Social Finance is finance that pursues both the realization of social value and financial profit. It aims to exert a positive influence on society through financial activities, from providing funds to social enterprises in the form of investment, lending, and guarantees, to grant disbursement and socially responsible investment.
[Social Finance Ⓟ ESG.ONL/ESG Today]
Social finance originated in the cooperative banking and mutual credit unions of 19th-century Europe. At that time, farmers and workers who were financially marginalized pooled their own funds and lent them to one another, and this went beyond the mere pursuit of profit — lending or investing money to those who needed it — to form a finance of solidarity and mutual prosperity that helped the recovery of people and society.
In this way, social finance places greater weight on solving social problems and creating sustainable value than on the risk management and profit-seeking that institutional finance focuses on. Today, social finance is broadening the scope of its activities to include ESG investment, impact investment in social enterprises, and microloans for the financially vulnerable, seeking to simultaneously address social problem-solving, environmental sustainability, and local resilience.
In South Korea, mainstream finance for ordinary people began to draw attention as income inequality and poverty rates increased following the 1997 financial crisis, and the financially marginalized became vulnerable in terms of access to finance. As a financial service that compensates for many of the limitations of institutional finance, Together Making the World (Social Solidarity Bank) is a social bank that has accompanied the birth of social finance in the Republic of Korea. Currently, it carries out diverse activities for the self-reliance of the financially marginalized, from funding to financial education, management consulting, career exploration, and network formation.
At a time when the social contribution of companies and institutions is becoming increasingly important, attention needs to be paid to domestic social banks that contribute to the expansion of social finance as a core tool for solving social problems and are making South Korean society healthier.
by Editor O