Banks serve as allies to the social enterprise, with a shift towards hybrid financing solutions.
In a rapidly changing landscape, the partnership between banks and social enterprises is shifting towards blended finance models that combine commercial banking with social impact goals. This holistic approach is gaining momentum as both parties recognize the growing importance of social enterprises in sustainable finance ecosystems.
The alliance, which emerged from the XII Edition of the Observatory on Finance and Third Sector, curated by Aiccon (with the support of Intesa Sanpaolo), aims to develop hybrid finance tools that can mix different components such as equity, grants, and debt. These tools are increasingly adopted by banks like Charity Bank (UK) and Spring Bank (USA), which operate as social enterprises or community development financial institutions, providing lending and services tailored to charities, social enterprises, and community organizations working on social/environmental issues.
Banks are embedding sustainability and ESG (Environmental, Social, and Governance) integration into their products and operations. This includes sustainable loans, green bonds, and lending practices that support social enterprises. Such integration builds trust and attracts investors and customers prioritizing social/environmental responsibility.
There is growth in digital transformation and AI applications to support innovation in banking services. AI fosters personalized and efficient service delivery for social enterprise clients, improves credit risk assessment for social enterprises, and enhances underwriting decisions through predictive analytics.
Embedded finance and social banking trends enable financial services delivery through non-banking platforms (e.g., e-commerce or social media), facilitating access for underserved social enterprises. Banks are leveraging data from diverse sources to assess risks and customize products suited for social impact sectors.
Training and capability-building within these partnerships focus on equipping social enterprises with financial literacy, digital skills, and innovation competencies. Banks act as both financial providers and advisors, often integrating digital tools and AI to provide ongoing support and improve customer experience.
The social sector, which employs more than half of all workers in the social economy, is a sector that is crucial for the country, both in terms of service provision and relational capital. Social enterprises, including social cooperatives, total 16,750 and represent 4.4% of the entire third sector. They play a crucial role in service provision (healthcare, social assistance) and relational capital in the country.
Andrea Lecce, Executive Director Impact Bank of Intesa Sanpaolo, noted that investments in the third sector are underdimensioned and in a phase of contraction. For the future, banks are asked to play not only an investor partner role but also a stimulus and accompaniment role in generating impact and innovation. Banks are asked for support, especially on training, new organizational models, measuring social impact, financial education, and fundraising.
The world of social cooperation, represented by Giusi Biaggi, reaffirmed the role of finance in accessing credit and invited banks to maintain a measurement and a look at the third sector that goes beyond traditional balance sheet criteria. Social enterprises, despite an increase in knowledge about impact finance tools such as subsidized loans, social and social bonds, and social venture capital, have seen a decrease in their use.
However, there has been an increasing trend in the use of resources from private investors and public institutions. The main reason for satisfaction of these organizations with banks in 2022 is that the bank has dedicated and trained personnel. Social enterprises employ 471,199 workers, more than half of all workers in the social economy (source Istat).
In conclusion, the evolving partnership landscape reflects the growing recognition of social enterprises as important clients in sustainable finance ecosystems. The focus on blended finance models, digitally enabled training and advisory services, and innovative finance tools like ESG-linked loans, AI-driven risk management, and embedded finance platforms tailored to social enterprises is set to drive growth and impact in the social sector.
- Banks are increasingly adopting blended finance models, combining commercial banking with social impact goals, as they recognize the growing importance of social enterprises in sustainable finance ecosystems.
- With the rise of digital transformation and AI applications, banks are leveraging these tools to provide personalized and efficient service delivery, improve credit risk assessment, and enhance underwriting decisions for social enterprises.
