Financing the Social and Solidarity Economy
In the current global context characterized by complex and pressing challenges, the Social and Solidarity Economy is receiving growing attention for its role and potential to re-balance economic and social objectives and foster sustainable development.
The Social and Solidarity Economy (SSE) is a concept designating organizations that produce goods, services and knowledge while pursuing both economic and social aims and fostering solidarity. These entities, known as SSE organizations, usually include cooperatives, mutual benefit societies, social enterprises, associations and foundations.
Because they do not seek profit maximization at the expense of social and environmental concerns, SSE organizations are often financially vulnerable. SSE organizations with a membership base generate funds from membership fees and shares. SSE organizations may also generate income by selling goods and services. While these are convenient financing streams, they are usually insufficient to build reserves and finance expansion. SSE organizations often have to rely on public subsidies and grants, which present challenges for their autonomy and may lead to suboptimal institutional performance.
Because of their double and sometimes triple bottom line -- achieving financial, social and environmental goals -- SSE organizations also often face challenges in raising capital from the conventional financial market. This departure from a pure profit seeking logic makes them less attractive to traditional investors seeking a maximum return. Their governance system in which often members have equal voting rights, their legal status and limited capacities to present bankable projects to financial institutions may also be additional hurdles to access financing.
In recent years, innovative financing mechanisms such as guarantees, impact investing, crowdfunding and complementary currencies, have emerged to address these challenges and enable SSE organizations to thrive. A recent study by the ILO’s Social Finance Programme and the ILO’s Cooperatives Unit (COOP) analysed the initiatives and financing mechanisms of 12 SSE organizations in nine countries. The findings highlight that, regardless of the countries (developed, emerging or developing) and the type of SSE organizations, the SSE and its innovative financing mechanisms presented some potential for creating and preserving decent jobs, creating wealth, reducing social inequalities and advancing local development.
Social Finance conducts research and documents the experience of SSE organizations and their financing mechanisms. Recent examples of publications include the above-mentioned study, “The contribution of social and solidarity economy and social finance to sustainable development and the Future of Work”, and the Working Paper “Social economy and social finance”. Social Finance, in collaboration with COOP, share the findings with the SSE movement, the financial sector, and other sustainable development actors through our regular communication channels (website and newsletters), presentations in international fora, and contributions to relevant training courses. In 2019, Social Finance and COOP organized the international conference SSE Momentum: Finance for Inclusion and the Future of Work, in collaboration with the research institutes EURICSE and HIVA.
Technical assistance
Social Finance provides technical advice on financing mechanisms for the SSE in the framework of development cooperation projects in several countries (such as South Africa and Tunisia) in collaboration with COOP, which is in charge of the SSE portfolio at ILO. In addition, Social Finance builds the capacities of SSE entities engaged in the financial sector. An example is its training programme ApexFinCoop, developed in collaboration with COOP, the Food and Agriculture Organization and the International Training Centre of the ILO. The training aims to empower apex organizations of financial cooperatives and support institutions to advance the scale and effectiveness of financial cooperatives in particular countries or regions.
Pushing the frontier
In the context of innovative finance, Social Finance explores the potential of innovative finance mechanisms, such as social and development impact bonds, to achieve the 2030 Agenda for Sustainable Development and promote decent work. In some cases, social enterprises are engaged in those innovative mechanisms as service providers.
Because they do not seek profit maximization at the expense of social and environmental concerns, SSE organizations are often financially vulnerable. SSE organizations with a membership base generate funds from membership fees and shares. SSE organizations may also generate income by selling goods and services. While these are convenient financing streams, they are usually insufficient to build reserves and finance expansion. SSE organizations often have to rely on public subsidies and grants, which present challenges for their autonomy and may lead to suboptimal institutional performance.
Because of their double and sometimes triple bottom line -- achieving financial, social and environmental goals -- SSE organizations also often face challenges in raising capital from the conventional financial market. This departure from a pure profit seeking logic makes them less attractive to traditional investors seeking a maximum return. Their governance system in which often members have equal voting rights, their legal status and limited capacities to present bankable projects to financial institutions may also be additional hurdles to access financing.
In recent years, innovative financing mechanisms such as guarantees, impact investing, crowdfunding and complementary currencies, have emerged to address these challenges and enable SSE organizations to thrive. A recent study by the ILO’s Social Finance Programme and the ILO’s Cooperatives Unit (COOP) analysed the initiatives and financing mechanisms of 12 SSE organizations in nine countries. The findings highlight that, regardless of the countries (developed, emerging or developing) and the type of SSE organizations, the SSE and its innovative financing mechanisms presented some potential for creating and preserving decent jobs, creating wealth, reducing social inequalities and advancing local development.
Social Finance work on the topic
Research, knowledge generation and disseminationSocial Finance conducts research and documents the experience of SSE organizations and their financing mechanisms. Recent examples of publications include the above-mentioned study, “The contribution of social and solidarity economy and social finance to sustainable development and the Future of Work”, and the Working Paper “Social economy and social finance”. Social Finance, in collaboration with COOP, share the findings with the SSE movement, the financial sector, and other sustainable development actors through our regular communication channels (website and newsletters), presentations in international fora, and contributions to relevant training courses. In 2019, Social Finance and COOP organized the international conference SSE Momentum: Finance for Inclusion and the Future of Work, in collaboration with the research institutes EURICSE and HIVA.
Technical assistance
Social Finance provides technical advice on financing mechanisms for the SSE in the framework of development cooperation projects in several countries (such as South Africa and Tunisia) in collaboration with COOP, which is in charge of the SSE portfolio at ILO. In addition, Social Finance builds the capacities of SSE entities engaged in the financial sector. An example is its training programme ApexFinCoop, developed in collaboration with COOP, the Food and Agriculture Organization and the International Training Centre of the ILO. The training aims to empower apex organizations of financial cooperatives and support institutions to advance the scale and effectiveness of financial cooperatives in particular countries or regions.
Pushing the frontier
In the context of innovative finance, Social Finance explores the potential of innovative finance mechanisms, such as social and development impact bonds, to achieve the 2030 Agenda for Sustainable Development and promote decent work. In some cases, social enterprises are engaged in those innovative mechanisms as service providers.