Social and Solidarity Finance: UNRISD-ILO-FES Workshop on Tensions, Opportunities and Transformative Potential
Held at the ILO, Geneva, 11-12 May 2015, this workshop brought together an interdisciplinary group of around 25 experts—in the fields of alternative finance, economic sociology and the anthropology of money—to look at the transformative potential of social and solidarity finance from a South-South and triangular cooperation perspective at a time when financing for development and the post-2015 sustainable development agenda are high on the UN’s list of priorities.
Report on the proceedingsThe financial and economic crises of recent years have resulted in profound worldwide economic instability, causing serious social and environmental damage. Recent reports by the ILO indicate that prospects for the creation of job opportunities worldwide have worsened. A high percentage of workers in both developed and developing countries were underemployed and pursuing economic activity with low productivity. In this context social and solidarity economy was gaining in importance, as it could facilitate the generation of work, employment and incomes through solidarity-based economic enterprises. For this reason South-South and triangular cooperation becomes an expression of such solidarity between developing and emerging countries. However, SSE still faces many challenges. Among these, the financial issue was crucial.
Social and Solidarity Finance (SSF) is hence an immensely important issue for the existence and maintenance of social and solidarity economy organizations (SSEO), especially in an economic system in which access to financial support for such organizations is difficult or unfeasible. Yet many experiences worldwide show that projects based on social and solidarity finance can be implemented and are sustainable.
UNRISD and the ILO have a close interest in conducting research on social and solidarity finance. As Mr. Pascal van Griethuysen, UNRISD Research Coordinator, stated in the opening session, efforts must be made to fill gaps in research so as to create an enabling financial environment for SSE organizations and to understand the unstable nature of the financial system at a time when the UN was debating financing for sustainable development.
In 2012 UNRISD launched a research project and organized a conference on the “Potential and Limits of Social and Solidarity Economy”. Many contributions addressed such issues as complementary currencies and related topics in SSF, which led the United Nations Non-Governmental Liaison Service to organize a special session on “Alternative Finance and Complementary Currencies”. However, SSE organizations faced obstructive financial environments, including restricted or onerous terms of access to credit, instabilities within financial markets, biases within microfinance associated with individual entrepreneurship, and the lack of financial arrangements recognizing the specific needs of SSE initiatives. This UNRISD-ILO workshop was the first step to focus on SSF and structural issues linked with finance and money.
Mr Jürgen Schwettmann, Director, ILO Department of Partnerships and Development Cooperation, stated that microfinance was an opportunity to support the creation of small businesses and local employment, thereby promoting socio-economic inclusion and reaffirming its value as a model that could be replicated in other countries through South-South and triangular cooperation initiatives. In this regard he referred to the success of Brazil’s Banco Palmas, a community development bank (CDB) whose mission was to implement programmes and projects for work and income generation using solidarity economy systems primarily focused on overcoming urban and rural poverty. SSF still had no formal definition in the economic field, but could play a crucial role for the ILO’s key concerns, such as green jobs, youth and women’s employment, the eradication of child labour, and the inclusion of vulnerable populations. The ILO had since 2010 organized the annual Social and Solidarity Economy Academy (SSEA), which gathered practitioners together for the purpose of promoting a more socially inclusive economy in the framework of the post-2015 Sustainable Development Goals. The next SSEA event would be held in South Africa July 2015.
Mr Hubert Schillinger, Director, Friedrich Ebert Stiftung Geneva Office, stated that while it was not a new concept, some effort had been made on an SSF basis to support the less privileged. Since current financial practices were difficult to adapt to real human needs, many of the programmes carried out in the last few decades had had no sustainable success. Hence, the legitimacy of the world financial system was increasingly called into question. SSF could form the basis of social democracy, but innovative financial arrangements were needed to better respond to the needs of the most vulnerable. Hence new initiatives such as microfinance and savings banks must be taken, which encompass inclusion and solidarity.
The rhetoric of microfinance and the shock of neoliberalism were still posing many difficulties for SSF development, as Mr Jean-Louis Laville, of the Conservatoire National des Arts et Métiers of France, cautioned. SSE served social development, but faced limitations due to its deviation from the norms of the orthodox economy. SSE had begun in the 1960s within the social and feminist movements, but it was regarded as an economic sophism rather than part of conventional market economy, especially in the mind-set of 1980s neoliberalism. At the end of the 20th century microfinance took the forefront in SSE, with new goals aimed at public financial effectiveness, poverty reduction, reciprocity and solidarity. Brazil had been a model country for SSF development.
Exploring and conceptualizing social and solidarity financeTraditionally, SSF encompassed social and ethical banking; financial cooperatives, including the credit union movement, cooperative banks and building societies; community-based savings schemes; and savings and credit cooperatives. More recently, new forms of SSF had appeared, including participatory budgeting, labour solidarity funds, social financial intermediaries, micro-credit, and equity debt instruments. Consequently, SSF could be defined by its difference from conventional finance.
For Amelie Artis, University of Science of Grenoble, SSF was a system, a social bond reinforced by social media, a monetary and non-monetary agreement, and a forum for social exchange. It was built on trust and financing support, a system in which several players were involved (savers and public stakeholders), involving multiple relationships (financial intermediation, socialization and support relationships) with common goals and common rules.
Mr Anup Dash focused on the need for agreed language in discussing SSF. SSF was a nascent stage of economy and was fragmented, since SSF was not based on conventional finance. While the opportunities for SSF were great, SSF was the future, but there were tensions to be resolved. Referring to SSE experiences, particularly in microfinance and cooperatives in South Asia, he emphasized the need for SSF to address critical challenges so as to avoid inefficiency and loss of direction. SSF enterprises needed to develop their own tools to do so, rather than using tools borrowed from commercial finance systems.
In turn, Mr Jem Bendell, of the University of Cumbria, stated that public policy was lagging behind innovation, and was failing to recognize SSF as a significant development tool because of prevailing cultural misconceptions about the nature of debt and finance. A Kenyan NGO, with very little investment, had helped people create business networks in the poorest urban areas; their vouchers functioned as a form of currency, which was enabling a more than 20% increase in turnover, reducing waste and unemployment. Unfortunately, this model lacked support, which was due to the lack of understanding of the origins and nature of currency and of the need for innovation. Consequently, workshops such as the present UNRISD-ILO were an ideal place to discuss and overcome such concerns.
SSF could also be defined as specifically including the vulnerable fraction of society. Ms Magdalena Villarreal, of the Centre for Advanced Research and Postgraduate Studies in Social Anthropology of Mexico (CIESAS) stated that stereotyped views of women still prevailed: they lacked education, power, control and a future. They were viewed as victims unable to help themselves. Women’s strengths and potential to act must be analysed and taken into account. Here it was important to recognize the value of the care economy, which was critical to the economy as a whole. The capitalist system was imperfect and uncoordinated, and people could change it and adapt it to their needs.
Social and solidarity finance as a financial tool for social and solidarity economyLittle had been achieved yet, despite growing interest in the real impact of SSE and the methodological challenges of assessing its manifold nature. The impact of SSF on SSE suffered from the same limitation. SSE practitioners were increasingly adopting innovative forms of hybrid financing, accessing, for instance, both private and public loans. But what role could SFF play in financing SSE and what would an integrated funding strategy for SSE initiatives look like?
Mr Nathanael Ojong, of the World Bank Group, stated that a major problem faced by SSE organizations was their under-capitalization and limited access to external financing. The fact that SSE organizations occupied the space between the state and the market was considered both a blessing and curse. As a blessing, they addressed market failures, and as a curse, access to capital was difficult since it was often difficult to identify their owners to guarantee loans, their legal structure may not allow the sale of shares, and their operations were not singularly focused on generating financial returns. Hence, it was vital to examine how SSE organizations were financed in practice.
Ms Nicole Alix, of Les Rencontres du Mont-Blanc, focused on the need of SSE enterprises to finance their operating cycle in terms of equity, and in terms of long-term financing to support diversified forms of social finance and cooperatives. To increase finance for development and promote long-term and patient capital, innovative means and new methods of evaluation must be created instead of continuing to fix prices. An action plan was needed to promote such forms of finance as a common good.
Many experiences showed that SSF could be a financial tool for SSE and reinforced in the South–South and Triangular Cooperation (SSTC) context. An impressive example was the SSE in Asia. As Mr Benjamin Quiñones, Founder and Chairman of the Asian Solidarity Economy Council (ASEC), had exemplified by case studies in Asia (Community-Supported Agriculture, Fair Trade, Supply Chain Integration through Microfinance, Social Enterprises of Consumer Groups, Cooperative Financing for Sustainable Development), there was ample evidence to show that South–South and triangular cooperation and Social And Solidarity Economy were two sides of the same coin, and that South–South and Triangular Cooperation had been a driving force in the development of Social and Solidarity Economy. Besides, both government-driven (top-down) and people-driven (bottom-up) South–South and Triangular Cooperation was flourishing on the ground and was instrumental in broadening South–South cooperation in developing countries. The recent Asia-Pacific High Level Consultation on Financing for Development (Jakarta, April 2015) had recommended enhancing North–South, South–South and Triangular Development Cooperation to support domestic finance and development. The round table discussion on community based enterprises (CBE) (Kuala Lumpur, April 2015) had also stressed the importance of developing a regional South–South Cooperation framework for CBE development.
The case of community development banks (CDBS) in Brazil was clear evidence of impressive progress in social and solidarity finance practices in Brazil. CDBs served the populations of poor and marginalized areas by financing and advising solidarity enterprises. They stimulated the creation of local networks, promoting endogenous development in order to generate employment and revenue. The main example mentioned by Mr França Filho Genauto Carvalho, of the University of Bahia, was the Banco Palmas. Such an experience had emerged and developed within a community setting. The Instituto Palmas was created in March 2003 as a civil society organization of public interest (OSCIP) for microcredit. It acted as an umbrella organization by managing the network and providing legal support to all community banks. The Instituto Palmas established partnerships with the public sector and official banks, thereby generating resources and technologies for the benefit of the community banks that were part of the network. Today Banco Palmas was undertaking strong political activities aimed at securing legal recognition of microfinance and the creation of legal frameworks and public policies on SSE.
Enabling the transformative potential of social and solidarity financeWhile the instability of the financial system hindered sustainable development by reducing the capacity of individuals to empower themselves, and increased poverty, SSF offered solutions to improve financial inclusion, combat poverty and enhance local economic development. To scale up such processes, challenges must be addressed at both world and local levels. As Jean Fabre, International Consultant, stated, the rich and poor ultimately faced the same dangers. It was urgent to move from a society predominantly based on competition towards a society of solidarity, and the ILO could do much to avoid economic collapse. The goal of the 21st century was not to give more power to the powerful but to empower those who needed the power to make progress, and to do so through a solidarity approach.
As for the local and systemic impact of SSF, Mr Leandro Morais stated that local economic and social development projects carried out by SSE initiatives and organizations involved the integration of economic and social dimensions, in addition to driving new productive behaviour based on partnerships, cooperation, bottom-up action, community development and the generation of social capital. Local initiatives involved knowledge, competencies, notions and principles acquired over time, which give sense and identity to a number of practices that generated dynamic economic, political, and organizational change.
SSTC included social, economic, environmental, technical and political initiatives, and includes sharing of knowledge and experience, training, technology transfer and tripartism. As such it was a useful tool to involve social partners from developing countries in the promotion of the Decent Work Agenda through development cooperation. SSTC was a manifestation of solidarity between the countries and peoples of the South. All of these helped it to play a significant role, because the structure of the ILO provided a useful tripartite platform to build consensus and cooperation among the actors. SSTC also promoted cooperation between trade unions and universities.
Ms Solène Morvant-Roux, University of Geneva, referred to research undertaken in Mexico showing the limits faced by microfinance and the emergence of the concept of universal financial inclusion. In Mexico financial exclusion affected 40 per cent of the population at national level and 80% at rural level.
Mr Pascal Glémain, University of Rennes 2, referred to an evaluation of the Ile-de-France département by France Active Support as a basis for understanding the strategic model and measure the socio-economic performance of SSF organizations at local level in small firms and local enterprises in Romania, Benin and France.
Mr Brett Scott, University of Arts London, promoted the Bitcoin initiative, which was an online peer-to-peer payment system where users could conduct transactions direct without an intermediary. The system worked without a central repository or single administrator, which had led the US Treasury to categorize it as a decentralized virtual currency. This model could be used to develop cooperation in the South–South context.
Professor Johnston Birchall of the University of Sterling in turn focused on the promotion and regulation of financial cooperatives. The financial and economic crisis had had negative impacts on most enterprises. However, cooperative enterprises around the world were showing resilience to the crisis. Financial cooperatives remained financially sound; consumer cooperatives were reporting increased turnover; worker cooperatives were seeing growth as people chose the cooperative form of enterprise to respond to new economic realities. Five types of countries could be defined in terms of their types of financial cooperatives: countries with a stable and developed financial cooperative system (Europe); countries with a less developed financial system; countries with a rapidly growing sector adequate for the development of a financial cooperatives system (Tanzania); countries where financial cooperatives existed but were controlled by the government; and countries with no financial cooperative systems.
ConclusionsResearch into the social impact of financial systems was of utmost relevance at a time of intense debate on financing for development and the post-2015 sustainable development agenda. Ms Anita Amorim, Head, ILO Emerging and Special Partnerships Unit, stated that, from a research perspective, many points of divergence and convergence had been advanced. But it was still necessary to define a full conceptual framework for SSF. Information was still needed on the economic and financial conditions in which SSF developed and on the links between SSE, SSF and traditional financing. Moreover, SSF was probably not alone a sufficient financing source for SSE organizations; a common language and common values were crucial to SSE development.
As regards policy aspects, successful experiences in Southern countries had revealed the transformative potential of SSF. ASEC, ASEAN, and Bolsa Verde were but a few examples of the programmes undertaken in India, Brazil, Southern Asia and other southern countries. However, SSF visibility should be improved not only among national and international policy makers, but also within the UN system through FFD and the post-2015 agenda.
The findings of the workshop were valuable not only for policy makers, civil society, the research community and practitioners of SSF, but also for employers’ and workers’ organizations. Inclusion, social justice, language, gender, poor-to-poor cooperation, networks and the post-2015 sustainable development goals were crucial to the development of SSF. The workshop had been designed to have a direct impact on the UN sphere through the United Nations Task Force on Social and Solidarity Economy. The findings would feed into a position paper by the Task Force, to be disseminated to stakeholders at the Third International Conference on Financing for Development (Addis Ababa, July 2015).