Abstract
Cooperative financial institutions operate under general cooperative principles, with a vision for economic, social, and environmental balance. In Ecuador, this model of finance gained momentum in 2012 with the creation of the superintendence of the social and solidarity economy, which regulates the country's cooperative sector. This research focuses on segment one, institutions with assets greater than $80 million. Currently, developments in the environmental area, or green finance, fall under the control standard for the management of environmental and social risk in savings and credit cooperatives and mutualists. The regulation provides the guidelines for implementing the social environmental risk management system (SARAS), which classifies risk based on the environmental impact of economic activities. It also includes a list of activities of activities excluded from financial services due to their negative implications for the social and environmental areas. This research analyzes and critiques the aspects, requirements, and conditions of the implementation of these regulations.
TopIntroduction
Savings and credit cooperatives emerged as an alternative to the traditional financial system and as protagonists in the development of the social and solidarity economy. They attempt to strike a balance between economic and social considerations and take into account the finite nature of existing natural resources; consequently, it is necessary to adopt control measures to regulate their functioning (Luque & Peñaherrera, 2021). Globally, the members of cooperatives represent at least 12% of the world’s population, or some 280 million people, representing 10% of the employed population (International Cooperative Alliance, 2023). As enterprises based on values and not merely on capital income, the 3 million cooperatives contribute to sustainable economic growth and stable and quality employment. In Ecuador, the declaration of cooperativism was strengthened by the constitution, in chapter six, article 319, which states that, “various forms of organization of production in the economy are recognized, including community, cooperative, public or private business, associative, family, domestic, autonomous and mixed businesses” (Constitution of the Republic of Ecuador, 2008). The Social and Solidarity Economy is based on the people who make up this sector, its values, its essence, its culture and identity, as well as the different mechanisms applied for the transformation of productive resources different from those of large industries, capitalism and neoliberalism (Leon, 2019). The solidarity economy is a recent economic movement associated with corporatism, solidarity and fair trade. It is a new economic model based on the accumulation of skills, social creativity, community life and values. These days, the solidarity economy has considerably strengthened its position in the society, especially when referring to the necessity of placing the people first in all the actions and activities that are done at an international level (Popescu & Luque González, 2022a). In like manner, both the assessment and the management of the environmental and the social risks have become a pivotal priority on the agenda of all devoted managers and of all dedicated leaders, regardless of the profile of their activities (Popescu, 2022). Also, it is of utmost importance to recognize the importance of social development in today’s society, since it is derived from strong ideas of cooperation among people and organizations, acting in favor of individuals and communities, and working for the benefit of the society and the environment (Popescu, 2021).
Savings and credit cooperatives are socio-economic organizations that work on two important axes: the first is to meet the needs of members through efficient and fair financial products, while the second is to ensure social development by promoting net cooperativism (Garcia, 2021). In Ecuador, cooperatives are identified as a form of organization based on social relations established to support economic production. Thus, this economic and local development has been adopted as a national policy, which institutionalizes cooperatives as a tool in the process of solidarity, social inclusion, citizen participation and equitable economic redistribution (Martinez, 2020). Prior to this approach, only the largest cooperatives were part of the traditional financial system and were controlled and regulated with the same rules as banks, with no regard to the principles of cooperativism (Ramírez, Herrera, & Londoño, 2016); in turn, there was a considerable group of small, almost invisible cooperatives that were controlled by the Ministry of Economic and Social Inclusion, which led to shortcomings in areas such as risk management and compliance with internal controls (Berries, 2019). Nevertheless, they were often the only option of finance for small enterprises that lacked the credit capacity to access commercial banking (Tobar & Solano, 2010). The Assembly of Representatives in 2008 set important guidelines for the administration of the Social and Solidarity Economy sector, recognizing it as a neglected social group in the supply of financial products.
Key Terms in this Chapter
Public Policy: This refers to decisions and actions that a government takes when addressing public or collective issues.
Social Economy: This encompasses a variety of businesses, organizations and different legal entities. They share the objective of systematically putting people first, producing a positive impact on local communities and pursuing a social cause.
Resilience: “Transformations within a complex system related to the capacity for self-organization while maintaining internal structure, together with the ability to create adaptive responses, generate knowledge, experience, and learning. Resilience and sustainability are directly related to changes within societies, economies, and the human system as a whole. The transformation of systems is inevitable since it allows systems to strengthen” ( Luque et al., 2022 ).
Sumak Kawsay: Describes a way of doing things that is community-centric, ecologically-balanced and culturally-sensitive.
Cooperative: An autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.
Environmental Care: Each day, the necessity of protecting the environment becomes more and more vital to the existence of people and biodiversity, especially in the context in which specialists are constantly pointing out that a healthy environment represents the key of having balanced, long and healthy lives ( Popescu & Luque González, 2022b ). What is more, the environment in which individuals and communities live in these days requires great attention, nourishment and protection like any other living form. Furthermore, the ideas of cooperation, mutual help, and sustainability should become the very essence of a responsible and resilient society, capable to foster life-changing solutions for a better future for all individuals and communities worldwide ( European Commission, 2023 ).
Economic Globalization: “This is a phenomenon in expansion that causes profound changes on the world stage. It revolves around trade, the flow of investment, financial capital, division of labour and specialization. The concept is not limited only to economic variables since its effects extend to individuals, society to the state. Developing countries are experiencing stagnation in the face of their inability to cope with globalization, which is compounded by poor management of their financial markets, leading to an increase in the income inequality gap. Economic globalization brings with it the mobilization of goods and capital, reduces distance between borders and energizes international trade with some alterations to sovereignty” ( Luque et al., 2022 ).