The growth of social cooperatives: focus on financial resource management
by
Tuccillo Danilo
Second University of Naples
Coauthors: Caterina Ferrone (University of Salerno) Francesco Agliata (University of Naples Federico II)

To guarantee the growth and the stability of a firm is necessary to achieve both the economic and the financial equilibrium. The non profit organizations are reaching a certain maturity on the tools that concern economic equilibrium, while in the management of financial position, probably there is an insufficient acquisition of suitable knowledge. In this organizations we often can observe a poor knowledge on financial tools, and the lack of the necessary competences to manage them.

In Italy the Third sector is showing a constant but slow growth (THOMAS, 2004). The factors that have determined this latest phenomenon can be identified in:

- a set of fragmentary rules not always so clear and useful for the third sector;

- a low level of managerial attitude in non profit organizations;

- the difficulties in financial management, generated by a low attraction both of debt and of equity financial resources.

Our study is based on the business studies of the social enterprises in Italy (BORZAGA-DEFOURNY, 2001), with particular focus on the social cooperatives (LIONZO,2002. TRAVAGLINI, 1997), with an analysis of the financial aspect in such typologies of firms (FIORENTINI, 1996. PACE, 2004. HULL-LIO, 2006). In consideration of the three factors of weakness in Third sector we want to focus on the third one, described as the weakness in the financial management.

We start from a description of the main causes (MANELLI,1996. MAROTTA, 2004) of the problem:

- Institutional constraints.

- Legal constraints.

- Production constraints

The aim of our study is to propose an analysis of the characteristics and of the effects of a particular financial tool, the "participation loan" proposed by a specific financial intermediary. We focus on this specific financial instrument because we identify it as a possible solution to the problem of the undercapitalization in the social cooperatives (MAROTTA, 2004. BARBETTA, 2004).

Our research questions are identified in the followings: is this instrument useful for the resolution of the financial problem in a social cooperative? What are its effects on the cooperatives’ financial structure? Are there also some indirect advantages in the financial management, in terms of relationships with the other financial intermediaries?

The search method is the deductive method, with a case study to show some empirical evidences related to the search questions.

In the first step of analysis we want observe the financial condition of a social cooperative before using the “participation loan”. After we will make a comparative study with the modified financial structure after using this financial instrument. The comparative study is conduct by the financial reclassification of asset and liabilities and by the ratio analysis. After a generic analysis based on the liquidity and leverage ratios, we want make a further investigation on the temporal effects on financial structure, with evidences both on short-term effects and on long-terms effects. Moreover, we want analyse the modification in the other financial relationship, and in particular if there are modifications in the cost of debt capital. Other considerations we want purpose are related on the effects of this instrument on the autonomy.

We think that this study will show the effects of this specific financial instrument. Moreover, it may suggest the adoption of similar solution in other country. If the study will show the attitude of this instrument to solve some particular financial problems, this one should be used in the country with similar financial conditions.

References

Barbetta G.P., Cesarini F. (a cura di), La finanza specializzata per il Terzo Settore in Italia, Bancaria Editrici, Roma, 2004.

Borzaga C., Defourny J.(eds), The Emergence of Social Enterprise, Routledge, London, 2001.

Lionzo A., La cooperativa sociale Originalità della formula, economicità e strumenti di analisi, Franco Angeli, Milano, 2002.

Manelli A., La gestione finanziaria dell’impresa cooperativa, Edizioni Seam, Roma, 1996

Marotta G., La finanza del terzo settore e Basilea 2, relazione presentata al convegno “Finanza strutturata e non profit: nuove opportunità aspettando Basilea 2, ISSAN, Trento, 17-18 giugno 2004.

Thomas A., The Rise of Social Cooperatives in Italy, International Journal of Voluntary and Nonprofit Organizations, Vol. 15, No. 3, September 2004.

Hull C.E., Lio B.H., Innovation in Non-profit and For profit Organization: Visionary, Strategic and Financial Considerations, Journal of Change Management, Vol.6, No. 1, March, 2006

Date received: October 14, 2007