Co-operative and Alternative Finance for Agricultural/Food Communities European Developments 2015 Interim Report for the Knowledge Transfer Partnership Scottish Agricultural Organisation Society Ltd and University of Aberdeen 2 This document has been produced within the context of a Knowledge Transfer Partnership: ‘To embed a capability enabling SAOS to establish new financial intermediaries for UK agricultural/food communities providing direct access to affordable, ethical financial services.’ www.abdn.ac.uk/saos This Partnership received financial support from the Knowledge Transfer Partnerships programme (KTP), which is funded by InnovateUK along with the other government funding organisations. Knowledge Transfer Partnerships aims to help businesses to improve their competitiveness and productivity through better use of knowledge, technology and skills that reside within UK universities and colleges. Author, researcher and translator: Dr Elizabeth Chalmers Macknight Correspondence address: Department of History University of Aberdeen King’s College Aberdeen AB24 3FX Scotland [email protected] © University of Aberdeen 2015 The University of Aberdeen has no responsibility for the persistence or accuracy of URLs for any external or third party Internet websites referred to in this report, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. 3 Table of Contents Abbreviations Introduction 5 Part 1 1.1 France 8 1.2 Germany 11 1.3 Italy 14 1.4 The Netherlands 17 1.5 Portugal 19 1.6 Spain 21 1.7 Sweden 26 Part 2 2.1 Banking regulation 29 2.2 Alternative finance 32 Concluding remarks 33 Appendix 34 Selected sources 37 4 Abbreviations BCC Banche di Credito Cooperativo BRRD Bank Recovery and Resolution Directive BVR Bundesverband der Deutschen Volksbanken und Raiffeisenbanken CEPS Centre for European Policy Studies CET1 Common Equity Tier 1 CIAP Coopérative d’Installation en Agriculture Paysanne COGECA General Confederation of Agricultural Co-operatives in the EU CONSOB Commissione Nazionale per le Società e la Borsa CRD IV - CRR Capital Requirement Legislative Package DDGS Directive on Deposit Guarantee Schemes DGVR Deutscher Genossenschafts- und Raiffeisenverband e.V. EACB European Association of Co-operative Banks ESS L'Économie Sociale et Solidaire EURICSE European Research Institute on Co-operative and Social Enterprises FENECAM Federação Nacional das Caixas de Crédito Agrícola Mútuo FEP Fondo de Educación y Promoción FRO Fondo de Reserva Obligatorio ICA International Co-operative Alliance ICAB International Co-operative Banking Association ICURN International Credit Union Regulators’ Network IRU International Raiffeisen Union NCR Nationale Co-operatieve Raad Voor Land-e en Tuinbouw SCIC Société Coopérative d’Intérêt Collectif SEK Swedish Krona SME Small and Medium Enterprise UNACC Unión Nacional de Cooperativas de Crédito 5 Introduction has been gathered on different forms of financial intermediary and specialised On 3 December 2014 the General lending for farmers in the UK, Quebec, Confederation of Agricultural Co- and Australia. This report turns operatives in the European Union attention toward continental Europe (COGECA) hosted a business forum in where credit co-operatives first Brussels. Innovation was the theme for emerged during the nineteenth century the forum in which representatives from to serve rural and urban communities. Sweden, Finland, the Netherlands and Now in the twenty-first century it has France explained the diverse ways and become clear that in order to recover markets in which European agricultural fully from economic crisis Europe must co-operatives show a capacity to strengthen its small and medium innovate. Many examples exist of enterprises that can only thrive when technical innovation. The importance of there is ready access to credit. financial innovation for improving the competitivity of co-operatives was Co-operative financial institutions have highlighted in a presentation given by long provided tailored lending to SMEs Professor Pennings of the University of and to families. Established on the Maastricht. Financial innovation is a concept of mutuality, these institutions broad and topical subject encompassing have specific capitalization schemes, new methods for organising finance and liquidity management systems and managing risk, new mechanisms for governance structures that differentiate payment and settlement, the use of them from other banks. Through emerging technologies for marketing or periods of economic crisis they have transactions, and transformations in continued to operate as an essential financial markets that stimulate the source of credit for families and for design of new products and bring about SMEs, thus playing a key role in change in the institutions that deliver economic recovery and ensuring those products. diversity of enterprise types in the banking sector. If at first glance co- In Scotland demand for financial operative financial institutions seem innovation to enable farmers and rather less innovative than alternative agricultural co-operatives to access finance methods, such as crowdfunding, targeted credit efficiently has prompted it should be remembered that these the Scottish Agricultural Organisation institutions’ longevity reflects their Society to investigate the potential for capacity to evolve and grow in a establishing new financial dynamic competitive market. intermediaries. Initial discussion focussed on the formation of a credit Research and networking with union to serve farming families and continental European contacts on rural businesses across Scotland. behalf of the Scottish Agricultural Subsequent research has widened the Organisation Society aims to provide range of possible options as information wider perspectives on access to finance 6 for Scotland’s farmers and agricultural the Czech Republic, Germany, Ireland, co-operatives, as well as to deepen France, Cyprus, Slovenia, and Finland. It understanding and learn from is not always clear from the reporting experiences of financing abroad through the precise factors behind difficulties or exchange of knowledge and lack of difficulties in access to financing information. There are good reasons to in each country; rather, a broad suppose that co-operative financial spectrum of contributing factors is intermediaries and agricultural co- apparent. There are some commonly operatives would make natural shared concerns: ‘the lack of trust of the partners, and while this can be the case banking sector in cooperative there are also constraints and entrepreneurship’, ‘banks do not challenges in the respective sectors. comprehend [co-operatives’] budgetary system’, and ‘the financial system and The situation for agricultural co- its entities do not favour granting credit operatives, and rural enterprises more to these types of joint member- broadly, with respect to financing varies responsibility corporations’. There is greatly across Europe. In the same way also some commonly expressed that there are differences between EU recognition of ‘difficulties relating to the member states in the legal structures, legal form’ and ‘business related tax regimes, and rules on membership, problems and co-operatives’ specific capital, and board governance that legal form’. In some countries: ‘co- apply to co-operatives, so too financing operatives didn’t modify their is an area where generalisations should governance structures in order to allow be avoided. A range of factors shape diverse/ proportional finance from access to finance for farmers and members’. Meanwhile in other agricultural co-operatives, from national countries: ‘if there was a need for economic circumstances to co- capital the co-operatives rather changed operatives’ local rules, legal form and their structure, for example, into business model. Problems in accessing Limited Liability Company’ or ‘some co- finance are not necessarily absent in operatives have established "shares countries where there is a dense with particular benefits" for their network of co-operative financial members, which grant them a priority institutions. return’ (COGECA, 2014). Investigation for COGECA revealed that, Part 1 of this report provides case where information was provided, studies of seven European countries financing for agricultural co-operatives where co-operative financial institutions is reported to be problematic in and alternative finance methods are Belgium, Spain, Croatia, Italy, Lithuania, used by the agricultural sector. Part 2 Portugal, Romania, and Sweden. By outlines changes in European regulatory contrast, financing for agricultural co- frameworks that are of consequence for operatives is reported to be not the viability of co-operative financial problematic or seldom problematic in institutions and alternative finance. 7 Part 1 appendix) so it is smaller and less representative than the EACB. Unico Across Europe there are some 3,700 was founded in 1977, at a time when locally operating co-operative financial the internationalisation of the financial institutions that serve more than 215 sector was gathering pace, and it million customers and work in allowed for sharing of expertise and partnership with SMEs. Historically collaboration on projects among the many of these co-operative financial eight. Differences in culture and in institutions were set up to serve rural national markets for financial services communities and although today the have meant the network structure of largest