Banks serve as key partners for the social enterprise, with a growing emphasis on diverse funding sources.
In a rapidly evolving social enterprise sector, banks are increasingly taking on an active role, moving beyond traditional financial intermediaries to become partners in nurturing these organisations. According to the XII Edition of the Observatory on Finance and Third Sector, this shift has been spurred by a growing need for innovation, financial education, and impact measurement.
Bank credit and self-financing remain the primary sources of funding, but both have shown a decrease compared to the last survey. The need, however, is for the development of hybrid finance tools that can combine equity, grants, and debt.
Banks are expected to provide access to tailored financial products, foster capacity-building through training and education, support innovative, sustainable business models, and implement robust impact measurement frameworks.
Innovative financial products and inclusion are key aspects of this new role. Banks are increasingly developing digital and agent banking platforms that extend loans, savings, and insurance products tailored to social enterprises and underserved communities. For example, Equity Bank in East Africa uses mobile technology to reach remote customers, and HSBC employs innovative credit techniques to support SMEs and migrants, promoting financial inclusion.
Financial education and capacity building are also essential. Banks like DBS Indonesia's DBS Foundation invest significantly in social enterprise training and financial literacy initiatives, especially for vulnerable groups such as women entrepreneurs, young people, and people with disabilities.
Measuring social and environmental impact is another critical area. Mission-driven banks like Charity Bank and Spring Bank incorporate impact measurement as a core practice, using tools like B Impact Scores and B-Corp certification to evaluate how their financing contributes to social and environmental goals.
The European Investment Bank (EIB) and its funds emphasise lending specifically targeting social infrastructure and social enterprises that contribute to social cohesion and innovative solutions for vulnerable groups. This highlights a growing trend where banks combine financial support with strategic social development agendas.
Banks are also expected to embed environmental, social, and governance (ESG) criteria into their lending and operational models, avoiding funding harmful industries and promoting green and socially responsible initiatives.
The trend shows a growing preference towards short to medium-term investments at the expense of long-term investments. Despite a decrease, 67.2% of organisations reported making investments in the three-year period from 2020 to 2022, with an increasing trend in the use of resources from private investors.
For the future, banks are expected to play a more active role, not just as investor partners (63%), but also in stimulating and accompanying the generation of impact and innovation (43%). Banks are being called upon to provide support and training, not just credit, for businesses and social enterprises.
Social enterprises, which include social cooperatives, represent 4.4% of the entire third sector and employ 471,199 people, according to Istat. The social enterprise sector is crucial for the country, providing services such as healthcare and social assistance, and building relational capital.
The social enterprise sector is evolving rapidly due to the reform of the Third Sector and its role in addressing growing social demands. There has been an increasing awareness of impact finance tools such as subsidized loans, social and social bonds, and social venture capital, but a decreasing use of these tools.
The Observatory's findings are based on a quantitative analysis of 350 cooperatives and social enterprises over the past three years and qualitative analysis of sentiment with Ipsos. The Observatory is curated by Aiccon, with the support of Intesa Sanpaolo.
Banks are expected to provide support and training, not just credit, for businesses and social enterprises, fostering capacity-building through investments in financial education and initiatives. Banks, like Charity Bank and Spring Bank, are incorporating impact measurement as a core practice, using tools to evaluate how their financing contributes to social and environmental goals.
