Journal of Business Ethics

, Volume 125, Issue 3, pp 361–380 | Cite as

Vive la Différence: Social Banks and Reciprocity in the Credit Market

  • Simon CornéeEmail author
  • Ariane Szafarz


Social banks are financial intermediaries paying attention to non-economic (i.e., social, ethical, and environmental) criteria. To investigate the behavior of social banks on the credit market, this paper proposes both theory and empirics. Our theoretical model rationalizes the idea that reciprocity can generate better repayment performances. Based on a unique hand-collected dataset released by a French social bank, our empirical results are twofold. First, we show that the bank charges below-market interest rates for social projects. Second, regardless of their creditworthiness, motivated borrowers respond to advantageous credit terms by significantly lowering their probability of default. We interpret this outcome as the first evidence of reciprocity in the credit market.


Social bank Reciprocity Social identity 



The authors thank Yiorgos Alexopoulos, Francesca Barigozzi, Régis Blazy, Carlo Borzaga, Damien Brousolle, Isabelle Cadoret, Anastasia Cozarenco, Jacques Defourny, Joeffrey Drouard, Silvio Goglio, Marek Hudon, Marc Jegers, Panu Kalmi, Georg Kirchsteiger, Philipp Koziol, Marc Labie, Neil McHugh, Fabien Moizeau, Jonathan Morduch, Tomasso Oliveiro, Anaïs Périlleux, Jose Luis Retolaza, Michael Roberts, Leire San-Jose, Jessica Schicks, Hubert Tchakoute Tchuigoua, Piero Tedeschi, Gregory Udell, Olaf Weber, Laurent Weill, the participants at the CERMi Seminar, ULB (May 2012), the “Cooperative Finance and Sustainable Development” Conference at the University of Trento (June 2012), the “Frontiers of Finance” Workshop at the Paris Panthéon Sorbonne University (October 2012), the Workshop on SME Finance at the University of Strasbourg (April 2013), the Third European Research Conference on Microfinance at the University of Agder (June 2013), the “Finance and Society” Workshop at BEM/KEDGE Business School (June 2013), the EMES Conference in Liège (July 2013), as well as an anonymous referee for helpful comments and discussions. This research has been carried out in the framework of an “Interuniversity Attraction Pole” on social enterprise, funded by the Belgian Science Policy Office.


  1. Adbulkardiroglu, A., & Bagwell, K. (2013). Trust, reciprocity, and favors in cooperative relationships. American Economic Journal: Microeconomics, 5, 213–259.Google Scholar
  2. Agier, I., & Szafarz, A. (2013a). Microfinance and gender: Is there a glass ceiling on loan size? World Development, 42, 165–181.CrossRefGoogle Scholar
  3. Agier, I., & Szafarz, A. (2013b). Subjectivity in credit allocation to micro-entrepreneurs: Evidence from Brazil. Small Business Economics, 41, 263–275.CrossRefGoogle Scholar
  4. Ahmed, A. S., Takeda, C., & Thomas, S. (1999). Bank loan loss provisions: A reexamination of capital management, earnings management and signaling effects. Journal of Accounting and Economics, 28, 1–25.CrossRefGoogle Scholar
  5. Akerlof, G. A., & Kranton, R. E. (2000). Economics and identity. Quarterly Journal of Economics, 115, 715–733.CrossRefGoogle Scholar
  6. Akerlof, G. A., & Kranton, R. E. (2005). Identity and the economics of organizations. Journal of Economic Perspective, 19, 9–32.CrossRefGoogle Scholar
  7. Allet, M. & Hudon, M. (2013). Green microfinance. Characteristics of microfinance institutions involved in environmental management. CEB Working Paper No. 13/005. Université Libre de Bruxelles.Google Scholar
  8. Armendariz, B., & Morduch, J. (2010). The economics of microfinance (2nd ed.). Cambridge, MA: MIT Press.Google Scholar
  9. Armendariz, B., & Szafarz, A. (2011). On mission drift in microfinance institutions. In B. Armendariz & M. Labie (Eds.), The handbook of microfinance (pp. 341–366). London: World Scientific Publishing.CrossRefGoogle Scholar
  10. Banque Populaire de l’Ouest. (2010). Annual report.Google Scholar
  11. Barigozzi, F., & P. Tedeschi. (2011). Credit markets with ethical banks and motivated borrowers. Working Paper DSE No 786. University of Bologna.Google Scholar
  12. Basel Committee on Banking Supervision. (2001). The new basel capital accord. Consultative Document.Google Scholar
  13. Becchetti, L., & Garcia, M. (2011). Do collateral theories work in social banking? Applied Financial Economics, 21, 931–947.CrossRefGoogle Scholar
  14. Becchetti, L., Garcia, M., & Trovato, G. (2011). Credit rationing and credit view: Empirical evidence from loan data. Journal of Money, Credit and Banking, 43, 1217–1245.CrossRefGoogle Scholar
  15. Becchetti, L., & Huybrechts, B. (2008). The dynamics of fair trade as a mixed-form market. Journal of Business Ethics, 81, 733–750.CrossRefGoogle Scholar
  16. Benabou, R., & Tirole, J. (2010). Individual and corporate social responsibility. Economica, 77, 1–19.CrossRefGoogle Scholar
  17. Benedikter, R. (2011). Social banking and social finance. New York: Springer.CrossRefGoogle Scholar
  18. Berger, A. N., Rosen, R. J., & Udell, G. F. (2007). Does market size structure affect competition: The case of small business lending. Journal of Banking & Finance, 31, 11–33.CrossRefGoogle Scholar
  19. Berger, A. N., & Udell, G. F. (1995). Relationship lending and lines of credit in small firm finance. Journal of Business, 68, 351–381.CrossRefGoogle Scholar
  20. Boot, A. W. A. (2000). Relationship banking: What do we know? Journal of Financial Intermediation, 9, 7–25.CrossRefGoogle Scholar
  21. Brown, M., Fehr, E., & Zehnder, C. (2009). Reputation: A microfoundation of contract enforcement and price rigidity. Economic Journal, 111, 333–353.Google Scholar
  22. Brown, M., & Zehnder, C. (2007). Credit reporting, relationship banking and loan repayment. Journal of Money, Credit and Banking, 39, 1883–1918.CrossRefGoogle Scholar
  23. Chakraborty, A., & Hu, C. (2006). Lending relationships in line-of-credit and non-line-of-credit loans: Evidence from collateral use in small business. Journal of Financial Intermediation, 15, 86–107.CrossRefGoogle Scholar
  24. Chen, Y., & Li, S. X. (2009). Group identity and social preferences. American Economic Review, 99, 431–457.CrossRefGoogle Scholar
  25. Cornée, S., Masclet, D., & Thenet, G. (2012). Credit relationships: Evidence from experiments with real bankers. Journal of Money, Credit and Banking, 44, 957–980.CrossRefGoogle Scholar
  26. Cowan, C. D., & Cowan A. M. (2006). A survey based assessment of financial institution use of credit scoring for small business lending. Office of Advocacy, US Small Business Administration.Google Scholar
  27. Cowton, C. J. (2002). Integrity, responsibility and affinity: Three aspects of ethics in banking. Business Ethics: A European Review, 11, 393–400.CrossRefGoogle Scholar
  28. Cowton, C., & Thomspon, P. (2000). Do codes make a difference? The case of bank lending and the environment. Journal of Business Ethics, 24, 165–178.CrossRefGoogle Scholar
  29. Crédit Agricole Ille-et-Vilaine. (2010). Annual Report.Google Scholar
  30. Crédit Mutuel Arkéa (2011). Annual report.Google Scholar
  31. Defourny, J. (2001). From third sector to social enterprise. In C. Borzaga & J. Defourny (Eds.), The emergence of social enterprise (pp. 1–18). London: Routledge.Google Scholar
  32. Degryse, H., & Van Cayseele, P. (2000). Relationship lending within a bank-based system: Evidence from European small business data. Journal of Financial Intermediation, 9, 90–109.CrossRefGoogle Scholar
  33. Dufwenberg, M., & Kirchsteiger, G. (2004). A theory of sequential reciprocity. Games and Economic Behavior, 47, 268–298.CrossRefGoogle Scholar
  34. Elsas, R., & Krahnen, J. P. (1998). Is relationship lending special? Evidence from credit-file data in Germany? Journal of Banking & Finance, 22, 1283–1316.CrossRefGoogle Scholar
  35. Fehr, E., & Fischbacher, U. (2002). Why social preferences matter—the impact of non- selfish motives on competition, cooperation and incentives. Economic Journal, 112, 1–33.CrossRefGoogle Scholar
  36. Fehr, E., Gächter, S., & Kirchsteiger, G. (1997). Reciprocity as a contract enforcement device: Experimental evidence. Econometrica, 65, 833–860.CrossRefGoogle Scholar
  37. Fehr, E., & Schmidt, K. (1999). A theory of fairness, competition and cooperation. Quarterly Journal of Economics, 114, 817–868.CrossRefGoogle Scholar
  38. Fehr, E., & Schmidt, K. (2003). Theories of fairness and reciprocity—evidence and economic applications. In M. Dewatripont, Hansen, L., & S. Turnovsky (Eds.), Advances in economics and econometrics8th World Congress, Econometric Society Monographs. Cambridge: Cambridge University Press.Google Scholar
  39. Fehr, E., & Zehnder, C. (2006). Reputation and credit market formation. FINRISK Working Paper, University of Zurich.Google Scholar
  40. Ferri, G., Kalmi, P., & Kerola, E. (2010). Organizational structure and performance in European banks: A reassessment. Paper prepared for the EURICSE Conference “Financial Co-operative Approaches to Local Development through Sustainable Innovation”.Google Scholar
  41. GABV (Global Alliance for Banking on Value). (2012). Full report.
  42. Gächter, S., & Falk, A. (2002). Reputation and reciprocity: Consequences for the labour relation. Scandinavian Journal of Economics, 104, 1–27.CrossRefGoogle Scholar
  43. Global Report Initiative. (2011). Sustainability reporting guidelines, version 3.1.
  44. Gouteroux, C. (2006). Le système bancaire et financier français en 2005. Bulletin de la Banque de France, 151, 75–85.Google Scholar
  45. Green, C. F. (1989). Business ethics in banking. Journal of Business Ethics, 8, 631–634.CrossRefGoogle Scholar
  46. Grunert, J., Norden, L., & Weber, M. (2005). The role of non-financial factors in internal credit ratings. Journal of Banking & Finance, 29, 509–531.CrossRefGoogle Scholar
  47. Gutiérrez-Nieto, B., Serrano-Cinca, C., & Camón-Cala, J. (2011). A credit score system for socially responsible lending. CEB Working Paper No 11/028. Université Libre de Bruxelles.Google Scholar
  48. Hudon, M. (2007). Fair interest rates when lending to the poor. Ethics and Economics, 5, 1–8.Google Scholar
  49. Iannotta, G., Nocera, G., & Sironi, A. (2007). Ownership structure, risk and performance in the European banking industry. Journal of Banking & Finance, 31, 2127–2149.CrossRefGoogle Scholar
  50. Jaffee, D. M., & Russell, T. (1976). Imperfect information, uncertainty, and credit rationing. Quarterly Journal of Economics, 90, 651–666.CrossRefGoogle Scholar
  51. Karlan, D. (2005). Using experimental economics to measure social capital and predict financial decisions. American Economic Review, 95, 1688–1699.CrossRefGoogle Scholar
  52. Kitson, A. (1996). Taking the pulse: Ethics and the British cooperative bank. Journal of Business Ethics, 15, 1021–1031.CrossRefGoogle Scholar
  53. La Nef. (2001, 2002, 2003, 2004, 2006, 2010). Annual reports.Google Scholar
  54. Liberti, J., & Mian, A. (2009). Estimating the effect of hierarchies on information use. Review of Financial Studies, 22, 4057–4090.CrossRefGoogle Scholar
  55. Machauer, A., & Weber, M. (1998). Bank behavior based on internal credit ratings of borrowers. Journal of Banking & Finance, 22, 1355–1383.CrossRefGoogle Scholar
  56. McLeish, K. J., & Oxoby, R. J. (2011). Social interactions and the salience of social identity. Journal of Economic Psychology, 32, 172–178.CrossRefGoogle Scholar
  57. Norman, W., & MacDonald, C. (2004). Getting to the bottom of ‘triple bottom line’. Business Ethics Quarterly, 14, 243–262.CrossRefGoogle Scholar
  58. Ory, J. -N., Jaeger, M., & Gurtner, E. (2006). La banque à forme coopérative peut-elle soutenir durablement la compétition avec la banque SA? Finance Contrôle Stratégie, 9, 121–157.Google Scholar
  59. Périlleux, A., Hudon, M., & Bloy, E. (2012). Surplus distribution in microfinance: Differences among cooperatives, nonprofit, and shareholder forms of ownership. Nonprofit and Voluntary Sector Quarterly, 41, 386–404.CrossRefGoogle Scholar
  60. Petersen, M., & Rajan, R. (1994). The benefits of lending relationships: Evidence from small business data. Journal of Finance, 49, 3–37.CrossRefGoogle Scholar
  61. Rabin, M. (1993). Incorporating fairness into game theory and economics. American Economic Review, 83, 1281–1302.Google Scholar
  62. Robert de Massy, O., & Lhomme, G. (2008). Les nouvelles frontières de la formation bancaire. Revue d’Economie Financière, 92, 229–243.CrossRefGoogle Scholar
  63. San-Jose, L., Retolaza, J. L., & Gutierrez, J. (2011). Are ethical banks different? a comparative analysis using the radical affinity index. Journal of Business Ethics, 100, 151–173.CrossRefGoogle Scholar
  64. Scholtens, B. (2006). Finance as a driver of corporate social responsibility. Journal of Business Ethics, 68, 19–31.CrossRefGoogle Scholar
  65. Stiglitz, J., & Weiss, A. (1981). Credit rationing in markets with imperfect information. American Economic Review, 71, 393–410.Google Scholar
  66. Taupin, M. T., & Glémain, P. (2007). Les logiques d’acteurs des finances solidaires contemporaines: Entre innovation et résilience. Annals of Public and Cooperative Economics, 78, 629–661.CrossRefGoogle Scholar
  67. Uzzi, B. (1999). Embeddedness in the making of financial capital: how social relations and networks benefit firms seeking financing. American Sociological Review, 64, 481–505.CrossRefGoogle Scholar
  68. Weber, O., & Remer, S. (2011). Social banks and the future of sustainable finance. London: Routledge.Google Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2013

Authors and Affiliations

  1. 1.Faculté des Sciences EconomiquesUniversité de Rennes 1, CREM UMR CNRS 6211, and CERMiRennes CedexFrance
  2. 2.Université Libre de Bruxelles (ULB), SBS-EM, CEB, and CERMiBrusselsBelgium

Personalised recommendations