It all started with the financial crisis. “We started thinking things over in 2009 when it became clear that there would be no effective answer to the crisis. We thought: ‘Let’s try it ourselves,’ ” recalls Marc Bontemps, co-founder of New B, a new co-operative bank in Belgium. “After a few months we had 40,000 members.” Today, New B has almost 49,000 citizen members, as well as more than 130 NGOs and other civic organisations, and more than € 2 million in subscriptions. It is about to launch its very first banking product for customers: a sustainable payment card.

Ethical, socially-minded and ecological finance is experiencing something of a boom since the 2008 financial crisis, well beyond Belgium. In Croatia, a country of four million that joined the European Union three years ago, a new cooperative and ethical bank is about to see the light of day. “Our goal is to create a bank that remains in the hands of Croatian citizens, and to ensure the inclusion of the population in banking governance”, says Magdalena Jelić, spokesperson for eBanka. Founded in 2014, the Croatian cooperative for ethical finance claims it had gathered more than 70 million Croatian kunas (€ 9 million). It just sent its first official approval request to the Croatian National Bank.

Ethical banks throughout Europe

A thousand kilometres away, in Germany, ecological and social cooperative bank GLS, founded in 1970, has 40,000 members, 200,000 customers, and takes on 2000 new customers every month. In 2014, it awarded € 1.9 billion in loans, including € 600 million for renewable energy projects. There are similar ethical banks all over Europe: Banca Etica (Italy), Triodos (Netherlands), Merkur (Denmark), Ekobanken (Sweden) to name just a few. They are represented at European leval by the European Federation of Ethical and Alternative Banks, Febea.

In France, Crédit coopératif, the main funder of the “social and solidarity economy” sector, has more than 320,000 customers and 44,500 members. Nef, a financial cooperative launched in 1988, has nearly 36,000 members and is getting ever closer to its goal of becoming a full-service bank [1]. For a long time, customers of this small financial institution could only hold fixed-term investments of more than two years. For current accounts and savings accounts, Nef has a partnership with Crédit coopératif. Since April 2015, it is authorised to open savings accounts and sight deposit accounts for professional customers. “Our next objective is to offer current accounts for individuals by 2018,” says Nicolas Morand, a Nef counsellor.

Democratic, socially-minded banks focussed on transparency and the public interest

There’s nothing new about the idea of a cooperative bank. It dates back to the nineteenth century. From a legal perspective, the “cooperative” status simply means that the bank is owned by its members – citizens, associations or companies – who have acquired shares. And that decisions are made on the basis of a “one member, one vote” principle, regardless of the number of shares owned. A formally cooperative bank is not, in itself, necessarily ethical.

The example of the historical cooperative banks in France is a case in point. Three of the five largest banking groups in the country – Crédit Agricole, Banques Populaires-Caisses d’Épargne (BPCE) and Crédit Mutuel – are legally cooperatives. This does not prevent them from developing speculative activities through their investment subsidiaries, or from financing dirty energy or nuclear weapons [2]. Nor does it stop them from selling toxic financial products or engaging in questionable practices [3]. What makes our new cooperative banks different from their not-so-nice big brothers?

Financing organic farming or ecological housing

The key difference is that these new banks are explicitly committed to developing a financial sector that is socially-minded, promotes the public interest, is transparent and, in most cases, environmentally friendly. Nef, which stands for “new fraternal economy”, is committed to “promoting the conscious involvement of individuals so that money contributes to social development, placing people at the heart of an economy that is more united and more fraternal” [4]. The bank, headquartered in Vaulx-en-Velin, near Lyon, has also developed a “Charter of values”, which states that Nef funds invested in loans are to be used for projects “that contribute to sustainable economic development, in a spirit of solidarity, in the cultural, ecological and social sectors”. It also specifies that Nef’s resources should come only from the savings and capital of its members, without resorting to financial markets. Crédit coopératif, for its part, is dedicated to financing the “social and solidarity economy” sector.

It would be inconceivable for Nef or Crédit coopératif to participate directly in the financing of coal mining projects or to speculate on commodity prices. In 2014, Nef allocated €1.6 million in loans for organic and biodynamic farming, and €620,000 for ecological housing. The “ecological” component of Nef loans amounts to two thirds of the €21.2 million loans issued last year. Remaining loans are divided between “social ventures” (e.g. nurseries, insertion companies, etc.) and “cultural ventures” (Montessori schools, libraries, etc.). Everything is transparent, as Nef makes all information on its loans public. In 2014, Nef also loaned €37,800 for a beef and cheese exploitation in Dordogne, €50,000 for the creation of an artisanal and organic microbrewery in Côtes d’Armor, and €12,600 to the local cooperative Énergie partagée in Alsace for a photovoltaic installation [5].

Financial innovation and transaction tax

Apart from their loan policies, French ethical banks also develop distinctive financial products: Nef’s fixed-term accounts enable customers to donate interests to partner organisations (such as Friends of the earth or Amnesty International) or to renewable energy projects. Crédit coopératif’s “Agir” current accounts are dedicated to funding the “social and solidarity economy” sector. Nef’s fixed-term account and Crédit coopératif’s savings account have been awarded the “Finance solidaire” label by Finansol, an organisation dedicated to promoting solidarity in financial institutions.

Ethical finance is also the source of genuine banking innovations. In 2011, Crédit coopératif decided to implement an in-house “Tobin tax”: a “voluntary contribution on foreign exchange transactions”. It is a contribution of 0.01% on all foreign exchange transactions, which is donated to international development organisations. Over three years, it has yielded about €230,000. This money has been used for renewable energy, zero-impact housing and energy conservation projects in India, Morocco and Mali – “the only genuine financial innovation of recent years,” according to Nadine Richez-Battesti, a specialist in ethical and cooperative economics who teaches at Aix-Marseille University.

Itinerant bankers

Nef also introduced a more practical type of innovation in 2009: the itinerant banker. “The goal is to ensure that a small organisation like Nef can be somehow present all over France, maintain an active membership and keep on developing,” says Béatrice Chauvin, Nef’s first itinerant banker and author of a PhD thesis on the subject. She pioneered this initiative, which is modelled on Banca Etica’s itinerant bankers in Italy. There are currently six itinerant bankers at Nef, located all over France (Caen, Lille, Forcalquier, Marseille, Bordeaux and Strasbourg).

“Itinerant bankers act as local facilitators. They make it possible to be directly involved with members. In my region, for example, I have open office hours and discussions in a cooperative cafe financed by Nef,” Béatrice Chauvin says. “Itinerant bankers travel around their region identifying business opportunities. But we are not like traditional sales representatives. We set up groups of volunteer members and can ask them if they are aware of a particular project in their area.”

Members involved in running the bank

There are now about thirty of these volunteer members’ groups within Nef, with several more being built up. “Our mission is to meet project leaders and pass the information on to the Nef team,” explains Annick Proix, a Nef member since 2003. He is part of one of these groups, created a few months ago in the Alpes-de-Haute-Provence area. “There are 280 members in this area. Everyone may not be aware of what is happening on the ground. We want to show our members how their money is being used.” Local groups also play a role in Nef’s internal democracy. “We discuss resolutions and undertake the necessary training in preparation for the general assembly,” says Annick Proix. Debates are held with members discussing various issues. A recent debate considered whether the short-term savings account soon to be launched should be available to everyone or only to members. Local groups also discuss the businesses that are have loans, and their members serve on regional credit committees.

At Crédit coopératif, only members who are legal persons – in other words associations and businesses of the “social and solidarity economy” sector – can vote at the general assembly. “The rule is meant to safeguard the bank’s core model,” says Imad Thabet, head of cooperative life at Crédit coopératif. “For years, we financed exclusively the social and solidarity economy sector. And it still represents three quarters of our activity. Of course, individuals are still welcome at general assemblies, and we have also created a director position for individual members.”

Can a bank remain ethical when backed by a major financial group?

In 2002, Crédit coopératif entered a formal agreement to benefit from the institutional and financial backing of the BPCE group – a move that raised many eyebrows within both institutions. Nef is also directly involved in the agreement, since it has a partnership with Crédit coopératif for the current and savings accounts it offers to individual customers. “There were heated discussions in both institutions,” recalls researcher Nadine Richez-Battesti. BPCE’s “backing” allows Crédit coopératif to refinance itself at the same rate as the larger banking group. “We are not a subsidiary of BPCE,” maintains Imad Thabet. “Quite the opposite. In a cooperative, it is shareholders that own local banks, which themselves own the national bank. This is the model of the popular banks.” Crédit coopératif owns 1% of BPCE’s capital.

Still, this agreement with BPCE raises questions for citizens who are looking, through Nef and Crédit coopératif, for an alternative that is totally independent from the current financial sector and its shady dealings. How is it possible to justify one’s status as the reference bank for the social and solidarity economy sector while benefiting from the institutional backing of a banking group whose investment branch, Natixis, was involved in the 2008 subprimes crisis? How can one be a pioneering bank financing organic farming and renewable energy, and at the same time be connected, even indirectly, to a group that has injected 11 billion euros into the fossil fuel sector since 2009 [6]? These are difficult questions, which Nef is seeking to resolve by becoming a full-service bank in the coming years, a move that would involve terminating its partnership with Crédit coopératif.

Concentration hinders alternative banks

One of the causes of these dilemmas is the concentration of the banking sector. Particularly in France, where the 1984 law on universal banking has enabled the development of exceedingly big banking groups. The five largest banks in France – BNP, Société Générale, Crédit Agricole, BPCE and Crédit Mutuel – control 85% of the market [7]. “We were the only medium-sized bank in the French banking landscape in the early 2000s. And as, like any other bank, we manage long-term loans but short-term deposits, we needed to refinance. However, the cost of refinancing depends on the bank’s size. Crédit coopératif had refinancing costs that were more than the credit rate it guaranteed its clients,” explains Imad Thabet. Backed by BCPE’s financial reserves, Crédit coopératif is considered a stronger player in the market, and gets lower rates. “We entered the BPCE group to enjoy the same refinancing rate. But it was on the basis of an agreement that preserves Crédit coopératif’s autonomy.”

Does this mean that in France there is no chance of developing alternative banks like GLS in Germany, which has all the features of a full-service bank while remaining completely independent? Or like the Dutch Triodos Group, funded in 1980 and present in five European countries, which funds the social and solidarity economy sector and offers sustainable investment solutions, without affiliation to a commercial banking group [8]? “European and international regulations are not adapted to cooperative banks, and make the emergence of new banking organisations very difficult,” argues Nadine Richez-Battesti. “For one, they do not recognize member shares as capital stock, even though cooperative membership, unlike shareholding, is very stable. Members almost never reclaim their shares.”

Nicolas Morand, of Nef makes a similar analysis: “These regulations don’t help us, even though our capital is very robust. The main risk in our activity is that we have to connect savers and borrowers in order to create businesses in sectors that we can’t necessarily guarantee will be successful, especially in the beginning – this was the case of organic farming in Nef’s early days, or collective housing today.”

Is the development of ethical banks under threat? “The main danger is that regulations could drive a process of standardization,” fears Béatrice Chauvin. But she also keeps an eye on innovations such the system invented by the Scandinavian Jak banks system: “People earn points when they save, and these points allow them to get an interest-free loan, only paying for the operating costs. And people who have savings but don’t need loans can transfer their points to others.” Could these experiments inspire the creation of new alternative banks? “I think that in any case the solution lies in creating a sense of proximity. Keeping the connection to what’s happening on the ground.” Ready to switch bank?

Rachel Knaebel

— 
Photo : Tax Credits CC