that an increase of $4.5bn to Indonesia's economy would typically lead to the following social improvements:

 

972,300 more people have an income above $2 per day...of whom

753,300 more people have access to an improved water source...of whom

652,300 more people have access to improved sanitation...of whom

90,400 more people survive past the age of 40...of whom

26,200 fewer people are undernourished...as well as

168,100 fewer children underweight for their age...and

28,600 more children attending secondary education

 

We have a free demo on our website that shows how we calculated these figures, just visit:

 

http://www.sequoiaonsustainability.com/SocioEconomic/Calculator.aspx

 

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