The VBS Mutual Bank scandal would not have happened if it weren’t for unethical management and a heavy dose of incompetence. But just how much is the regulatory framework to blame? On the face of it, the mutual bank structure looks like a sound model — particularly in a developing country. It seems to follow an African concept of shared values: when investors make deposits, they buy ownership stakes in the bank and can vote at shareholders’ and members’ meetings. The concept is widely credited with having begun in 1810, when the reverend Henry Duncan started the Savings & Friendly Society in the slums of Scotland. It was meant to encourage a savings culture, uplifting poorer communities in the process. This is the philosophy that underpinned SA’s first mutual banks, like the GBS Mutual Bank in the Eastern Cape, which opened its doors in 1877 and was then called Grahamstown Building Society. A similar concept underscored the building societies, which gained traction in SA in the midd...

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