When Social Enterprises Engage in Finance: Agents of Change in Lending Relationships, a Belgian Typology

• DOI: http://doi.org/10.1002/jsc.2009
• Date: 01 May 2015
• Published date: 01 May 2015
• Author: Anaïs Périlleux

Strat. Change 24: 285–300 (2015)

Published online in Wiley Online Library

(wileyonlinelibrary.com) DOI: 10.1002/jsc.2009 RESEARCH ARTICLE

Copyright © 2015 John Wiley & Sons, Ltd.

Strategic Change: Brie ngs in Entrepreneurial Finance

Strategic Change

DOI: 10.1002/jsc.2009

When Social Enterprises Engage in Finance: Agents of

Change in Lending Relationships, a Belgian Typology

1

Anaïs Périlleux

Université Catholique de Louvain , Belgium

 e 2007–2009  nancial crisis and its destructive consequences for the real

economy have generated a revival of interest in social  nance. Social  nance can

be de ned as  nancial institutions, products, or practices whose goal is not solely

pro t maximization but seeking other bene ts such as social, ecological, or ethical

outcomes. It involves a wide spectrum of initiatives ranging from large institutions

such as social or alternative banks to small informal initiatives such as savings

groups, and includes micro nance as well as collaborative  nance (social crowd-

funding).  is sector has expanded considerably, although it still remains relatively

marginal. It does, however, generate enthusiasm, and authors such as Benedikter

( 2011 ) suggest that it represents a partial but promising solution to the excesses

of the traditional  nancial sector.

In particular, social  nance is a crucial source of funds for social enterprises.

Traditional  nancial institutions are usually reluctant to serve them since they are

generally small, informationally opaque  rms, involving a high level of risk ( Berger

et al ., 2001 ). However, social  nance initiatives can also be social enterprises,

whose economic activity is to provide  nancial services with social purpose. Based

on social values and reciprocity,

2 those social enterprises have triggered major

changes in lending relationships.  ey can be grouped in two main categories:

alternative  nancial institutions , which play a role in  nancial intermediation

between lenders and borrowers, and collaborative and local community-based  nan-

cial organizations , which create a direct relationship between lenders and

borrowers.

Social enterprises have two ways

of getting involved in social

 nance; either through  nancial

intermediation or through direct

 nance.

They bring lenders and borrowers

closer together and develop

relational lending based on shared

values and reciprocity. Thanks to

the transparency principle, lenders

can provide additional support to

 nanced projects by means of

consumption.

Furthermore, complementary

currency could be used to

reinforce social capital and

reciprocity in lending

relationships.

1 JEL classi cation codes: G21, G30, L31, O16.

2 ‘  e reciprocity principle of circulation of goods and/or services expresses a speci c

social tie amongst individuals or groups who, receiving a gift, are supposed to give freely

a counter-gift, as a complex mix of altruism and self-interest’ ( Laville and Nyssens,

2001 ); see also Lemaître and Helmsing ( 2012 ). ‘Agents practice reciprocal behavior

when they response to kindness by kindness, even though they obtain no additional

bene ts from this behavior’ ( Falk and Fischbacher, 2006 ).

A

typology of six major models drawn from the B elgian case shows how social

enterprises working in  nance are agents of change in lending relationships.

286 Anaïs Périlleux

Copyright © 2015 John Wiley & Sons, Ltd. Strategic Change

DOI: 10.1002/jsc

that social banks have a threefold aim: people (they seek

a balanced development in society with emphasis on the

community); the planet (they work to protect the envi-

ronment and practice a sustainable use of resources); and

pro t (they have to be economically sustainable). Further-

more, social banks tend to have a participatory ownership

to prevent any shareholder pressure for pro t maximiza-

tion. Pro t distribution is generally capped. Actually, the

majority of social banks have a cooperative ownership.

Consequently, social banks are close to the ‘ideal-type’ of

social enterprise as de ned by EMES, the largest Euro-

pean research network in the social economy ( Defourny

and Nyssens, 2010 ). 3 Furthermore, social banks attach

great importance to principles such as transparency and

accountability ( Cornée and Szafarz, 2014 ).

Micro nance is the provision of  nancial services to

marginal individuals without access to traditional banking

services ( Armendáriz and Morduch, 2010 ). Working for

 nancial inclusion, MFIs generate important societal ben-

e ts ( Hudon and Périlleux, 2014 ). Although MFIs can be

for-pro t companies — especially in developing coun-

tries, where micro nance can be quite pro table — in

developed countries they are mainly public or non-pro t

organizations. Belgian non-pro t MFIs have opted for

cooperative status (SCRL) and are recognized by the

National Co-operation Council (CNC) as cooperatives in

 is article is organized as follows: the next section

explains how social enterprises engage in social  nance,

while the following section draws up an overview of

Belgian social enterprises active in this  eld and proposes

a typology of the main models. We then discuss how these

social enterprises are agents of change in lending relation-

ships. A  nal section concludes and suggests an innovative

perspective explaining how complementary currency

could be used to reinforce social capital and reciprocity in

lending relationships.

Social  nance and social enterprises

Social  nance has blurred boundaries. For example, when

commercial banks o er speci c products, such as invest-

ment funds, with a social purpose, those products may be

considered social  nance. However, di erent types of

social enterprise are also active in social  nance. Typically,

social enterprises have two ways of doing so: they can o er

 nancial intermediation, as social banks or micro nance

institutions do, or direct  nance, as social crowdfunding

platforms or local community-based  nancial organiza-

tions do.

Financial intermediation

Alternative  nancial institutions are the largest players in

social  nance. However, they form a very heterogeneous

group that includes social banks, ethical banks, micro -

nance institutions,  nancial cooperatives, or community

and development banks. Although they di er in terms of

focus, business culture, products, and practices, they all

pursue additional goals beyond pure pro t maximization

( De Clerck, 2009 ).  e literature has not yet agreed on

clear de nitions for all these terms, and the boundaries

between categories are quite blurred. For example, the

majority of social banks have adopted cooperative owner-

ship, but not all cooperative banks may be considered to

be social banks.

Can social banks and micro nance institutions (MFIs)

be considered social enterprises? Benedikter ( 2011 ) stresses

3  e EMES ‘ideal-type’ is based on the following three

criteria. (1)  e economic and entrepreneurial dimension of

social enterprises: a continuous activity producing goods and/

or selling services, a signi cant level of economic risk, a

minimum amount of paid work. (2)  e social dimension of

social enterprises: an explicit aim to bene t the community,

an initiative launched by a group of citizens, a limited pro t

distribution. (3)  e participatory governance of social

enterprises: a high degree of autonomy, a decision-making

power not based on capital ownership, a participatory nature,

which involves the various parties a ected by the activity

( Nyssens, 2006 ; Defourny and Nyssens, 2012 ).