A better way to think about banking?

Financial crises are sometimes used as evidence that banks’ profitability can come at the expense of customers and communities. But those who take this view forget the crucial idea that financial institutions also have a social mission and are uniquely placed to have a large positive social impact, if they are run with that in mind.

In Europe, a unique example of this is MicroBank, a wholly-owned subsidiary of Iberian leader CaixaBank, whose entire business model is, essentially, a project to drive financial well-being and progress throughout all levels of society and community, contributing to economic growth and job creation, to financial inclusion, and to generating a positive social impact.

Juan Carlos Gallego, chairman, MicroBank

€8bn in social financing in 15 years: Funding projects that change lives

MicroBank is the biggest microfinance bank in Europe. It has just celebrated its 15^th anniversary, and since its inception, it has financed over €8bn in almost 1.3 million social projects in Spain, in sectors as diverse as social economy, education, innovation and health.

Of that €8bn, more than €5.1bn was in the form of microloans primarily directed specifically to needy families, while more than €2.6bn was granted to launch or consolidate entrepreneurial businesses and microenterprises. Over this period, MicroBank's efforts have led directly to the creation of approximately 300,000 jobs, and more than 96,000 new businesses. In addition, more than €700m to date has been used to fund the social economy, education, innovation, and health projects.

In 2022 alone, MicroBank, signed 100,323 contracts in Spain worth a total of €1.02bn, 6.6% higher than 2021. Within this total, lending to vulnerable families experienced the most growth, and financing for groups with few resources with specific needs reached €636.5m (+16%). The average value of these microloans was €7764 (+23%).

As Juan Carlos Gallego, Chairman of MicroBank, says: “In 2022, MicroBank has again demonstrated that it is able to adapt to changing circumstances, always prioritising support for the most vulnerable groups, and will continue working towards financial inclusion, progress and wellbeing.”

Funding female entrepreneurs

Andrea Martín, entrepreneur, Splash Baby Spa

A key element of MicroBank’s mission is the financing of entrepreneurs, self-employed workers and micro-enterprises with the aim of helping to start up or consolidate small businesses. In 2022 alone, 17,455 direct jobs were created with support for entrepreneurs, and 5876 businesses were launched with the financial support provided by the bank.

In 2022, the businesses supported by MicroBank contributed €4bn to the Spanish economy, which is equivalent to 0.3% of GDP. According to a study by PIMEC, 69% of entrepreneurs believe that they could not have started their business, or could have done so only with great difficulty without the MicroBank loan.

In line with its commitment to financial inclusion, the bank has a great track record of financing female entrepreneurs. In 2022, close to half of the beneficiaries who used the microcredit to start up new businesses were women (46%).

In order to be able to keep moving forward and support women, MicroBank has specific collaboration agreements to support female entrepreneurship. This includes, for example, the agreement with the Spanish Women’s Institute through its Women’s Entrepreneurial Support Programme (PAEM), which is implemented through the chambers of commerce. The programme aims to provide information, advice and business support to women to promote self-employment and entrepreneurship.

A great example of this is Splash Baby Spa. Andrea Martín always wanted to be an entrepreneur, but it was not until her first baby was born that she decided to make her dream a reality. Her baby was born prematurely, and she was very concerned about him developing correctly, which led her to found Splash Baby Spa. This network of centres combines aquatic stimulation with child massage to boost the baby’s motor, cognitive and personal development, so Andrea did not hesitate and decided to open her own establishment.

However, to do this she needed financing and for this she needed a bank that was prepared to provide a microloan, but also the business planning and advisory support she needed. MicroBank granted the €25,000 microloan to Andrea to launch the project without the need to obtain a guarantee.

Innovative financing for innovative businesses

MicroBank is also a key funder of innovative technology. Borja Templado identified a need for educational institutions, schools, teachers and parents to provide extracurricular technological training with a strong commitment to educational robotics. He founded Robots in Action driven by the belief that he was creating an essential learning methodology to improve the future employability of new generations. Through learning based on robotics and coding, the programme educates children between the ages of 3 and 16 in STEAM disciplines with the aim of making them technologically literate and well prepared for the modern world.

Thanks to MicroBank's support, with a €30,000 loan, Borja was able to scale up his business and reach more people. Today, Robots in Action is a firmly established venture in the field of educational robotics, a sector with a strong social impact as it helps to empower young people today for tomorrow's world of work.

Cristina González, general manager, MicroBank

The importance of collaboration across borders

Key to MicroBank’s success — and a lesson for other institutions who wish to increase their social impact — is its relationships with stakeholders. CaixaBank, one of them, has supported it since its inception, through the financing needed for its activity growth and commercialising its products through the more than 4000 branches of its commercial network. Moreover, MicroBank works with 101 own and city councils, 41 chambers of commerce, 100 non-profit organisations, nine universities and schools and 40 other local and regional entities.

The bank has also extended its model beyond Spain, as it also collaborates with several European institutions. Likewise, MicroBank has the support of the main European institutions dedicated to promoting entrepreneurship and microfinance. There are the European Investment Fund (EIF), the Council of Europe Development Bank (CEB) and the European Investment Bank (EIB).

In 2022, the European Investment Fund (EIF), CaixaBank, and MicroBank, reinforced their support for Spanish small and medium enterprises, and mid-caps, by providing them with guarantees worth €637m through the first InvestEU portfolio guarantee agreement in Spain. CaixaBank and MicroBank will use these guarantees to mobilise more than €1bn in financing that will help firms to reach their full potential.

As Marjut Falkstedt, CEO of the European Investment Fund (EIF) states: “We are delighted to be working with MicroBank to facilitate access to financing for the self-employed and microenterprises in Spain. Our goal is to help Spanish companies that move towards a greener, more digital and inclusive future and, in this sense, our vision fully aligns with that of MicroBank.”

Growing further

Growth is paramount for MicroBank. As Cristina González, MicroBank’s general manager says: “At MicroBank, we have targeted our efforts towards ensuring that no one is left on the sidelines in this highly complex context. We are committed to further increasing our impact in 2023 and to forging new alliances to strengthen our social purpose and consolidate our social banking management model.”