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Prospective Innovation at Ethical Banking and Finance

Vol:0, №:0, Year:2013

Social Banks and their Profitability: Is Social Banking in line with Business Success?

Olaf Weber
School for Environment, Enterprise and Development - University of Waterloo

Social banking is conducted by social, ethical or alternative banks, financial cooperatives, and credit unions. In contrast to conventional banks, social banks conduct their business to create a positive social, environmental, or sustainability benefit. This study analyses both, the missions of social banks and their financial figures. Based on data of the members of the Global Alliance for Banking on Values, a global association of social banks and microfinance institutions, we conducted a qualitative analysis of the missions of the member institutes. Furthermore we explored whether their loans and investments follow their mission and whether this business strategy is able to achieve attractive financial return. The results suggest that the banks follow the mission of social finance and prefer social impacts over financial returns without neglecting financial sustainability. With respect to financial indicators social banks are, though being still small, especially in the years 2007 to 2012 more profitable than conventional banks or credit unions and presented stronger growth than their conventional counterparts. Regarding their financial health all institutes in the sample meet the Bank for International Settlements (BIS) capital ratio. We conclude that it is possible to follow the concept of social finance and to be financially sustainable, if social banks provide the tangible and intangible resources.


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Key words
Social banking, ethical banking, blended return, shared value, credit union, financial return, capital ratio, resource-based theory

Olaf Weber (2013), Social Banks and their Profitability: Is Social Banking in line with Business Success? in Leire San-Jose, Jose Luis Retolaza (eds.) Prospective Innovation at Ethical Banking and Finance (Studies in Philosophy, Law and Economics), - Sumy: Vinnychenko M.D., pp. 2-19. Available at

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