CREDIT COOPERATIVES

A credit cooperative, or credit union, is a cooperative company whose purpose is to serve the financial needs of members and third parties through the exercise of the activities of a financial institutions, with an unlimited number of members whose liability for company debts is equivalent to the value of their contributions.

In Spain, these cooperatives are subdivided into rural, professional and labour cooperatives, or cajas, depending on their origins and the purpose of their incorporation to cater to the needs of specific groups.

They are regulated by Law 13/1989, of 26 May, on Credit Cooperatives. 

ETHICAL FINANCE

There are two types of ethical financial institutions:

• Ethical banks: Ethical banks are financial institutions that operate as financial intermediaries, offering services like savings accounts and loans. Their activity is intended for the public, social and solidarity-based enterprises, and social impact companies, ensuring their transactions adhere to the principles of sustainability and social responsibility.

• Ethical non-bank financial institutions: Ethical non-bank financial institutions are organisations that do not have a full banking license but provide financial services to members, third parties, social and solidarity-based enterprises and persons at risk of financial exclusion. They use their own resources and contributions from members and partner organisations, ensuring that the capital managed is invested in projects with a positive impact on society.

The differences between cooperative banking, ethical banking and traditional banking like in the focus, ownership and objectives. While conventional banking prioritises profitability and the interests of shareholders, cooperative and ethical models are focused on community and well-being.

Structure and decision-making:

• In cooperative banking, customers are also owners and participate actively in decision making through a democratic system.
• In ethical banking, although the financial institution may adopt different legal structures, they are generally governed on a participative basis that ensures they are aligned with social and environmental values.
• In traditional banking, decisions are taken by management in the interests of the shareholders, seeking to maximise profits.

Focus and objectives:

• Cooperative banks reinvest profits in the community or in improving services for members.
• Ethical banks apply exclusion criteria to sectors like the arms industry, prioritising investments in sustainability, cooperation and social development.
• Traditional banking, on the other hand, has a more global outlook geared towards maximising profits, with no particular link to community development.

Client relationships and financial inclusion:

• Cooperative and ethical banking approaches foster closer relationships with customers and seek to ensure financial inclusion, extending services to rural area and groups with lower access to the banking system.
• Traditional banking usually prioritises operating efficiency over personalised services.

Risk management and stability:

• Cooperative banks, despite allocating a greater percentage of investments to risk assets like home loans and company loans, are usually more stable in times of crisis thanks to their long-term focus and knowledge of their customer base.
• Ethical banking, for its part, maintains prudent investment strategies in sectors with a positive social impact, minimising exposure to speculation.
• Traditional banking, although efficient in terms of operations, can be more affected by volatility in the markets due their pursuit of high returns.

Relationship between cooperative and ethical finance:

Cooperative and ethical financial institutions share a vocation for service to the community and social economy, although their focus can differ in scope. While ethical financial institutions prioritise investments aligned with their founding mission and principles of sustainability, credit cooperatives offer a broader portfolio of financing, aimed at serving the entire community and different productive sectors.

The Alternative and Solidarity Financing Network (REFAS) is an organisation that represents different institutions committed to ethical and solidarity finance in Spain. Today, it is comprised of 17 financial institutions dedicated to promoting financial inclusion and development of a fairer, more sustainable economy.

Founded in 2015, the purpose is to coordinate the circuit of local alternative and solidarity financing, exploring both the possibilities and the limits of near-bank activity within the framework of ethical financing, fostering links and synergies with related initiatives.

REFAS brings together non-bank financial institutions active in financial intermediation on a small scale. All members share the principles of ethical financing and adopt the legal status of foundation or association.

The  National Union of Credit Cooperatives (UNACC) is the principal association of the credit cooperative sector in Spain. Founded in 1970, it currently represents 42 credit cooperatives

Its mission is to defend, promote and strengthen the credit cooperative model, and the values governing activity in the financial sector.

Its vision is to generate value from the essence and specific characteristics of the credit cooperative model, boosting its development and sustainability.

The European Federation of Ethical and Alternative Banks and Financiers (FEBEA), founded in 2001 in Brussels and present in 17 European countries, is an international non-profit organisation that brings together financial institutions committed to the development of ethical and social finance in Europe.

FEBEA's mission is to promote and consolidate financial models based on the principles of transparency, equity and social responsibility, ensuring that the economy is at the service of citizens. Its work is focused on promoting ethical and solidarity financing, supporting initiatives that prioritise a positive social and environmental impact.

It also promotes support for sustainable projects, channelling financing to initiatives that contribute to inclusive economic development, social cohesion and innovation in the social and environmental spheres, ensuring equitable and sustainable growth.

In the promotion and advocacy of ethical financing, the role of Ethical and Solidarity Financing - FETS stands out. This association, founded in 1999, aims to drive the development of ethical and solidarity financing, bringing together entities from the social and solidarity economy, and the areas of cooperative finance, social action, education and international solidarity

FETS also promotes and coordinates the Observatory, a meeting space where different entities linked to ethical finance and the social and solidarity economy participate. The aim of this space is to analyse the situation of the ethical financial system and its impact on the socio-economic reality of today.