3.1.3.3 Cooperatives with a social purpose in the financial sector – Microstart

Microfinance has been defined as the provision of direct or intermediate financial services to marginalised individuals, entrepreneurs and communities that have no access to commercial financial banking services.1 Microfinance services are provided by a variety of microfinance institutions in Belgium among others, cooperatives and non-profit organisations, with double bottom line objectives which aim at creating not only financial but also social returns.2 Microfinance institutions in Belgium are considered social enterprises.3 Many microfinance social enterprises have been incorporated as cooperatives and are accredited by the Belgian National Cooperative Council (hereafter ‘CNC’) that they fully comply with the cooperative principles.4 Other cooperatives have adopted the VSO social purpose label by introducing the legal requirements in their AoA.5

Microstart is a microfinance social enterprise which is located in Brussels, Belgium. Microstart was incorporated in 2011 by the French non-profit organisation Association pour le droit à l’initiative é conomique (hereafter ‘Adie’) and the bank BNP Paribas Fortis with the financial endorsement of the European Investment Fund (hereafter ‘EIF’). Adie is the founder of Microstart, and one of the largest microfinance institutions in Europe. It provides microcredit and microfinance to French micro-entrepreneurs. With the establishment of Microstart, Adie aimed at the extension of its successful microfinance practice to Belgium (Interview with LH, 16 June 2015).

Microstart’s organisational structure combines the operating and financing aspects of two legal entities and corresponding organisations, i.e. Microstart, a limited liability cooperative with a social purpose, and Microstart Support, a non-profit organisation. Microstart has been assigned with the task to provide microcredit and microfinance to clients who are excluded from the traditional Belgian banking system, such as unemployed people, jobseekers, recipients of welfare support and self-employed persons. Microstart Support is a non-profit organisation with the task to provide coaching and business development services to clients who receive microcredit and microfinance.

Microstart is a cooperative that has adopted the social purpose and accordingly it should comply with the VSO legal requirements. The members/shareholders of Microstart are not allowed to strive for any pecuniary gain (profit) (AoA, Article 1). The cooperative is required to act both financially and commercially, directly or indirectly, in accordance with the social purpose mentioned in its AoA. Microstart is a for-profit legal entity. However, according to Microstart’s AoA, the distribution of dividends to its members/shareholders is not allowed (AoA, Article 29). On the contrary, profits are used for the development of new agencies, the design of new projects, the elimination of costs, and rewards to employees (AoA, Article 29).

Adie and BNP Paribas Fortis have purchased the majority of Microstart shares. The AoA of Microstart provide for three types of shares: (i) Type A shares that are reserved for Adie; (ii) Type B shares that are reserved for BNP Paribas Fortis; and (iii) Type C shares that can be purchased by other legal and natural persons. In Microstart, all types of shareholders ought to be represented in the board of directors. Microstart Support is also represented with one member in the board of directors. The general assembly has the competence to appoint additional directors if the capital of the cooperative exceeds a certain amount (€1,210,000) (AoA, Article 17). The president of the board is an independent director elected and appointed by the general assembly.

Microstart is governed by a board of directors. The board is appointed as the competent organ to exercise the broadest powers and activities necessary for the cooperative to achieve the social purpose. The board of directors has been elected directly by the general assembly. At Microstart the general assembly is convened annually to decide on issues of major importance for the continuation of Microstart’s activity, i.e. to review and accept the annual accounts, to decide on the use of profits, and to discharge the liability of directors (AoA, Article 21). Decision-making processes at a general assembly level are subject to the VSO legal requirement according to which no one is allowed to participate in the voting procedure with more than 10% of the total number of votes. However, as of today, all Microstart decisions in the general assembly have been taken unanimously (Interview with LH, 16 June 2015). Finally, even though Microstart has adopted the majority of the legal VSO requirements, its AoA exclude the provision of membership rights/shares to employees and other stakeholders. A member of the board of directors mentioned that ‘we don’t give membership rights to employees and so I would be surprised if that particular aspect would be in the statutes’ (Interview with LH, 16 June 2015).