The inclusion of ‘Promoting the Growth of the Social Solidarity Economy’ among the government’s national agenda items reflects the urgent recognition that our society can no longer be sustained by the logic of money alone. The core task of ‘Activating Social Solidarity Finance’ contains the demand of the times that finance must restore its original role as a public good. Social finance goes beyond the mere pursuit of profit to aim for a ‘people-centered economy’ that serves humans and communities and helps those in need to rise.
One of the areas in which social solidarity finance is most urgently needed in the Korean context is ‘Inclusive Finance.’ In the modern financial market, accessibility is starkly divided according to the size of assets and credit scores, and citizens below a certain threshold are entirely deprived of opportunities to access financial services. Under a ‘financial system that takes away the umbrella when it rains,’ they easily fall prey to high-interest opportunity costs or predatory lending. Inclusive finance fills these deficiencies and provides opportunities for financial access to those excluded from the financial market, thereby restoring the dignity of individuals and breaking the cycle of deepening social inequality — this is its social value. The most important factor in carrying out this special and difficult mission is social solidarity finance intermediary institutions such as the Together Making the World (Social Solidarity Bank), which builds demand-centered financial delivery systems. Unlike existing financial institutions that demand collateral or guarantees and avoid the risk of loss, intermediary institutions of a social solidarity finance nature play the ‘special’ role of accepting risk and jointly seeking solutions.
Inclusive finance must be viewed not as re-supplying finance to those already struggling with low credit scores and heavy debt in the institutional financial system by imposing a ‘burden,’ but as creating ‘an opportunity for recovery.’ Behind the heartbreaking stories of entire families taking their own lives that are frequently mentioned in the press, situations of financial crisis are almost always present. Amid such crises where cash flow is severed, finance supplied at the right time under favorable terms becomes a lifeline that creates new opportunities for individuals and families.
Even if problems such as existing debt exist, by supplying finance in various ways tailored to the individual’s circumstances, opportunities can be created for the person concerned to recover on their own. Repaid money is used again for other people in crisis situations, creating a virtuous cycle, and through the experience of participating as a producer, the sense of solidarity and responsibility that ‘the money I repaid becomes someone’s next opportunity’ is also cultivated together.
The creation of social value through inclusive finance is also recognized as an important task in the United States, where financial inequality has deepened. The Mission Asset Fund (MAF), a non-profit financial institution in San Francisco, is a representative case that helps low-income households and immigrant families for whom entry into the mainstream financial system is difficult. Inspired by the Mexican communal fund method called ‘tanda,’ it operates the ‘Lending Circles’ program, in which participants take turns receiving interest-free small loans based on mutual trust and report their repayment records to credit rating agencies, helping them build credit. This opens the path to entry into the institutional system for those for whom financial access was impossible due to lack of credit, demonstrating that inclusive finance can create the new social value of ‘credit formation.’
In this way, the inclusive finance models of the Mission Asset Fund and the Social Solidarity Bank go beyond simple financial support to create social resilience based on trust and relationships. This leads to the financial independence and restoration of dignity of individuals, and ultimately realizes the public value of reducing costs for society as a whole and building a tighter financial safety net.
In an era where everything is judged solely by numbers, the stories of people are gradually disappearing from finance. Finance is not an end but a human-made means and tool, yet it has long since fallen to the status of a ‘product’ selectively sold by providers. However, social solidarity finance — which fills the places of exclusion in a mutually beneficial way and speaks of trust in people and their potential within it — will become a new alternative of ‘cooperation and solidarity’ for our society, which has become harsh and increasingly divided.
by Ahn Jun-sang, Standing Director, Together Making the World (Social Solidarity Bank)