A refreshing aspect of Spanish society is that “Cajas” (Savings Banks or “Caixas” in Catalan) are obliged by law to invest a proportion of their profits back into society. In the case of Caixa Catalunya for example, thirty percent of its income is invested in the form of social and cultural initiatives. In addition, La Caixa, founded here in Catalonia, is the second biggest charitable donor in Europe according to a recent study. In the last 25 years, cajas have continued to boom, accounting for around 54 percent of deposits and mortgages and almost 46 percent of all credit in Spain. It is estimated that within the next few years, cajas will overtake traditional banks – who’s profits go exclusively to shareholders rather than social projects – as the principal lenders and money holders in the country.
Cajas are a typical feature of Spain’s proud regional identities. Most are founded and remain in their region of origin with 46 different ones at the last count across Spain’s 17 different regions – the only nationwide cajas being La Caixa and Caja Madrid. They emerged from a society ravaged by the War of the Independence, with the purpose of insuring small farmers against bad harvests. Founded over 200 years ago by Spanish liberals during the enlightenment, cajas were an immediate success and by 1914 already formed one quarter of the banking community. As they grew, their social role expanded too, directing the savings of the people towards investment and to carry out social work in their respective regions. Since then, cajas have been converted into the comprehensive financial institutions we see today but with a distinctly different role to traditional banks.
This is in contrast to the UK for example where savings banks are almost indistinguishable from traditional banks after Margaret Thatcher liberalised banking laws in 1986. The result was a public scramble for shares in savings banks making a handsome profit for a minority whilst society, which Thatcher famously claimed did not exist, lost out. The result is that today, it is rare to find anything cultural, social or environmental sponsored by a bank in the UK – maybe the odd cricket match if you are lucky. It was speculated that, due to pressure from the EU, Cajas would be privatised in Spain under Jose María Aznars PP government but his dramatic defeat in the election makes that an unlikely prospect now. For the foreseeable future, cajas will continue to invest a significant proportion of their profits into society rather than shareholders.
According to the President of the Spanish Federation of Savings Banks (CECA) Juan R. Quintás Seoane, cajas are impressive proof that big business does not necessarily have to mean exploitation of the community. “As free entities whose ultimate purpose is not maximisation of profit, but rather social progress, cajas are an emblematic business model for the market economy,” says Seoane. The figures are indeed impressive – in 2003 alone, over one billion euros was channelled into social projects by cajas across Spain totalling €12.5 billion over the past 25 years. Each caja invests its money in causes of its own choosing. Enrique Goñi, Managing Director of Caja Navarra, says that one out of every four euros deposited in his caja is spent on social projects. “The funds are spent on social care, the maintenance of buildings and monuments of historical value to society, and also sports,” says Goñi. The work of cajas in the cultural arena is also impressive. In fact, CECA estimates that collectively, cajas contribute a larger budget to art exhibitions than that of the Ministry of Culture.
Barcelona based La Caixa is the biggest caja in Spain.
The main players in Catalonia are Caixa Catalunya and La Caixa. In 2004, Caixa Catalunya made around €247 million of which around a third was invested in social projects. Its charitable operations are split into four main “Foundations” – Fundación Caixa Catalunya (Culture), The Centro Cultural de Caixa de Catalunya in La Pedrera, Fundació Territori i Paisatge (Environment), Fundació Un sol món (Solidarity) and Fundació Viure i Conviure (Social Care). Montse Dueñas explains some of their activities. “Our cultural work has a particular focus on maintaining Gaudí’s heritage such as La Pedrera where we hold a number of exhibitions throughout the year. One of our most successful cultural projects was the Kandinsky exhibition there which was visited by a quarter of a million people – over two thousand per day. We also fund natural conservation projects by buying fields and natural areas from private owners to turn them into reserves for public access like the National Trust do in the UK. Our social projects include community care programmes with a focus on senior citizens, the disabled and people with health problems. This is done either through our own exclusive projects or by working in partnership with other organisations in similar fields.”
In particular, Dueñas claims the creation of Fundació Un sol món in 2000, was an attempt to recapture the original spirit of savings banks – to economically promote the most underprivileged and excluded members of society. “This foundation provides social “microcredits” to people with few or no resources. They can invest this money to in their own business to get it off the ground. It was partly inspired by the work of Grameen Bank in Bangladesh which has helped the poorest parts of society start collectives.”
But with so many worthwhile causes out there, how does Caixa Catalunya choose which projects to fund? “Our social investment objectives are studied by a team of experts,” explains Dueñas. “Each Foundation is then headed by a special committee which matches our social objectives with the appropriate programmes out there.” In the case of La Caixa, at least a quarter of its revenue is invested in similar programmes totalling €255 million Euros in 2004. Last year, it organised almost 13,000 activities in over 1000 towns and cities with close to 12 million people taking part. These activities ranged from educational projects, foreign aid work and hospital initiatives to scientific and cultural exhibitions. Most recently, it has been focused on helping immigrants, the elderly, NGO’s working in South America and those suffering from neurodegenerative diseases, such as Alzheimer’s, Parkinson’s and Multiple Sclerosis.
One of its most well publicised educational projects of recent times was the re-construction of the Barcelona science museum, now known as “CosmoCaixa”. Originally opened in 1981, it was rebuilt last year and is now home to one of the most modern, largest and comprehensive science museums in the world. La Caixa is also well known for funding some of the city’s most high-brow cultural events in the Caixa Forum at Montjuic. This year, it has pledged to focus its social investment in housing vulnerable sectors of society, offering housing at rents below the market rate to social groups such as the young and elderly.
Indoor rainforest in the impressive Cosmo Caixa science museum in Barcelona
So what of the future for cajas? According to financial expert Miguel Ortero, further Spanish integration into the EU will be the next big boost for them. “From a business perspective, ratification of the EU constitution can only be a good thing,” says Ortero. “Deep within its many, many complex acts and articles, the new constitution promises liberalisation and privatisation galore for companies and financial services such as cajas and this will enable them to make even bigger profits and thus invest more in society.” Critics however continue to accuse the big cajas of hypocrisy. They highlight that whilst playing the good Samaritan at home, they are involved in various exploitative initiatives abroad. La Caixa is a stakeholder in Endesa, Repsol, Gas Natural and Telefonica which are all involved in various privatisation projects across Latin America. Many indigenous populations have seen their land and resources usurped by these companies whilst prices of basic essentials such as water and electricity have rocketed. Closer to home, La Caixa has been criticised for its investment in weapons manufacturing firms Daimler Chrysler Aerospace and Telefonica Sistemas, selling-off land designated for social projects to private investors as well as engaging in the type of property speculation that has driven property prices into orbit.
However, most cajas in Spain continue to be small-scale parts of regional identity where they play a valuable local investment role. In a world of footloose and fancy-free corporations, cajas remain a rare example of business with responsibility.
I think part of the reason why the banks in Spain did not end up getting as much criticism as British banks was because some of the smaller cajas that are much more genuinely “local.” Caixa Catunya may be too big now for this statement to apply to them though.
There is an old fashioned honesty to my bank (Caixa Penedes) where, at our closest branch they know us by name. There are about a dozen branches in the town of about 30,000 people. If one branch is busy you can just go to another one only a few minutes walk away.
I think banking of this kind is less likely to abuse the systems.
You may be right Brett if you’re referring to Spanish reaction to the financial crisis. I agree too that there is something pleasant about the more “local” feel to many cajas.
However, we don’t see what they do behind the scenes and although there is tighter regulation on Spanish banks than in many countries, I’m sure that cajas speculate as recklessly as commercial banks to make more profits. It’s just that at least some of those profits go back into society. Nevertheless, cajas are a good example of how banks can be made to work at least in some measure for the benefit of wider society although in the bigger picture, their contribution is minuscule.
On a separate point, I think it’s inevitable that many of the smaller cajas will eventually be absorbed by bigger ones in Spain. It’s amazing that there are still so many in Spain but especially in the current economic climate, I just can’t see how many of the smaller ones will survive.