The relationship between small and medium-sized social enterprises and banks

Abstract

Purpose The purpose of this paper is to perform a critical analysis of the relationship between small- and medium-sized social enterprises (SMSEs) and banks. Based on the conceptual framework for the analysis of SME’s credit availability developed by Berger and Udell (2006), this study aims to contribute to the current debate in two ways: first, outlining the characteristics of the lending technologies currently used by banks and financial institutions to evaluate SMSEs when they apply for credit; and second, discussing, based on the results of the empirical analysis, the coherence of these systems from the social ecosystem perspective and identifying areas for possible improvement. Design/methodology/approach The paper develops a conceptual framework based on the model proposed by Berger and Udell (2006), which defines the characteristics of lending technologies that banks use to evaluate SMEs, and applies it to the case of SMSEs. To study the interplay of these lending technologies, the empirical analysis is based on a case study of five Italian banks. Data are collected from multiple sources to capture key dimensions of the problems analyzed. Findings The paper provides empirical insight about the relationship between SMSEs and banks. The Italian case shows that the current lending infrastructure must be revised to support SMSE credit availability, and government policies affect the national financial institution structure. The relationship between SMSEs and Italian banks remains underdeveloped. Social implications The research supports the scaling up of social business. Originality/value This paper fulfills an identified need to study how social enterprises credit access can be enabled.

Managing the external financing constraints of social enterprises: A systematic review of a diversified research landscape

“…Social banks, which are financial institutions that specifically provide funding to organisations that aim to create social value (e.g. Bengo & Arena, 2019) are an option, as their products and services directly link with the societal goals of social enterprises (Geobey et al., 2012). In fact, social banks are usually value‐based organisations that do not strive to maximize profit, but rather a fair balance between financial and social objectives, and can thus be regarded as social enterprises themselves (Cornée et al., 2020).…”

Systematic Literature Review of Social Enterprise Financing and Investment

“…Mixed findings are observed in the reviewed literature, possibly due to the different categories of investors surveyed. Mostly, investors back the social rather than the economic values of entrepreneurs; however, having too much emotional investment in the social mission can scare off potential backers (Bengo and Arena, 2019). Microfinance investors favor economic qualities since they suggest a greater likelihood of loan repayment by the social entrepreneur (Battilana and Lee, 2015).…”

“…However, in the crowdfunding setting, the notion that investors view social enterprises and traditional businesses the same does not hold, and according to studies conducted about entrepreneurship, businesses owned by males are more likely to receive funding than those owned by women (Battilana and Lee, 2014). Crowdfunding investors may be more likely to support a social company managed by a woman since the venture's social goal aligns with the stereotypes of women in business (Bengo and Arena, 2019). The inverse association is also demonstrated by previous research, suggesting that women who want to attract investors of both sexes should act in ways that go against gender stereotypes.…”

A Systematic Literature Review of Technology Social Ventures: State of the Art and Directions for Future Research at the Micro-, Meso- and Macro-Level

“…In these terms, literature that could be usefully integrated is the one that, by focussing on the social dimension, has started to address financing mechanisms and tools to support SEs. The main stream of research in this field refers to the concept of Social Finance (Nicholls and Emerson 2015) and Impact Investing (Barber, Morse, and Yasuda 2021) as an emerging practice that can solve SEs' financing needs; in this case, funders may encompass private investors (Agrawal and Hockerts 2019; Gl€ anzel and Scheuerle 2016), banks (Bengo and Arena 2019), venture philanthropists (Bonassi e, Coletti, and Sansone 2019) or the public sector (Vanderhoven et al 2020). TSVs, however, are characterised not only by a social dimension but also by a technological domain.…”