This is a CTP of initiative: FEBEA/Merkur Cooperative Bank (Denmark)
This critical turning point refers to the partnership between Merkur Cooperative bank and the Danish Gaia Trust signed in 1993. As a result of the agreement between both entities, Merkur receives a 4 m DKK capital injection from this foundation in order to strengthen its banking activity, which will also increase Merkur´s finance businesses opportunities. Through this agreement, Gaia Trust became a new shareholder of the bank, which invested approximately 4 million kr. in share capital as the interviewee explains:
That was in 92 or 93. We had been an existence for about 10 years and at that time we got in contact with the foundation of an investment company that was funded by a person which had a strong interest in sustainable development. He got interested in our banking project and saw that if he injected additional capital it was possible to grow, to speed up the growth and to create some free space where we could do more promotion at the bank, that we would increase the lending, etc. So this foundation invested at that time 4 million Kr that, today, is a small amount, but at that time in our accountancy it was a real increase of our capital base
This new partner investment facilitated that Merkur could open a new office in Copenhagen and expanded its activity thorough Danish territory, and enabled to engage with more sustainable companies and start-ups, i.a. organic farmers and processors. This also contributed to the good performance of the bank. Annual rates growth about 20% per year:
It worked well since from that moment we started to grow 15-20 % per year and that kept on for the next more than 10 years. That was really a push to the development
This investment permitted Merkur to enhance their marketing strategy and thus gaining visibility in the community. The interviewee affirms that the bank experienced a change in its communication to the public “in more professional ways, producing some marketing material, brochures, etc.”.
Besides, this new investor pursued Merkur to support the development of sustainable businesses, green technologies (alternative energy systems) or ecological projects such as ecovillages:
We enhanced our lending so we got in contact also with more commercial oriented cooperatives that were operating in this field of sustainability; with organic food, or other things (…) we were able to take a broad different types of clients so, in that sense, we grow up in our scope.
The coproduction of this critical turning point was mainly facilitated by the agreement between both Merkur and the Gaia Trust which as a result enhanced the expansion of Merkur bank.
Established in 1982, Merkur Cooperative Bank was born as a funding association that turned into a cooperative bank in 1985. Although, in the first moment, Merkur Cooperative Bank had limited impact on the country, it was the first grassroots financial cooperative in Denmark with a clear sustainability focus and had gained the attention of press and part of the third economy sector.
The Gaia Trust, founded in 1987, is a Danish charitable cooperative society which aimed to promote green lifestyles. This trust was funded by a philanthropist who had a strong interest in sustainable development and showed interested in ethical banking. Merkur represented the best option for him to contribute to strengthening green business projects in Denmark, so he decided to make a 4 m DKK investment on the bank:
So this foundation invested at that time 4 million crowns that today is a small amount but at that time in our accountancy it was a substantial increase of our capital base
One of the conditions to Gaia become a new shareholder was to respect the internal rules of Merkur. Practitioners were confident about the good faith of the new shareholder. The new investor was a foundation who wanted to strengthen the work that Merkur has been doing until the moment.
Besides, the internal regulation of the bank settled on the principle of “one person, one vote”, so the foundation would have the same power than the rest of the shareholders. As the interviewee highlights, despite the important amount of money that this new partner contributed with, none change was needed to be adopted:
The only thing they asked us to do was to open up and to produce some marketing material, brochures etc. At that time, the interest was much higher than today so just to get 4 million capital into the bank immediately created income from interests. The foundation did not ask to have a sit on the board or any kind of control so it was very much based on trust
The members of the bank were strongly confident in the good functioning of their internal rules, that they did not feel concern or preoccupied by being compromising their principles and decision-making practices:
The whole point was that we found a trust, so no need to take any kind of control was in question. Of course we had talked with the cengral person behind the foundation before, because it was a very important step for us. And, of course, if we had been mentally weaker, there are ways of influencing organisations without having a formal vote, but we stack to our core and to our basic ideas and this man was interested in strengthening just that core and just those ideas
Finally, the interviewee briefly mentioned that this critical turning point is also related to favourable contextual circumstances. For instance, the great converting wave in organic agriculture, which gave the big breakthrough for organic food in Denmark, created a new business niche that needed financial support. This new business opportunity also contributed to the expansion of Merkur’s activity in green agriculture sector.
A number of events are related to this critical turning point. The first one refers to the constitution of the social initiative, which occurred in 1982 in the city of Hjørring, as a savings and loan association which served only associates’ loan needs.
Sooner, Merkur pioneers had the opportunity to transform the association into a real bank with competence to develop banking activity to the wide public. The mentioned organizational transformation happened in the year 1985, which directly relates to the harmonization of the European banking regulations. The new legislation assigned existing cooperative banks and savings and loan associations similar rights with other banks. Taking advance of this new regulation, Merkur is recognized as a Cooperative Bank in 1985.
Besides, one of the consequences of the critical turning point is the enlargement of Merkur in a number of divisions and employees in the period of 1993-1996. In 1993, Merkur opens a new branch in Copenhagen and, few years later, Merkur will open a new office in Aarhus (in 1999). Finally, in 2004, Merkur decided to move its headquarters from Aalborg to Copenhagen.
The enlargement of the cooperative bank also implies the increasing number of clients and entities which operate with Merkur. 2005 is another important milestone in Merkur timeline, thus the bank counts with 10,000 customers and collaborates with an important number of Danish NGOs in order to collaborate on various fields of common interest.
This critical turning point, which consisted in the agreement between Merkur and Gaia Trust had not any contestation inside the cooperative. Being asked about the reasons that can explain this consensus, the interviewee mentioned that, despite the big investment that this trust made in Merkur, the new partner “just became a member just like anybody else”.
Since the constitution of Merkur Cooperative bank, the initiative applied the common criteria for ethical and alternative banking such as transparency, egalitarian decision-making mechanisms, etc.
These internal norms contributed to trust-building and member´s confidence, which also minimizes internal contestation to the decisions adopted by the committee board. Besides, as it was explained above, adopting the democratic “one member one vote” criteria guarantees that all associates have the feeling that they still have some control and decision on the banking activity:
In the cooperative we have only one vote regardless of the number of shares any member owns. It's not possible to dominate the general meeting. That's part of being a cooperative bank. The cooperative organisation model fits well into our values but it was also the only legal form that was offered to us in 85. That was part of the legislation
Merkur leaders remark especially one idea that is very important for all of them: despite this investment and in spite of the changes and the evolution of the bank, remaining close to the core values seems to be essential in order to members continue engaged and motivated within the initiative.
The founders and leaders of Merkur were able to comprehend the significance of the investment that Gaia Trust wanted to do within the bank. From the beginning, this was perceived as a critical point, a great opportunity to gain the capital which would permit them to grow up, to expand the bank over the country.
For this reason, this opportunity is considered a critical turning point by most of the associates and is included as a milestone in the timeline of Merkur. When the bank celebrated its 25 years of existence, a special publication was released which included articles signed by relevant members who highlighted the investment of Gaia Trust as critical event in the history of Merkur.
Merkur leaders pointed out that the investment came to Merkur when the bank had 10 years of existence and had gained extend experience in baking activity. The initiative had the ambition of increasing their capacity of impact and the new investment enhanced the opportunity to take a large step in the same direction the bank had planned.
Besides, the Gaia Trust put them in contact with new entities and new possible customers, from the third economy sector, green companies or organizations that were working on the ground developing sustainable projects. These potentialities were foreseen by Merkur leaders regarding the forthcoming meaningful contribution of Gaia when Merkur accepted the investment of this new shareholder.
Lessons drawn by the interviewee focused not just on the punctual event that constitutes the critical turning point but from the opportunities for learning that the CTP facilitated.
The first lesson mentioned is related to the improvement in the communication and marketing strategy that Merkur had. This involves a professionalization of their marketing activities, and new publications were edited from this moment (flyers, brochures, etc.). The bank expanded its external communication that up till then was more based on face to face relations between customers and the few employees that worked for the bank in these days.
Second, Gaia trust brought a new perspective to banking activity, more oriented to the ecological development and green technologies. Merkur was able to approach to different types of clients, increasing its scope and being more sensitive to green businesses ventures which face hard difficulties to obtain financial investment.
Also we enhance our lending so we got in contact also with more commercial oriented cooperatives og companies that were operating in this field of sustainability, with organic food, or other things. Also the size of loans could grow, that was also a part of it but that was more limited I would say, because if we really wanted to give more loans, we should have much more capital, but it was enough to kick-start a new development
Thus, Merkur bank became a kind of laboratory where practitioners rehearsed on how to conduct banking business. Some reflections were made also regarding the need of assessment of the impact that banking activity has on the ground.
In this term, the interviewee acknowledges that the principal way of measuring such impact usually is “ by storytelling” although more effort should be done in this area:
We are not able to have all kinds of impacts measured. We are part of Global Alliance impact metrics project which is still on a very general level. We don't count workplaces created by our clients or whatever, we don't have resources for that
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