Constitution of Credal Credit Cooperative

Date interview: December 8 2016
Name interviewer: Isabel Lema Blanco (Interview and analysis)
Name interviewee: Anonymous
Position interviewee: Member of Crédal, employee.

Values Lobbying Emergence Competence development Civil Society organizations Business models

This is a CTP of initiative: FEBEA/Credal (Belgium)

The critical turning point describes the foundation –in 1984- of the first Belgium credit cooperative “Crédal” with the aim of creating a financial alternative, in the French-speaking part of Belgium, which supports solidarity projects through credit and counselling. As the initiative explains in a recent historical review:

“In 1984, citizens discovered that their savings were invested by banks in South Africa and supported Apartheid. They founded Crédal, an alternative credit cooperative for social purposes. Very soon, the first projects are financed. Solidarity finance in Belgium is born!”[1].

 The pioneering vision of Crédal is highlighted by its members. There was no one similar credit cooperative in Belgium at that moment so as promoters took the chance of making true the idea of ethical banking:

We were the first, clearly, already in 1984. The pioneers, the people who have launched the cooperative are those who have truly made this idea to come true and have all been volunteers

Crédal was created to support social projects that do not have access to bank credit, functioning mainly in the Wallonia region and in the city of Brussels. Pioneers aimed to offer solidarity- based investments by supporting initiatives concerning the baking excluded people (Belgians or foreigners). Besides, Crédal offered to social entities and individuals “a form of alternative saving whose output is not initially financial, but social and human”.

The interviewee explains that, despite its financing mission, Crédal is a grassroots cooperative with substantial differences when comparing with traditional banks. As an example, Crédal proposes a new way of relating in the financial system,  building a trusting relationship between the cooperative and the customers based on transparency[2]. The following quotation illustrates this differential feature:

We are very different; we do not face the same pressure banks do, especially as regards the profitability of our activity. For example, if we were a bank we could not give micro credits, such as small loans of less than € 25,000, since it is not an activity that is profitable. So it costs us money to do this (...) We collect money, we have a fund, and with this money we make credits, these are the banks' own activities, but we do not share the same logic

During its 32 years of existence, the cooperative progressively developed its financial activity across the territory. Crédal was founded in the city of Brussels but it spread along the country opening branch offices in Louvain-la-Neuve (current headquarters), Monceau-Sur-Sambre, Liège and Namur. With 2050 co-operators and almost 2.000 clients - individuals, professionals, associations, social economy enterprises and citizen movements- Crédal has proved that "solidarity-based and committed finance is possible over time and can be presided over by transparency and ethics”.

We are in a much more participatory logic because people who lend their money to Credal, come to the general assembly and must validate the decisions that are made. There is a process that is much more participatory and democratic than within any other banking structure that could be found. Also regarding loans, as we are not a bank, and although the model of Credal must be obviously financially viable, some of our activities may be unprofitable because others are, and then we take stock. So, the activities that make us earning money are compensated by the ones that make us loosing it

Co-production

The CTP is preceded by the awareness among the Belgian society of unethical activities performed by the mainstream banks. Concretely, pioneers of Crédal were people linked to the Anti-Apartheid movement. In the 80s, they launched a "bank-apartheid" action call on the main Belgian banks which directly or indirectly invested in South Africa and strengthened this regime. This action call provoked a public debate on the use of savings by banks. Anti-apartheid activists decided to start an alternative to the Belgium banking system by creating a value-based credit cooperative. Crédal’s former director explained this idea in the following quotation:

"At the time, left-wing Catholic movements demonstrating against apartheid were challenged by South Africans who drew their attention to the significant place that Belgian banks occupied in South Africa. These militant people then began to wonder about the use that the banks made of their money" (M. Genet, 2003¹⁾).

The interviewee stresses the community-based origin of Crédal, without the intervention of any public administration or a banking institution:

The citizens began the process. It came neither from the Belgian administration, nor from certain companies. They were from a group of citizens, who argued that they did not want to put their money into the banking system, knowing that that system financed the apartheid regime. And it is this group of citizens who went to their banks, telling them that they did not want their money to be earmarked for this ... and since it was not enough, if the banks did not move, they will create their own banking structure

The respondent also highlights the participation of two Belgium non-governmental organizations which strongly contributed to the creation of Crédal: Justice de Paix and “Vivre Ensemble.

In the early 80’s some people that were involved in the association networks, became aware of the power of money. This was a movement that was so prevalent in the Belgian territory, and which has been very active. There are many occasions where these movements are limited to inform the population and this not always ends up materializing in something real. But in this case, they have gone to the end and have really created an alternative. So, at the level of the people who have been involved in this, there are two associations that are among the core founders: "Action vivre ensemble", and "Justice et paix", together with citizens.

Being asked about contextual conditions that could facilitate the emergence of the social initiative, the respondent mentions that this CTP happens in the decade of 80s, which characterized by a higher social commitment to support social causes, such as the Anti-Apartheid movement, the environmental movement or the Fair Trade movement. Public awareness and social mobilization against injustices directly facilitate the constitution and enlargement of Crédal:

Citizens were committed at personal level. It was an environment conducive to the creation of the bank since there was a lot of consciousness, knowing that money did not stop in their bank accounts. At that time, there was an awaking of awareness, and also as the anti-apartheid movement was very active, since it is from that moment on, when they saw the banks directly supported the apartheid movement, a turning point occurred the creation of Credal could happen

Related events

Several related events have been mentioned by the respondent. Crédal was established in 1984 aiming to promote a fairer and supportive society. During its first years, the initiative put emphasis on the financing social projects. Crédal´s first loan activity was to finance non-profit organisations and cooperatives through various traditional credit mechanisms at low interest rates. Crédal’s members chose to support enterprises with social purposes, fighting social exclusion and thus to develop the third sector. The cooperative remarks as a critical event the grant of the first credit, which happens in 1985. The fist loan was given to a foster home project for people in difficulty. Promoters wanted to start an organic and artisan bakery to help people to be reinserted by work but mainstream banks were reluctant. Crédal granted them a Solidarity credit [1].

A second related event occurs in 1988, when the cooperative hired its first employee. Crédal is a volunteering-based initiative grounded on commitments and responsibility of their associates. The work was 100% developed by volunteers in the beginning and, after four years of existence, Crédal could pay one person to work in the headquarters’ office. According to the interviewee, this event represents a step forward in the professionalization of the bank:

 

Going back to the origins, there is a moment that is also important to highlight, that three years later, in 1988, so 4 years later, is when we had the first employee of Crédal, the first person who was paid and employed on a part-time basis and while things were already working before, this if you want is the beginning of the professionalization of the activity, and things have changed since the arrival of that first employee. He was the first and we are 48 currently

 

At that time, the structure will suffer important progress in terms of loans. In 89, we became a consulting agency, so we can advise companies, we acquire a status in Belgium that accelerates from the moment when the first worker was hired… “It is a very important because it means that there is a kind of structure, we have the ability to hire staff, even a part-time person. In some way, it gives us a more professional image

In the following years, the bank will enlarge its structure in order to attend the increasing loan activity. In the nineties, inspired on Mohamed Yunus’s Grameen Bank, Crédal launched the professional microcredit activity in Belgium. Such activity is oriented to fund social valued activities and people excluded from banking activity or experiencing trouble to access bank credits. Since 2000, Crédal granted microcredit for self-employment entrepreneurship (who cannot obtain suitable financing from traditional banks) as well as providing advice to professionals who want to start their own business. Later, the bank decided to start a new line of socially-oriented microcredit targeting individuals with very limited resources.

Actually, while making credit for the associations it arose that certain people did not need credits but advice. Well, then, we'll start giving them advice. And on the other hand, while giving credits for the associations, we have thought that, there were not only associations, there were also people and we considered making credits for people as well

Contestation

No contestation existed regarding this critical turning point. Going further, the responded reflects on the lack of internal crisis which the cooperative had to deal with along its 30 years of history. In the case of Crédal, the turning points are commonly product of new opportunities rather than negative situations:

We have never held any big discussion, this is my opinion anyway, and there wasn’t any big crisis. There were many changes in activities, in supplementary things, but this is already done, these changes have not come about through crisis, it was rather a question of opportunity, of evidence. You see things happened not because of the crisis, but rather because of the reality on the ground, changes have been made on the basis of the reality we have observed on the ground

Anticipation

In terms of anticipation, as the CTP is related to the emergence of the credit cooperative, most of the people involved in the initiative consider this event as a turning point in the history of Crédal by also for Belgium financial system. Then, Crédal was the pioneering social finance institution in Belgium. The cooperative was also the first organization to launch micro-credit in Belgium. The interviewee affirms that 30 years ago, pioneers had not imagined or anticipated the current success of Crédal:

Not at all. There are still many pioneers who are active in Crédal, we have already had talks in this regard. In fact when they launched the project, they were very afraid. They were very much afraid to stand up, in short, to fail. For example, when they made the first analysis on the application for credit, they were really very restless, because they knew that the funds came from the people who had entrusted their money to them, and they were very nervous, in fact, they were afraid

Learning

As the CTP coincides with the starting point of Crédal, the main lessons that pioneers and the members of the cooperative draw from the experience of running a bank. Despite difficulties and barriers, they acquired competence and abilities to carry out the responsibility to start a credit cooperative from the ground, being pioneers in socially-oriented banking in Belgium.

They have learned how to manage a bank, since no one knew how to do it, they have explored, they have been helped, at the status level they have acquired the cooperative status, and it was not something that was familiar to them. So they have also been legally assessed, and I believe that there were also phases during the Crédal's creation where, at times, they had doubts. So there were times that went well and more difficult ones. This did not happen overnight, knowing that the basis was volunteers and paying a person to develop that work was the right thing to do, because they believed in the project, and they had looked for different skills

Considering the background of most of the pioneers, we also observe a lack of banking experience in most of them. Such situation is perceived as a positive feature by the interviewee, who remarks that volunteers felt free to build the bank per their values and goals. Besides, they were able to overcome the lack of financial knowledge asking for professional advice at the same time they found the resources to start:

Yes, in fact, I think they were a bit immature. They had no preconceived ideas, they were a bit limited, but they could also be creative, to have a status, to develop a procedure and projects to sustain. They had few barriers, and although they were very prudent, this is clear, they also had an open field in front of them, everything was possible but they had an open field in front of them, everything was possible. Although they certainly did not have many financial competencies, even so, they have been helped by people who were competent, so they have found the resources for the model to be sustained.

Third, the respondent emphasizes the prudence and caution with which operated the first leaders of the initiative. The lack of experience was compensated with the extraordinary responsibility that pioneers felt in these days in order not to fail in their duties and make Crédal a reliable institution:

They have been very prudent; they have done things very carefully, taking a maximum guarantee to try not to risk the money that had been entrusted to them. Moreover, in the beginning, in 1984, only legal entities, including institutions, associations, etc., could request a credit from Crédal. So individuals could not request loans, since they were really afraid that afterwards they could not reimburse them. However, these fears, being totally legitimate, in the end were proven not realistic since they had taken enough precautions for everything to work properly. They were mostly fearful, worried about all that money

Finally, the interviewee highlights that, 30 years later, and counting on almost 40 employees, volunteering engagement is still essential for the good performance of the cooperative. Volunteers have been trained in loan activity and they also are involved in executive bodies, such as the Board of Directors or several credit committees.

The involvement of volunteers is still very strong today. There are more than 100 volunteers who work, who devote their time to Crédal. These volunteers are on the board of directors or on the credit committees (...). This committee is composed solely of volunteers, who have both social and financial training