Approach to the cost of public policies to support the financing of entrepreneurship in cooperatives

Abstract

The contribution of cooperatives to the attainment of the Sustainable Development Goals is recognised at an international level. The 2030 Agenda includes the need to implement comprehensive, effective public policies that promote the development of Social Economy organisations to maximise their impact. One of the most important sources of financing for Spanish entrepreneurs is bank loans, then these credits are going to be necessary for launching new cooperative projects linked to sustainable development activities. However, obtaining them is usually subject to the provision of guarantees, which can be a setback. This difficulty can be mitigated by Mutual Guarantee Institutions (MGI). The aim of this research is to analyse the failure ratio of loans guaranteed to newly created cooperatives by Spanish MGIs between 2003 and 2012. This period is pertinent as it covers a period of expansion until 2008 followed by the economic crisis. The results revealed that cooperatives performed better than other business models and permit a comparison, considering various classification criteria (size of the company, sector of activity and destination of funds), of the cost of default of the overall portfolio and that corresponding to cooperatives, with a generally more favourable situation being observed for the latter, as they present lower ratios. The conclusions are relevant for MGS managers, financial institutions and especially for public administrations, and can be considered when estimating the contribution of technical provision funds to support the financing of sustainable entrepreneurial initiatives through cooperatives.