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Feasible Institutions of Social Finance: A Taxonomy

Simon Cornée (), Marc Jegers and Ariane Szafarz
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Simon Cornée: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique
Marc Jegers: VUB - Vrije Universiteit Brussel [Bruxelles]

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Abstract: This paper unpacks the continuum of social finance institutions (SFIs), ranging from foundations offering pure grants to social banks supplying soft loans. The in-between category includes quasi-foundations granting loans requiring partial repayment. In our model, SFIs maximize their social contribution arising from financing successful social projects, under a budget constraint dictated by their funders. We determine the feasibility of each SFI category. Quasi-foundations appear to be efficient and adapted to low market rates. However, reciprocity from SFI borrowers can elicit a so-called hold-up effect, whereby the SFI charges a high interest rate to its loyal clients.

Keywords: foundations; philanthropy; social banks; social finance (search for similar items in EconPapers)
Date: 2022
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Published in Journal of Institutional and Theoretical Economics, 2022, 178 (3), pp.280-310. ⟨10.1628/jite-2022-0010⟩

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DOI: 10.1628/jite-2022-0010

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