Comparing Australian 'Community Banks' - Theories Explain Their Success

Abstract

This paper explores the similarities and differences among three community-based banking models implemented in Australia, in terms of size, structure, core function and partnership with the community. Despite the differences each model appears to be successful, even where community-based banks are being established in communities already well serviced by other banks. This paper suggests that part of the answer to the success of these community-based banks lies within the theories of economic sociology and accounting, particularly the theory of embeddedness and legitimacy theory. Within the context of embeddedness, this research proposes that rather than a specific type of embeddedness it is the general communitarian ties of these banks that contribute to their success, while from legitimacy theory perspective customers see community-based banks as fulfilling their social contract via community engagement activities.