This is a CTP of initiative: FEBEA/Credal (Belgium)
This CTP relates to interest rate cuts in the lending business by the European Central Bank after the 2008 financial crisis. As a consequence of this new monetary policy, the primary source of benefit for Crédal was reduced. So the cooperative had to change its marketing strategy to recruit new clients and convince them to work with Crédal, rather than doing so with other commercial banks:
Well I think that another CTP is the lower rate for credits and deposits in the banking system. When we had high rates, 9%-10% interest rate on loans, Crédal offered credits at an around 5% rate instead of the around 9% rate offered by banks, and it was obvious to everybody in the social economy world that going for Crédal was better. But after 2008, due to monetary policies worldwide, especially in Europe, with low-interest rates, Crédal had to follow this trend on the rate of interests. Crédal had to emphasize the advantages it could offer as a credit institution with a social approach in order to lend money to social enterprises.
This CTP also enhanced a process of internal reflection on the mission and goals of the initiative in the mid-term and long-term. In the last decade, Crédal has diversified its activities becoming a group of institutions specialized not only in capturing savings and lending money, but in financial and social management counselling. Credit activity is still an important instrument within Crédal, useful for social transformation, but Crédal was also able to adapt its structure to the new societal needs.
What I would add is that in the long history of Crédal, more than 30 years is a long history, the activity has gone in several directions. It has been diversification of activities. Lending money is still an important activity or Crédal, but more and more, besides money, besides the lending, there are other activities: advice, support for Crédal’s lenders. That is especially so in this time of low credit activity, this is very important
As a consequence of this CTP, the cooperative has changed its strategy, focusing more on counselling activity and differentiating its activity from services provided by regular banks. Indeed, most of the services that the respondent highlights have no financial benefits for Crédal associated. Current counselling added to a credit is mainly for free and individual loans are costly for the cooperative. However, the positive social impact of these activities has been demonstrated and practitioners are committed to the social aims of the cooperative.
Crédal’s job is completely different nowadays, with these low interest rates. The activity has really changed a lot. The strategy is going on with lending and granting credits and besides this, advising more and more social organizations or providing credits for physical persons, unemployed people who wanted to start a small activity and who could receive a credit with the advice and support from Crédal, support from Crédal’s team of employees and also sometimes with mentoring services by external people, volunteers who agree to accompany the person starting this small activity with a credit by Crédal for 2 years
More and more the activity of Crédal is not only lending money but adding something more. That is something that makes the difference between Crédal and asking for a credit in a bank
In terms of co-production, the interviewee has pointed out the 2008 financial crisis and the following decisions adopted by the European Central Bank as the main circumstances and actors that made this CTP happen (as we explained above). Since 2008, the financial system has experienced a period of great turbulence as a result of the lasting crisis triggered by speculative finance, which had dramatic consequences in the real economy.
In the following years, Crédal experienced a steady increase in confidence from investors and shareholders. Despite the low loan rates caused by the policy of the European Central Bank, share capital at Crédal have grown significantly since 2008. The interviewee has noticed that, after the 2008 crisis, Belgian citizenship is more concerned about the banking activity and what ethical banking means:
Yes, that is one of the reasons why Crédal collects much more money year after year since 2008. The crisis was very important for that. Other reasons are the reducing gap between interest rates at large banks for deposits and the level of the dividend at Crédal
Other actors involved in the production of this CTP are both the managers and employees team of Crédal which, according to the interviewee, developed an extraordinary capacity to adapt to the new contextual circumstances, making the initiative more resilient in front of the effects of the economic crisis.
Yes. I think it is important, Crédal is doing quite well. I see their capacity for change. Sometimes I go to the office and meet them and I see that always they are working on improving, and thinking about what is necessary for social good, for changing a little bit, doing more and more activities. And they are also critical about themselves; self-critical
Third, the respondent highlights the commitment of more than a hundred volunteers involved in the different bodies, like the board of directors or the credit committees, or those who dedicate time to counselling and tutoring people who obtain a loan:
This counselling activity is free of charge. That is important. For some of these activities, you have volunteers besides from Crédal’s workers; this is so for some of them but not for all of them
The 2008 economic crisis made even more evident the need for credits that individuals, families and social enterprises had. In order to offer credit solutions for the economic crisis, Crédal grants professional microcredits for self-employed people who do not have access to banking facilities and personal microcredit (addressed to low-income people to support needs as means of transport (cars, etc), training or health.
In order to be able to face the increasing social demand for credit -which commercial banks did not provide any more or not sufficiently- Crédal managed to obtain subventions from public authorities “In order to gain funds for counselling and support activity. To pay the salaries of employees”.
The cooperative created three associations “to differentiate between financing activities, support and advisory activities”. Each association constitutes a relevant event in Crédal’s history:
After 2008, Crédal has also improved its communication strategy in order to disseminate its activity and reach new clients: “With the growth of Crédal, the function that Julie does was created. Since 5 years ago or more, we have a full-time employee dedicated to communication. Before that, this was done by someone who had
With the growth of Crédal, the function that Julie does was created. Since 5 years ago or more, we have a full-time employee dedicated to communication. Before that, this was done by someone who had another function
As a consequence of this change in Crédal’s activity and the need for attracting people to Crédal –despite the low-interest rates-, Crédal increases its public communications and improves the documents published or uploaded to the website. The annual reports are examples of that, which show clear information on the credit activity, but also the global strategy, the mission, outcomes and social impact.
This CTP did not generate any contestation among practitioners or shareholders, despite having involved an important change in Crédal’s traditional financial activity. Crédal was founded to support social-oriented associations. Nowadays, the profiles of those working with Crédal are more diverse. However, this change did not break internal consensus. The interviewee explains the reasons in the following:
On one side, a wider societal awareness among people saving their money brings more shareholders and funds for the action of Crédal. On the other side, the needs for credits is going on, for natural persons as well as for organisations or enterprises in the scope of “social economy”. Crédal succeeds in making the link between these two trends.
In its original activity of credit to social enterprises, there is an efficient procedure for the decision. The Credit Committee examines all applications presented by the team (Employees of Crédal who have made an in-depth analysis and structuration of the application) . Before authorizing the credit, the Credit Committee think about the social impacts that the project or the activity to be funded will have. The investment has to have social added value. That’s very important to maintain the orientation of the cooperative
According to the respondent, in spite of changes, the core values and social value criteria prevail over others. Practitioners are happy with the new investments. The social impact of credit activity seems to be clear for everybody:
I was a member of the credit committee during 4 years, 20 years ago. These social added value criteria are very important. Because Crédal has assets to give credits, but its capacity is limited, and choices need to be made, social better to give credit to enterprises. And besides the economic aspects, the capacity for reimbursement; the social added value criteria comes
He remarks that the Crédal credit committee has been operating since its very beginning; applying criteria and principles which remain close to the initiative’s core values:
I think the committee remains close to the core values settled in the very beginning, but it has been technically improved over a long time. It is more professional, it has improved a lot, actually
This CTP relates to the decision of the European Central Bank on reducing the interest rates, which was difficult to anticipate. However, according to the interviewee, the different managers of Crédal, as well as the workers, did anticipate that Crédal’s mission could not be restricted to credit activity. The cooperative started to prepare itself for this change some years before, when Crédal created three different non-profit associations for getting funds to cover new activities, such as the counselling and tutoring of credit borrowers.
Crédal had to create several non-profit associations; I think 10 years ago more or less. The reason was to obtain money from public authorities to pay people for giving support to those people asking for credits. These associations are not giving the credit- which is Crédal’s cooperative company work- they give support besides of the credit given by the cooperative. In Belgium the associations could receive grants, subsidies from public institutions, and cooperatives cannot in principle because cooperatives are for-profit organizations.
In terms of learning, the respondent reflects on the experience of Crédal in the last years and the creativity that managers developed to deal with external barriers, anticipating to new demands or imagining new products and services to improve their performance.
I was always amazed, surprised about how clever these people had been, working in various directions.
He reflects on the personal characteristics of some people that leaded Crédal over time. Although pioneers and first managers had no backgrounds in economics or finances, they managed to start a financing cooperative and to deal with barriers being creative.
The first Manager of Crédal, Michel de Wasseige, he had not any banking experience at all! He had experience mainly in social activities, but he was extremely practical and creative (and still is now in other projects for a more human economy). ! And I have known the other managers of Crédal, the next one, Michel Genet, stayed and worked for Crédal during 8 years, and later we worked for Greenpeace. The same, new ideas! Extraordinary. And it’s going on with the current General Manager, Bernard Horenbeek, who also was recruited for his personality, his involvement and wide experience (but not in the financial field). It was and is really a pleasure to me meet these people.
The interviewee observes that, after 33 years of history, the leadership skills of Crédal’s leaders really matters: “the leader’s profile was very important for the evolution of Crédal”.
They were “exactly the right persons at the right place due to their leadership characteristics”. Such leadership skills involve "being strong but not restricting people’s willingness”.
Crédal leaders have always been very persuasive people who encourage employees’ and volunteers’ proactivity and commitment. Crédal leaders succeeded in maintaining people’s motivation, which explains the increasing number of volunteers (currently around 120 people) that participate in the decision-making processes (Board of Directors, Credit Committees, etc.), or that are involved in counselling activity.
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