Solidarity finance cooperatives

Community and peripheral enterprises, such as worker cooperatives, social care projects, job-integration firms, small renewable energy projects and cultural associations, struggle to get loans from mainstream banks. Their collateral is thin, their legal forms are unfamiliar to lenders, and their social value does not show up in a standard credit score.

It has thrived where there is an existing web of cooperatives and social movements to draw members and borrowers from. Coop57 grew out of a workers' struggle in Barcelona and expanded through alliances with regional social economy networks. Mag2 grew out of a Milan social centre, and Banca Etica was built on those Mag cooperatives and on Italian third sector networks. It needs a legal form that lets a cooperative take member capital and lend it (a credit cooperative, a financial cooperative, or a licensed bank). It also needs volunteers or member organisations willing to do social assessment of loans, and enough patient savers who accept a low or zero return. Mutual guarantees from people close to a borrowing project work best where trust networks are dense.

When the people who share a set of values also own the lender, they can judge borrowers by social purpose and trust as well as by collateral. Pooled member savings turn many small deposits into patient capital. Mutual guarantees from a borrower's own community spread risk and add social pressure to repay, and one-member-one-vote governance keeps the lending aligned with members' values rather than with returns.

Coop57 (Barcelona, with sections in Aragón, Madrid, Andalucía, Galiza, Euskal Herria and Asturies); Banca Etica and Fiare Banca Etica (Italy and Spain); Mag2 Finance (Milan); La Nef (Lyon); Hefboom (Brussels); FEBEA, the European Federation of Ethical and Alternative Banks and Financiers; the Global Alliance for Banking on Values.

Expanding faster than the volunteer and social-assessment capacity can follow. Lending to sectors the group does not understand. Promising members liquidity the balance sheet cannot support, which can lead to frozen withdrawals and anger. Relying on one large partner bank or one founder. Letting regulatory compliance crowd out the social assessment that made the model different. Concentrating loans in a few large borrowers.

Rooted in 19th century European credit cooperatives (Raiffeisen and the popular banks) and in the Italian Mag (Mutua AutoGestione) movement of the late 1970s and 1980s, which produced Mag2 in Milan in 1982 and later helped found Banca Etica. Coop57 began in Catalonia in 1995, seeded by a fund that dismissed Editorial Bruguera workers built from their severance struggle. La Nef began near Lyon in 1988 and Hefboom in Brussels in 1985. Knowledge is held openly by these cooperatives and their federations (FEBEA, GABV, REAS in Spain). There are no custodial restrictions, but each regional section is usually expected to adopt the parent cooperative's ethical criteria and governance rules.