An introduction to MAG -Mutua Auto Gestione-, a network for alternative financing in Italy

In Italy there are 10 MAG cooperatives (Mutua Auto Gestione). Their aim is to operate as alternatives to the formal bank circuit and to promote social and cooperative economy, ecological and solidarity projects. MAGs operate according to some basic principles. These include self-management of funds by the members of the financial cooperative and the participation in the decision making process on the allocation of funds. Although they are not part of a single national body, the 10 MAGs have various features in common. What follows is a summary of these common features together with an independent survey of each.

In order to become a MAG member one has to go through a selection process. Basically this means verifying that the new member shares the MAG’s basic ideals and aims. There is no other criteria for selection and no importance is placed on political affiliation. There are no charges for deposit operations while interest rates from savings are taxed at 12,5%, which under Italian law must go to the Treasury of the Province. Traditional banks normally charge a 30% interest rate plus other charges for different services. Mag members contribute to the cooperative fund through their membership fee. This social capital is meant to give the cooperative a stable financial base. No other charges or payments are required of MAG members. They can deposit their savings as loans to the cooperative. MAGs deposit savings in a bank but try to limit as far as possible the time they are kept on deposit there. The aim is to use these savings only for investment in projects supported under the MAG financial scheme. Today capital is mainly circulated amongst MAGs themselves.

MAG members usually receive between 6 and 8% interest, depending on the duration of their deposit. MAG members can choose their intrest rates themselves. Some of them are highly motivated and choose to receive very low interest rates in order to support MAG activities. Passive interest rates agreed with cooperative that receive loans from MAGs are around 13%. It is a very favourable rate. Traditional banks would not finance non profit-making or social oriented organizations, or would ask for much higher interest rates.

MAGs do not request property guarantees. Loans are agreed to on the basis of the quality of projects and on individual guarantees. Usually the procedures for repayment are agreed to in advance by the Mag and the organisation requesting the loan. This is usually based on an analysis of the kind of project submitted for financing, its feasibility and the profile of the organisation requesting the loan. In order to obtain a loan, a person/organization must be a member of a MAS and share MAG ideals and aims. To obtain the loan a member must submit a proposal for a project, including the social qualities and financial feasibility of the activity. Organisations must also present all the documents relating to their structure and budget. MAGs are allowed to finance individual members only if they have the status of "individual enterprises", under Italian law number 197 (July 1991). This law considers a MAG to be a "simple financial agent". As such, MAGs can only finance financial activities; no consumer credit is allowed.

MAGs also function as consultants for their members and for other organizations and admnistrations, on managerial and financial matters. MAGs are not real banks. They do not provide all the services of a traditional bank. According to the MAG statute, it is the responsibility of the Board of Directors to decide upon new financial projects. The Board of Directors also consults other members and experts to contribute to an anlysis of the new request for finance, before taking decisions. In order to remain independent, MAGs do not belong to any Italian cooperative movement or federation. MAGs can therefore work with and include among their members organizations and cooperatives with different views and which are affiliated to different national umbrella organisations such as the Cooperative League (Lega delle Cooperative)or the Cooperative Union (Unione delle Cooperative). In all MAGs voluntary work still plays avery important role. The main problem facing MAGs today are difficulties in expanding the network in Southern Italy. A positive element is the high rate of repayment: less than 2% of loans are not repayed while normal banks have to face a 9-10% repayment defecit.