The Business Model of Social Banks

Simon Cornée, Panu Kalmi and Ariane Szafarz
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Simon Cornée: Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France
Panu Kalmi: University of Vaasa, Faculty of Business Studies, Finland
Ariane Szafarz: Université Libre de Bruxelles (ULB), SBS-EM, CEB, and CERMi, Belgium

Economics Working Paper Archive (University of Rennes & University of Caen) from Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS

Abstract: Based on an extensive literature review, this paper proposes to define social banks (SBs) as social enterprises that run banking activities with the social mission of supplying credit to other social enterprises, which are typically less profitable than for-profit businesses. This definition marks our starting point for developing a theoretical framework to explain how SBs survive without subsidies in the banking market. We build on a two-pillar business model of value-based financial intermediation, which comprises an ownership structure that limits residual ownership claims and preferential credit conditions associated with financial sacrifices from motivated depositors. We also clarify the link between SBs and stakeholder banks and weigh up the importance of market interest rates for facilitating the business of SBs. An empirical analysis based on panel regressions on 5,400 European banks over the 1998-2013 period attests to the relevance of our theoretical framework. It also confirms that a low interest rate environment raises concerns about the sustainability of the SB business model.

Keywords: Social banks; European banks; Business Model; Financial Intermediation; Social Enterprises (search for similar items in EconPapers)
JEL-codes: G20 L31 L33 M14 P13 (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-ban and nep-hme
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The Business Model of Social Banks (2020)
Working Paper: The Business Model of Social Banks (2020)
Working Paper: The Business Model of Social Banks (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:tut:cremwp:2019-08

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