What modern banking can learn from 19th-century mutual aid

Before modern banking, people approached finance through a series of informal mechanisms. And amid the bartering, trading and money-lending were community-based set-ups such as guilds or mutual aid societies: cooperatives that would pool savings to support one another in times of need.

That’s how Banco Montepio was born – in 1844, Portugal, by a group of teachers, artisans and civil servants.

Since then, the mutual savings organization has evolved to embrace the concept of stakeholder capitalism – an idea that prosperity must be shared among people, the planet and the institutions that sustain them – and adapt to changing times. With over 180 years of experience, Banco Montepio seeks to demonstrate how finance can better serve people and the common good.

Here is what it has learnt.

Financial health is one of the most underestimated forms of social resilience. A bank’s real balance sheet is not just numbers; it’s the lives it empowers.

Financial institutions can help achieve this mission in several ways:

Women make up 58% of Banco Montepio’s Board of Directors and half of its Executive Committee. Reflecting this milestone, in 2024, the World Economic Forum recognized Banco Montepio with the Excellence in Diversity as a Strategic Asset award.

While the 19th-century debate may not have centred around carbon footprints, one thing Banco Montepio’s founders did understand was stewardship: the idea that one generation holds resources in trust for the next.

This can provide a plan for the banking sector to help achieve net zero:

Progress must be inclusive, responsible and accountable, or it won’t last.

Prosperity is not just about returns; it’s about the ripple effect of value creation. Every small business financed, home built and local cooperative empowered can help weave the fabric of society.

To increase their impact, banks should focus on two key pillars:

Supporting cooperatives and mission-driven start-ups with patient capital and practical tools for governance and impact measurement. Supporting cooperatives and mission-driven start-ups with patient capital and practical tools for governance and impact measurement means banks can amplify local value.

These entrepreneurial and cooperative enterprises help circulate value in communities, create jobs, embed democratic decision-making and deliver services that markets and governments alone may not provide.

A home can transform a family’s trajectory by providing shelter, stability, health, education, wealth accumulation and community engagement. By financing decent, affordable and stable housing, especially for low-income families and underserved communities, banks can multiply social and economic value.

A study by the Joint Center for Housing Studies at Harvard found that children of homeowners (versus renters) had 13-23% higher-quality home environments, math scores up to 9% higher, reading scores up to 7% higher and up to 3% fewer behaviour problems.

Trust is the cornerstone of finance. In the 21st century, it must extend beyond neighbours to citizens and institutions.

That’s why good governance is so key. Here are several key principles that can serve as a strong governance model that fosters trust:

Banco Montepio’s work in this area was recognized by the UN Global Compact as Advanced under the Transformational Governance framework for SDG16 – Peace, Justice and Strong Institutions.

Other institutions can adopt these principles to move the industry forward and create better outcomes for society.

Only this October did world leaders gather for the International Monetary Fund and World Bank meetings to debate how to make global growth more inclusive and sustainable.

These conversations are crucial but their success will depend on something older and simpler: the belief that we are responsible for one another.

Modern banking can still draw inspiration and wisdom from its roots – that finance is more than a system of transactions and at its core, it is a social contract. The tools may change – algorithms instead of ledgers, data instead of coins – but the essence is timeless: prosperity must be shared to be sustained.

To advance its own impact, Banco Montepio is focusing on three key priorities.

More importantly, as an industry, banking must rediscover the purpose that first made it a public good. The future of finance depends on who leads it with meaning.