This is a CTP of initiative: FEBEA/Credal (Belgium)
This critical turning point describes the strategic alliance between the Belgium Credit Cooperative Crédal and the Foundation Dexia, which occurred in 2006 and will finish in the end of 2016. The agreement with -and support from -the Dexia Foundation has supposed to Crédal the reinforcement of its microcredit activity. Partnership involved positive outcomes for the initiative, not only for the increasing lending activity but also because of potential synergies between both entities and enriching sharing know-how.
However, this critical turning point was preceded by tense internal discussions among Crédal’s shareholders. Despite the cooperative has benefited from multiple supports, including financial support, since its inception, the potential alliance with Dexia Foundation was perceived with reluctance from part of the members and shareholders. Dexia used to be a leading European financial institution which concentrates its activity in public sector banking. Its financial activity was not much consistent with Crédal’s principles and values. For this reason, some associates showed their concern about the risk of compromising Crédal’s independence, which represents one of the few examples of strong disagreement and internal contestation within the history of Crédal.
The social initiative has pointed out in several documents that the support of public and private partners is essential to conduct its financial activity – in special microcredit loaning for entrepreneurs and individuals- “while maintaining its ethical and interdependent dimension”. Dexia Foundation, for ten years, has provided financial support as well as “it has contributed with its competence and unfailing involvement in Credal’s credit committees and the Board of Directors of Crédal Plus ASBL” (Crédal, 2014).
At the level of the credit activity of Crédal, part of the lending operations is sustained by the profits of the cooperative, but the other part of social-oriented credit is supported by external funds that Crédal receives from public and private institutions. According to the interviewee, the alliance with Dexia was strategic for the short-term development of Crédal as explained in the following:
In fact, this partnership has really enabled us to develop all the microfinance activity. If we had not signed this agreement with Dexia Foundation, we would not have been able to reach to the level of activity we have nowadays. Dexia´s support really allowed us to work on microcredit and to be able to follow up the applicants, the people who asked us for these micro-credits
Due to the financial endorsement from Dexia Foundation, Crédal was able to provide financial guidance to all its clients and concede microloans to “non-bankable” persons, Belgian and not Belgian. Crédal’s microcredit efforts has been also supported by the government of Brussels–Capital Region and by “Fonds de Participation”. The cooperative describes microlending activity as “a real tool for social action”.
Two main actors have been involved in the co-production of this critical turning point. Crédal is a credit cooperative established in Brussels – and Walloon region- in the 80’s. The initiative was founded in 1984 by Anti-Apartheid social initiatives and individuals which united to fund a social-oriented financial institution in Belgium. The first activity of Crédal has been to collect savings and offers their shareholders and clients ethical and transparent investment opportunities. For example, it granted loans to non-profit organizations like Oxfam, Medical care centres, daycares etc. Since the 2000s, Crédal launched professional microcredits targeted to people with not access to bank credit and who want to start or develop their own activities. The interviewee highlights that Crédal is a pioneer cooperative in solidarity finance in Belgium and is also the first institution to develop microfinance.
Besides, the cooperative offers consulting services to their clients and supports unemployment people to become self-employed through a specific entrepreneurship program. It should be mentioned as well that, in order to maintain its microcredit activity, Crédal has received also funds from the Belgium state, the Walloon regions or the council of Brussels and some public and private institutions:
The support of public and private partners is essential for Crédal to conduct its activities while maintaining its ethical and interdependent dimension (…) Professional microcredit could not be realized without the guarantees provided by Sowalfin, the European Investment Fund and the Brussels Guarantee Fund or the financial support of Wallonia (...) Alongside this official and direct support, there are also numerous partnerships with support structures and social institutions. And behind all these institutions are also people who commit themselves alongside Crédal [1]
The second relevant actor in this CTP is the private Dexia Foundation -currently named “Belfius”.
Dexia is a big bank in Belgium. Nowadays, the bank is almost dead, but at this time it was really a big Belgian bank, and this bank has a philanthropic foundation that set as objectives to support financial players but with a more social vocation as Credal.
According to its Website, Dexia Foundation is a Belgium ASBL, created in 2005 to bring together the corporate philanthropy activities of Dexia in Belgium and support solidarity projects: “The Foundation has two main areas of intervention: social Integration, via microcredit and accompanied social credit, and well-being of hospitalized patients”. According to Dexia’s 2010 Sustainable Development Report 2010 (Dexia, 2011[2]): “Since 2005, Dexia Foundation Belgium has supported the two main Belgian associations promoting microfinance: Crédal and Hefboom. The Foundation makes operating grants available to these associations, representing 420,000€ in 2010, as well as the skills and support of sixteen volunteers drawn from current and former staff of Dexia Bank”.
Concerning the contextual circumstances which facilitate this CTP, it should be mentioned that Crédal’s financial activity is concentrated in the entire Brussels – Capital region, and the Walloon region, where the majority of the population speaks French. Brussels–Capital – context is considered to be the “geographic target of subsidized microcredit in Belgium”. According to the study conducted by Armendáriz (2009[3]), “the so-called Belgium MC2 zone –is an area with large number of poor and socially excluded individuals who would, in principle, need a microloan to start-up or expand their businesses”. This author also remarks that “due to the specificities of Brussels–Capital, where well-defined pockets of poverty are the exception rather than the rule”, Crédal’s outreach was rather small in 2006. The posterior 2008 economic crisis has increased the loan demand from “non-bankable” sector of population which demand Crédal would attend increasing its counselling services and loans increasing the number of hired people and volunteers dedicated to these activities.
[1 CRÉDAL (2014) RAPPORT DE ACTIVITE 2013.
[2]Dexia Sustainable Development Report 2010. http://www.dexia.com/EN/shareholder_investor/individual_shareholders/publications/Documents/RDD_2010_EN.pdf
[3]Armendáriz, B. (2009). Microfinance for self-employment activities in the European urban areas: contrasting Crédal in Belgium and Adie in France. Bruxelles, Centre Emile Bernheim, SBS-EM, Université Libre de Bruxelles.
A list of earlier events had evoked this CTP. Most of them have been briefly described in a recent publication of Credal (2014), which commemorates its 30 years of history. The respondent also mentions some of them. For example, she highlights that Crédal’s microcredit activity was previous to the CTP. Indeed, professional microcredit line started in the 90s as a pilot experience but it gained momentum in 2000. At this time, “microcredit has proved to be an effective tool against exclusion, but it does not solve the many difficulties that create micro-enterprises”. Crédal redesigned the program “to better support future upstream entrepreneurs (partnerships with creative support organizations) and downstream credit”.
A second related event, which enhanced microcredit activity, was the visit of Professor Muhammad Yunus to Belgium to receive, in February 2003, the title of Doctor Honoris Causa of the UCL. Yunus met the members of Crédal “to exchange good practices in finance”[1]. According to the initiative, “the visit of Professor Yunus is an opportunity for Crédal to find a resounding echo at its credit activity as a lever for social change and human development”.
In 2005, Crédal launches its pilot program “Women’s Business, Women in Business”. The project targets women who are unemployed and/or living on social benefits who would like to start a small business. Crédal becomes an example of an organisation working with both sexes but implementing a gender aware approach to women entrepreneurs.
In 2005, we launched a program called "Women’s Business, Women in Business" to counsel women's entrepreneurs. We have observed that very few women start in entrepreneurship, because they find obstacles, they do not dare, they have fears, which was really very specific women thing. So we started this program dedicated to women. Our idea was really to validate their business idea and see with them if such ideas were financially viable and compatible with their family life.
As it was explained in the first section, the CTP permits increasing and improving Crédal’s credit services. The bank obtains resources to hire specialized staff to coach entrepreneurs and grant loans aimed to people who have no access to bank credit and who want to start or develop their own activities. Even, due to the 2008 economic crisis, the credit cooperative created new programs oriented to support companies in difficulties. Credal launches, in 2013, a specific microcredit program for companies in difficulty called “Microcredit Relance” in partnership with the Center for Businesses in Difficulty (CEd) and BECI: “The number of companies in difficulty is constantly increasing and, while many of them have good potential for growth, they are excluded from the banking sector, which generally refuses any risk”.
[1] Explanation: Yunus is a Bangladeshi economist nobélisé in 2006, is the founder of first bank in the world to practice microcredit, the Grameen Bank. By lending small sums of money to totally insolvent individuals (essentially Of women), Grameen Bank allowed them to set up an independent activity and thus escape from misery (credal, 2014)
This critical turning point was preceded by a period of tension within the initiative motivated by the terms of the alliance between Crédal and Dexia Foundation. Under the agreement, Dexia Foundation provided financial support to individual credit activities (microcredit and accompanied social credit) and made available to the cooperative a group of Dexia´s volunteers to advise Crédal´s customers. Despite the initiative had been sponsored by government entities and private institutions, Crédal members were strongly concerned about the issue of independence. In the context of this partnership, Dexia took a share in its equity:
There was, in 2006, the opportunity to have access to funds through the Dexia Foundation, but it created tensions internally and also externally, with our shareholders. It was a very important discussion focusing on the independence of Crédal
Crédal leaders bluntly explained the importance of finding a partner to fund the very costly individual loan in the absence of sufficient subsidies or funding. Moreover, they convince associates that the autonomy of Crédal as a financial alternative was ensured by the fact that the agreement was signed with the Dexia Foundation, not with the bank itself. Under these terms, the 2005 shareholders´ assembly approved the agreement with the support of an extent majority of participants:
We have had very clear that our partnership is not with Dexia, the bank, but with the Foundation, which definitely is not the same. Every year we have an assembly, a general meeting with all the shareholders. The 2004 assembly was a very lively assembly, with shareholders who did not agree with the proposal. It was a moment of debate; there was discussion because we wanted to be sure that by this alliance we were not linking up and putting themselves on the guardianship of Dexia bank. This was an important moment. Finally, we signed the agreement
The agreement also involved the collaboration between volunteers and staff from both institutions and, in this term, the respondent remarks the importance of working with the Foundation and its personnel, but not with the mainstream bank:
The fact that it was the Foundation, not the bank, was very important for the employees and for the Board of Directors. It was intensely discussed at all levels of the cooperative. Finally, the shareholders voted positively to the agreement and validated this decision
The interviewee describes this alliance as a very positive decision which contributed to the enlargement of the initiative and, in special, increased its capacity to have a positive impact on Belgium context. Shareholders and practitioners understood, at the time when it occurred, that the alliance with Dexia Foundation would be a turning point in the history of Crédal, with positive or negative outcomes.
Critical voices argued that the cooperative could be compromising its independence. Supporters argued that the agreement would permit Crédal to increase its social investment and maintain microcredit activity. This perception seems to be shared by most of Crédal associates and there is not contestation nowadays regarding this CTP. In both cases, the decision was perceived as critical for the future of the initiative.
The principal lesson that the respondent extracts from the critical turning point relates to the need that any social initiative has to maintain its autonomy and liberty of action:
In any partnership, we must see which are the best criteria or measure to keep our freedom of action, and put in place all the necessary to keep this freedom. Indeed, we did that, by also separating the participation of Dexia Foundation in our activity. We allowed Dexia to be involved in some areas but not in all. We really adopted a set of preventive measures that reduced the existing fear of losing our freedom
Besides, the interviewee also reflects on the existing dialectic between the need to guarantee the independence of the social initiative and, on the other hand, the need of increasing its social impact by networking with other institutions and obtaining external resources to achieve its goals. Actually, Crédal´s microfinance activities are supported by several public and private partners: the Dexia Foundation, the European social fund, the Walloon and Brussels regions, the Participation Fund, the Sowalfin and the IBGE-BIM.
This kind of partnerships is necessary for maintaining the activities that we develop. External support can have the form of patronage, or under the more traditional form of subsidy. In any case, it is indispensable for us in order to continue the more social-oriented face of our business. It makes sense that public authorities take part and engage in
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