Feasible Institutions of Social Finance: A Taxonomy

Simon Cornée (1) , Marc Jegers (2) , Ariane Szafarz (3)

1 CREM - Centre de recherche en économie et management
2 VUB - Vrije Universiteit Brussel [Bruxelles]
3 ULB - Université libre de Bruxelles

This paper unpacks the continuum of social finance institutions (SFIs), ranging from foundations offering pure grants to social banks supplying soft loans. The in-between category includes quasi-foundations granting loans requiring partial repayment. In our model, SFIs maximize their social contribution arising from financing successful social projects, under a budget constraint dictated by their funders. We determine the feasibility of each SFI category. Quasi-foundations appear to be efficient and adapted to low market rates. However, reciprocity from SFI borrowers can elicit a so-called hold-up effect, whereby the SFI charges a high interest rate to its loyal clients.

Mots clés: foundations; philanthropy; social banks; social finance

Domaines: Gestion et management

Simon Cornée, Marc Jegers, Ariane Szafarz. Feasible Institutions of Social Finance: A Taxonomy. Journal of Institutional and Theoretical Economics, 2022, 178 (3), pp.280-310. ⟨10.1628/jite-2022-0010⟩. ⟨hal-03830596⟩