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Credit Cooperatives and Savings Banks A template for SME finance and development? - An approach in.

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1 Credit Cooperatives and Savings Banks A template for SME finance and development? - An approach in historical perspective Paul Thomes Business Technology Innovation Society

2 © 2012 Agenda Relevance and objective: A historical approach, why? history as dialogue between present and past about future perspective by retrospective exploiting the „history lab“ Broadening the methodological perspective Process and orientational knowledge, Creative capacity = combining strengths Business Model Analysis Assessment Conclusion and Message

3 © 2012 Data and Knowledge Base - Knowledge 35 years of research in economic and social history - banking history esp. savings banks and credit coops - regional development and structural change - change management processes economic and business mixed method holistic approach - Data quantitative and qualitative data from banks all over Germany and beyond ( )

4 © 2012 MF = Inclusive Regionally Integrated Banking IRIB Yunus Nobel-Prize Grameen Bank disappointment need for optimization Adaption of concepts self-reflection impertinence searching for alternatives euphoria hype Coop Banks Savings banks Circle of Sentiment „New“ MF-Models vs. „Old“ MF-Models Roodman, 2012 Bateman, 2010

5 © 2012 MF as Change Management Instrument CM Model: Lewin/Schumpeter/Thomes Kurt Lewin ( ), Drei-Phasen-Veränderungs-Modell (1947) Joseph Schumpeter ( ), Theorie der Innovation (1911) Changing MF COOP Banks Savings Banks Refreezing Unfreezing Old Structure/ Paradigme New Structure/ Paradigme Innovation Diffusion Invention Structures = Institutions conventions arrangements to optimize transaction costs and interaction

6 © 2012 Plausibility Check in Historical Perspective 18th/19th century Europe 20/21th century developing countries no or limited financial integration of large social groups general problems to be solved fast growing population rural exodus – urbanization structural change from agrarian to industrial society melting social institutions pauperism infrastructure Individual perspective: poverty, lack of finance, unsecurity

7 © 2012 Cooperative Banks as Financial Inclusion Scheme Raiffeisen (1850s): Credit-Unions Darlehenskassen-Vereine Aims: „poverty relief of rural population“ „material and moral improvement“ Concept: paternalistic-christian approach including the whole parish or borrough – rich and poor Schulze Delitzsch and Haas (1850s): Credit Societies, Banks for the Mass Vorschussvereine, Volksbanken Aims: „Welfare of the mass“ Concept: liberal grass roots democratic „A Coop means freedom, economic freedom, too“ (Haas) „It … aims at the credit needs of the small firm sector, rural and urban … It cares for the tiniest credit need as well for big firms....“ (SD, 1855) = spatial and social inclusion Starting with credits, adding savings since 1870s

8 © 2012 § 1 Purpose of the association Furthering industriousness (Arbeitsamkeit) among the poor by creating occasions to improve their options Aachen Fire Insurance (est. 1825) Pension scheme Savings bank (1834) including regional branches and bonuses on savings Kindergardens Girl schools Acquirement of knowledge guide books nationalregional 50% of profits until 1874 Process design direct indirect Verein zur Beförderung der Arbeitsamkeit (1834) Non-profit PPP interplant organisation “innovation-lab“ Undertaking - Sponsoring Fröbelseminar Sponsoring education and sciences RWTH (1870) Sponsoring health care Relief fund Endowments Holistic Regional Change Management Scheme smoothening industrialization

9 © 2012 Volume of creditsNumber of credits credit-portfolio Delitzscher-Vorschussverein (according to Schulze-Delitzsch), Impact 1850s

10 Minimizing Usury Access to FS for all transparent & fair SME Finance Money transfer Improving education and social security Charity WelfareInfrastructure Enablement by saving Impact around 1900 Economic stability Mobilizing hoarded money MF COOP Banks Savings Banks Individual and societal impact

11 © 2012 Delivering Results - MF matters and MF works Parameters to achieve results above average Parameters that do matterParameters that do not matter INTEGRATED REGIONAL CONCEPTS organisational design Local reinvestment consumption of profits education cross institutional cooperation PPP flexibel legal frame profit vs. non profit top down vs. bottom up general pre-conditions: growing economy and population competition private vs. public Implicit welfare orientation transpa- rency integrated finance SCI

12 © 2012 About terminology and content Towards an inclusive MF-Definition Concept …, offering basic financial services (credit and saving facilities, insurance) to clients, who are not in the focus of normal banking institutions … Quality of Services: transparent and fair … Goals of Services: participation, inclusion, prevention … Scope of Business Model: regional, including investment or consumption of earnings Key Concept Features: integrative, inclusive, sustainable, resilient, regional

13 © 2012 Success factors – „Innovative“ Socio-Economic Inclusion saving and credit sustainable – price worthiness bearer - SME PPP rivlary - regionality transparency - reliability flexible legal framework bandage building responsability Leadership Diversity Innovation Protection Empowerment Cooperation Knowledge Proportionality and Framework (G20 Principles for Innovative financial Inclusion, 2011) Past / Future Commonplace

14 Kredit basisdemokratisch Eigeninitiative gewinnorientiert Individualität privat filiallos lokal individueller wirtschaftlicher Erfolg Sparen patriarchalisch Verordnung sozial orientiert Gemeinwohl öffentlich filialhaft regional gesellschaftspolitisch motivierte Daseinsvorsorge Alle einschlägigen MF-Kriterien erfüllt ! Divergenz und Konvergenz VR BankenSparkassen

15 © 2012 Time incongruity and growing competition

16 © 2012 Asset buisness of the prussian savings banks

17 © 2012 Impact Inklusion: 1913 every German household with a bank account at a savings or cooperative bank Mobilization of hoarded money until then deprived of the economy Structural change: market integration and merket entry through finance of traffic and supply infrastructure stability in crises Mix of individual and social Impact


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