How solidarity-based finance addresses major challenges

Unemployment has been THE major social issue in France over the last thirty years. The number of families under the poverty level has also increased significantly, leading to dramatic housing problems. Environmental issues such as organic farming or clean energy have cropped up more recently. And the development of third world economies has been a constant concern. These four lines of business (inclusion through labor or housing, green business and aid to the developing world) have been up to now the main focus of solidarity-based finance in France.


A bit of history

The first social initiative was taken in the early 1980s in the basque region of southwest France. A venture-capital fund –Herrikoa – was set up to bring local seed money to local basque job-creating businesses. In 1983, the first solidarity-based mutual fund, Faim et Développement (Hunger and Development) was launched by the Crédit Coopératif on the behalf of a Christian NGO. The loading fees on the fund where granted to the NGO, as well as part of the fund’s performance. And, last but not least, up to 10% of the fund‘s assets were secured by a company whose purpose is to invest in small businesses and micro-credit funds in former French colonies. Third novelty: in 1983 as well, inspired by the booming stock market and the success of investment clubs, under the acronym CIGALES, the club concept was extended to the financing, on a monthly five-year basis, of socially-oriented local start-ups. There are many paths to social business financing.

For a number of years, it remained a cottage industry. At the end of 2002, the total amount of solidarity-based savings remained under the 200m € mark. And the solidarity-based savers numbered less than 50 000. The 2019 figures show an impressive increase: close to a million French inviduals have invested 15,6 billion € which have spurred over 3 billion € of solidarity-based financing, a very high figure by international standards.


The current boom

Why such a spectacular increase? Since January 1, 2010, all French companies practicing what are known as 'corporate savings plans' or plans d’épargne enterprise (PEEs), must offer their personnel what is known as a 'solidarity-based corporate savings fund'. Such a fund must invest between 5 and 10% of its assets in equity or debt of social concerns. Subscribing to these funds is not compulsory but is often highly recommended both by management and trade unions. Such funds have turned out to be very popular and account more than 50% of 15,6 billion € of solidarity-based investment. But since only part of that money ultimatly flows to social busineses, the effective amount of solidarity-based financing is much lower, as stated above.


Where the money goes

Where does that money go and what is its impact? In 2019, it is estimated that, thanks to solidarity-based finance, roughly 42.000 jobs were created or consolidated by companies practicing inclusive policies.

Around 1.060 people have been housed in very low-rent apartments. More than 60 actors in economic development of emerging countries were supported by French solidarity-based finance. And 25 155 households rely on clean energy.