**4. The embeddedness of the institutional credit system**

In the previous section I have drawn attention to the alternative and multifarious forms of financial help which small entrepreneurs can mobilize or can have access to, when the institutional credit system turns down their loan applications - or when it is feared that they will do so. In this section, by contrast, I turn to the institutional system itself, to discuss a much more elusive matter: the hegemonic aspects embedded in the social relationships built up between two influential local institutions in the area: the local bank and the artisan association. With respect to these elements, ethnographic details are quite sketchy due to the discretion and secrecy that notoriously surrounds banking affairs. Nevertheless, they provide some material worthy of discussion. First of all, though, it is necessary to turn to local history to briefly discuss the circumstances surrounding the origins of the local bank, the *Cassa Rurale*.

At the turn of the XX century, a new generation of parish priests in Brianza stood out for their social activism as a pragmatic way to confront and contrast socialism that was trying to creep into the local communities among peasants and workers. In a short period of time they set up an effective network of associations, such as mutual aid societies, local newspapers, cooperative bakeries, dairy cooperatives and local banks, mostly modelled on the cooperative organizations of the Christian socialists and the *Gewerkschaften* created in England and Germany respectively, a few decades earlier.

On the whole, the *Casse Rurali* became the most successful financial undertaking of clerical activism in rural areas, for they paved the way for the eventual development of small scale industrialization. In Italy in 1897 there were already some 779 Catholic financial institutions of this kind in contrast to 125 institutions that were liberal leaning. Most of them (about 90 percent) mushroomed in the towns of the North (Degl'Innocenti, 1978), despite the presence of older and well-established local banks in the same municipalities. If the development of the former was never obstructed, it was because they were not thought to be in competition with the latter. In the area where I carried out most of my fieldwork research, for example, there were two branches of the Cassa di Risparmio delle Provincie Lombarde (CARIPLO), established in 1823 by the Central Commission of Charity (Commissione Centrale di Beneficenza) in order to cope with the tragic consequences caused by the famine and epidemics that had hit vast areas of Lombardy during 1815-17. As a banking institution, though, it soon created financial links with the local élite, becoming a means of capital accumulation for the rich landowners and industrial capitalists, and a safe saving account office for the middle classes (Conigliani, 1905). Only with the increasing industrialization in the last decade of the Nineteenth century were a small number of peasants, factory workers and artisans able to create small saving accounts in this bank; but in most cases, they were unable to get loans (Conigliani, 1905). Thus, the creation of the *Cassa Rurale* - a general partnership with unlimited liability - meant for the associates and their families the provision of a little liquidity in case of necessity, without turning to landlords or usurers, who then would ask for repayments at exorbitant interest rates.

partner's shares as well as the used machinery and moved their workshop to a nearby town, in a formerly brick-making plant where two large hangars had been divided up and rented

In the previous section I have drawn attention to the alternative and multifarious forms of financial help which small entrepreneurs can mobilize or can have access to, when the institutional credit system turns down their loan applications - or when it is feared that they will do so. In this section, by contrast, I turn to the institutional system itself, to discuss a much more elusive matter: the hegemonic aspects embedded in the social relationships built up between two influential local institutions in the area: the local bank and the artisan association. With respect to these elements, ethnographic details are quite sketchy due to the discretion and secrecy that notoriously surrounds banking affairs. Nevertheless, they provide some material worthy of discussion. First of all, though, it is necessary to turn to local history to briefly discuss the circumstances surrounding the origins of the local bank,

At the turn of the XX century, a new generation of parish priests in Brianza stood out for their social activism as a pragmatic way to confront and contrast socialism that was trying to creep into the local communities among peasants and workers. In a short period of time they set up an effective network of associations, such as mutual aid societies, local newspapers, cooperative bakeries, dairy cooperatives and local banks, mostly modelled on the cooperative organizations of the Christian socialists and the *Gewerkschaften* created in

On the whole, the *Casse Rurali* became the most successful financial undertaking of clerical activism in rural areas, for they paved the way for the eventual development of small scale industrialization. In Italy in 1897 there were already some 779 Catholic financial institutions of this kind in contrast to 125 institutions that were liberal leaning. Most of them (about 90 percent) mushroomed in the towns of the North (Degl'Innocenti, 1978), despite the presence of older and well-established local banks in the same municipalities. If the development of the former was never obstructed, it was because they were not thought to be in competition with the latter. In the area where I carried out most of my fieldwork research, for example, there were two branches of the Cassa di Risparmio delle Provincie Lombarde (CARIPLO), established in 1823 by the Central Commission of Charity (Commissione Centrale di Beneficenza) in order to cope with the tragic consequences caused by the famine and epidemics that had hit vast areas of Lombardy during 1815-17. As a banking institution, though, it soon created financial links with the local élite, becoming a means of capital accumulation for the rich landowners and industrial capitalists, and a safe saving account office for the middle classes (Conigliani, 1905). Only with the increasing industrialization in the last decade of the Nineteenth century were a small number of peasants, factory workers and artisans able to create small saving accounts in this bank; but in most cases, they were unable to get loans (Conigliani, 1905). Thus, the creation of the *Cassa Rurale* - a general partnership with unlimited liability - meant for the associates and their families the provision of a little liquidity in case of necessity, without turning to landlords or usurers,

**4. The embeddedness of the institutional credit system** 

England and Germany respectively, a few decades earlier.

who then would ask for repayments at exorbitant interest rates.

out to small workshops.

the *Cassa Rurale*.

The first subscribers to the local cooperative bank were 28 male family-heads, all residing in the same town where it still stands today: 15 peasants, 6 wage-workers, 6 artisans (1 mason, 1 carpenter, and 4 weavers), and 1 costermonger. The parish priest and another peasant man acted as legal witnesses to the subscription procedures. In the original text of the deeds (dated 29 April 1903) regarding the constitution of the bank, the hand-written document shows the extent to which Catholicism provided the ideological basis for the drawing up of the contract (indeed carried out under the guidance of the local parish priest), and consequently, it gives us a hint of the role this institution was going to play in the community. The opening article states that "the association has the purpose of improving the religious, moral and economic aspects of the associates. Any political end is excluded". The fourth article sets the cultural and spatial boundaries of the association by stating that only individuals who were honest, moral, and expressly "not against the Catholic Church, and that reside in the town or in the surroundings", could join the *Cassa rurale*. Net profits would go to build up the reserve funds of the cooperative, but should the association make profits exceeding its needs, money would be given away as charity or for public purposes (art. 9). Other than stressing Catholicism, the text of the document addressed the importance of the territory and its community, within which the institution would operate and accomplish its social aims. Thus, the cooperative bank - created to provide some measures of economic protection for land-tenants, workers and artisans, particularly resulting from the widespread problem of indebtedness - did by all means seek to conflate moral and institutional goals. Not only did it promote the economic emancipation of the lower classes within a context of social solidarity to minimize class conflicts; but it also became the main source of credit for other emerging cooperatives, in need of money for their activities.

There is another point to consider and that may give us a hint of the level of embeddedness of local credit institutions. Being ideologically well defined, such cooperative institutions were not easily accessible to everybody. Indeed, there were some families, for example, who voluntarily excluded themselves from the cooperative system because of their socialist ideas, while others did not get access to membership for reasons I was unable to find in documents. The exclusion must certainly have caused discontent. An indication of this is given by the embittered account of Mr. Virginio Ratti (entrepreneur and founder of the local artisan association), who disliked the personalistic style adopted by the local cooperative bank that he regarded as an institution run by "a clique of Catholic bigots" only interested in helping the businesses of their own friends. His account refers to the years after the war; however, given that at the time the cooperative was still very small and close to its original type of organization, I gather that his view may well reflect the opinion other people had during the early decades of its creation. Interestingly, similar complaints can be still heard today toward the same bank, despite its large expansion. It is hard to prove the reliability of these remarks, nonetheless I find them interesting. The bank's historically and deeply local roots, its commitment to operate in this territory and the personal connections between the board and the local entrepreneurs may inevitably cause tensions with specific groups and individuals. Such tensions might denote the level of intimacy that got established between the bank and some parts of its community, and might reveal the conflicting interests at stake. Yet these characteristics have kept the bank away from risky transactions on derivatives and other hazardous financial instruments in the global market. Investments are aimed to increase and sustain local business and financial speculation is eschewed.

Small-Scale Entrepreneurship in Modern Italy –

reproduced weekly in the decision making process of the Board.

indolent worker8.

know what it means to work!"

An Ethnographic Analysis of Social Embeddedness in the Access to Capital and Credit 251

a seniors home, and the regular sponsorship of a whole series of local events all year around, from bicycle races and classical concerts, to street festivals and firework displays. The close relationship between these two institutions is thought to facilitate artisans' access to credit, mainly for one reason. Unlike other banks operating in the area, the Board of *Cassa Rurale* (now renamed *Banca di Credito Cooperativo*), the organism in charge of granting loans, meets weekly on Mondays. Thus an artisan can already find out in only a few days whether or not his/her application has been accepted. However, the decision-making process that lies behind the granting of credit is not always impartial, but rather guided by personal relationships and ideological convictions. Mr. Enzo Panini, the nephew of the first vicepresident and the son of a former president of the *Cassa Rurale*, is both a member of the Board of the artisan association and a regular auditor in the Board of *Cassa Rurale*. He explains that collateral security is not always a *conditio sine qua non* to receive a loan. For example, the work order contracts from a client-firm that the applicant presents in his/her application are viewed as assets, provided that this firm is known for its good reputation. The reputation of the artisan does count as much. As I learned from many informants, though, this word bears nuances that mask critical issues. The reputation of a client-firm refers to its determination to pay its suppliers regularly and to establish a steady collaboration with them. Rather, the reputation of an artisan refers to his/her (family) predisposition to work 'well' and 'hard', and by virtue of this moral quality, s/he may obtain sponsorship within the Board and outside it. But the principle of 'working hard' is not a neutral statement; it is politically loaded, it holds an ideological assumption that is

Admittedly, such a reading without any specific example leaves my assumption unexplained empirically. However, if I look at the organizational structure of the artisan association, I see the same élite ruling and a clearly recognizable ideological component at work, evident, for example, in the president's preoccupation with addressing in every public speech (and in several conversations with me) the importance of the values of the family, work, and Catholicism that are contained in the artisan profession. It is possible that Mr. Faloni's personal problems with the artisan association might have arisen out of his 'bad' reputation as a 'Communist', by virtue of his past role as a union representative. Among entrepreneurs, such a derogatory expression surfaces occasionally in everyday speech, to assume the metonymic meanings of trade unionist, trouble maker, or even

8 In Italian the expression is "fare il comunista", that is, "to behave like a Communist". A fellow former worker of Mr.Faloni referred to his colleague using this term in a unambiguous derogatory fashion. Once in a public gathering, I observed for the first time this metonymy being staged during a discussion with other artisans. I was publicly introduced by the president of the artisan association to an audience of artisans during an evening meeting organized by this association to exchange Christmas greetings between its members and the mayor of the town. I mingled with a group of men who started asking me questions regarding my research. One of these men, an upholsterer, had been in the 1970s both a worker in a large factory near Milan and a union representative. While conversing with me about those days as a worker, he was interrupted by a couple of listeners who, mocking him and joking about his experience, said to me in Milanese dialect: "What work? He has never worked! He was one of those *sindacalisti (*trade unionists) carrying three newspapers under their arm to read while the 'real' workers would sweat on the shop floor. But the good times are over." Addressing him he added, " Now you

The much more recent history of the local artisan association intertwines with that of the local bank. As I said above, the association was founded by Mr. Virgilio Ratti (the first president) and Enzo Panini (the vice president), whose brother had been president of the *Cassa Rurale* right after the war. Despite this kin connection, there was no apparent relationship between the two institutions in this period. The association has always defined itself as a non-political initiative, even though the Catholic slant - or, in Mr. Ratti's words, the "non-Communist mentality" - of the administrative board has always been a matter of fact. Its affiliation to Confartigianato, the national league of artisans that groups together all the Catholic-based local associations, casts no doubt on this point. Mr. Ratti recalls that the input needed to form the association came from the Artisan Union of Monza, which was urging the formation of Catholic-based associations to contrast those that were being formed by the Communists. "In the aftermath of the war Communism was very strong. After I was contacted, I managed to put together a bunch of artisans.... fifteen showed up at the first gathering, enough to create the association formally. Then we went to every nearby town to recruit as many artisans as we could. They needed everything and there was nothing. Metal workers needed iron, but they couldn't find it; cabinet makers needed timber, and there was no timber; everybody needed coal, and there was no coal. But we were able to get them all, by means of the coupons. We would also help members with the paper work, such as bookkeeping, tax forms, receipts, payroll,... these kind of things. "

The board members of the artisan association began to strengthen their ties with the bank when Mr. Ratti resigned in the 1960s and the Panini family consolidated its influence. As for the co-operative bank, by the end of the 1960s, it had grown considerably, mainly through investments in housing (which also helped expand the number of accounts and customers). It was in this period that the collaboration with the artisan association became more concrete. Overtime, an increasing number of artisans acquired membership in the cooperative bank. It is interesting to notice that according to the previous bank statutes - in force for 40 years - membership was open to peasants, workers, and artisans residing in the area. Subsequently, though, the term "workers" was dropped from the newly approved bank statutes. As for the peasants, they were turning into either full-time workers or artisans; hence, the only group left that would be eligible for membership was the artisan class. Unchanged was the prerequisite of residing in the towns hosting the bank headquarter and the bank's operating branches. Bank membership had evident benefits for artisans for it would facilitate access to banking and financial services, such as savings accounts, transacting deposits, and credit lines, at a lower than average cost. In 1970s, the artisan association moved into the new building of the bank headquarters, as office space was lent to the association at no cost. The move to this building gave mutual advantages to both institutions: while the bank could increase the number of artisan customers thanks to its closeness with the association, the latter could take advantage of the close propinquity to bank offices in matters of consulting and credit facilities. Recently, as the bank needed this office space back, it helped the artisan association find another location and paid for its furnishings. As the profits of the co-operative bank increased, its involvement in noneconomic initiatives expanded accordingly. The most notable have been the partial provision of funds for the construction of the local technical high school7, the construction of

<sup>7</sup> Which is visited periodically by the president of the artisan association, to promote the "values of artisanry" and, more pragmatically, to organize meetings between artisans and students, or rather, between potential employers and employees.

The much more recent history of the local artisan association intertwines with that of the local bank. As I said above, the association was founded by Mr. Virgilio Ratti (the first president) and Enzo Panini (the vice president), whose brother had been president of the *Cassa Rurale* right after the war. Despite this kin connection, there was no apparent relationship between the two institutions in this period. The association has always defined itself as a non-political initiative, even though the Catholic slant - or, in Mr. Ratti's words, the "non-Communist mentality" - of the administrative board has always been a matter of fact. Its affiliation to Confartigianato, the national league of artisans that groups together all the Catholic-based local associations, casts no doubt on this point. Mr. Ratti recalls that the input needed to form the association came from the Artisan Union of Monza, which was urging the formation of Catholic-based associations to contrast those that were being formed by the Communists. "In the aftermath of the war Communism was very strong. After I was contacted, I managed to put together a bunch of artisans.... fifteen showed up at the first gathering, enough to create the association formally. Then we went to every nearby town to recruit as many artisans as we could. They needed everything and there was nothing. Metal workers needed iron, but they couldn't find it; cabinet makers needed timber, and there was no timber; everybody needed coal, and there was no coal. But we were able to get them all, by means of the coupons. We would also help members with the paper work, such as

The board members of the artisan association began to strengthen their ties with the bank when Mr. Ratti resigned in the 1960s and the Panini family consolidated its influence. As for the co-operative bank, by the end of the 1960s, it had grown considerably, mainly through investments in housing (which also helped expand the number of accounts and customers). It was in this period that the collaboration with the artisan association became more concrete. Overtime, an increasing number of artisans acquired membership in the cooperative bank. It is interesting to notice that according to the previous bank statutes - in force for 40 years - membership was open to peasants, workers, and artisans residing in the area. Subsequently, though, the term "workers" was dropped from the newly approved bank statutes. As for the peasants, they were turning into either full-time workers or artisans; hence, the only group left that would be eligible for membership was the artisan class. Unchanged was the prerequisite of residing in the towns hosting the bank headquarter and the bank's operating branches. Bank membership had evident benefits for artisans for it would facilitate access to banking and financial services, such as savings accounts, transacting deposits, and credit lines, at a lower than average cost. In 1970s, the artisan association moved into the new building of the bank headquarters, as office space was lent to the association at no cost. The move to this building gave mutual advantages to both institutions: while the bank could increase the number of artisan customers thanks to its closeness with the association, the latter could take advantage of the close propinquity to bank offices in matters of consulting and credit facilities. Recently, as the bank needed this office space back, it helped the artisan association find another location and paid for its furnishings. As the profits of the co-operative bank increased, its involvement in noneconomic initiatives expanded accordingly. The most notable have been the partial provision of funds for the construction of the local technical high school7, the construction of

<sup>7</sup> Which is visited periodically by the president of the artisan association, to promote the "values of artisanry" and, more pragmatically, to organize meetings between artisans and students, or rather,

bookkeeping, tax forms, receipts, payroll,... these kind of things. "

between potential employers and employees.

a seniors home, and the regular sponsorship of a whole series of local events all year around, from bicycle races and classical concerts, to street festivals and firework displays.

The close relationship between these two institutions is thought to facilitate artisans' access to credit, mainly for one reason. Unlike other banks operating in the area, the Board of *Cassa Rurale* (now renamed *Banca di Credito Cooperativo*), the organism in charge of granting loans, meets weekly on Mondays. Thus an artisan can already find out in only a few days whether or not his/her application has been accepted. However, the decision-making process that lies behind the granting of credit is not always impartial, but rather guided by personal relationships and ideological convictions. Mr. Enzo Panini, the nephew of the first vicepresident and the son of a former president of the *Cassa Rurale*, is both a member of the Board of the artisan association and a regular auditor in the Board of *Cassa Rurale*. He explains that collateral security is not always a *conditio sine qua non* to receive a loan. For example, the work order contracts from a client-firm that the applicant presents in his/her application are viewed as assets, provided that this firm is known for its good reputation. The reputation of the artisan does count as much. As I learned from many informants, though, this word bears nuances that mask critical issues. The reputation of a client-firm refers to its determination to pay its suppliers regularly and to establish a steady collaboration with them. Rather, the reputation of an artisan refers to his/her (family) predisposition to work 'well' and 'hard', and by virtue of this moral quality, s/he may obtain sponsorship within the Board and outside it. But the principle of 'working hard' is not a neutral statement; it is politically loaded, it holds an ideological assumption that is reproduced weekly in the decision making process of the Board.

Admittedly, such a reading without any specific example leaves my assumption unexplained empirically. However, if I look at the organizational structure of the artisan association, I see the same élite ruling and a clearly recognizable ideological component at work, evident, for example, in the president's preoccupation with addressing in every public speech (and in several conversations with me) the importance of the values of the family, work, and Catholicism that are contained in the artisan profession. It is possible that Mr. Faloni's personal problems with the artisan association might have arisen out of his 'bad' reputation as a 'Communist', by virtue of his past role as a union representative. Among entrepreneurs, such a derogatory expression surfaces occasionally in everyday speech, to assume the metonymic meanings of trade unionist, trouble maker, or even indolent worker8.

<sup>8</sup> In Italian the expression is "fare il comunista", that is, "to behave like a Communist". A fellow former worker of Mr.Faloni referred to his colleague using this term in a unambiguous derogatory fashion. Once in a public gathering, I observed for the first time this metonymy being staged during a discussion with other artisans. I was publicly introduced by the president of the artisan association to an audience of artisans during an evening meeting organized by this association to exchange Christmas greetings between its members and the mayor of the town. I mingled with a group of men who started asking me questions regarding my research. One of these men, an upholsterer, had been in the 1970s both a worker in a large factory near Milan and a union representative. While conversing with me about those days as a worker, he was interrupted by a couple of listeners who, mocking him and joking about his experience, said to me in Milanese dialect: "What work? He has never worked! He was one of those *sindacalisti (*trade unionists) carrying three newspapers under their arm to read while the 'real' workers would sweat on the shop floor. But the good times are over." Addressing him he added, " Now you know what it means to work!"

Small-Scale Entrepreneurship in Modern Italy –

unskilled labour than capital (i.e. expensive machines).

*(Informal arrangements) (The institutional and* 

• buying second hand machines

• loan from relatives/friends • leasing with informally delayed payments

Table 1. The embeddedness of credit

Network embeddedness Institutional embeddedness Personal assets

• Barter • local banks • good reputation

programs

• national and regional loan

• leasing with private companies

• rent paid below market value • friendship, acquaintances

Thus the anthropological approach towards the role that culture and social networks play in the credit transactions I have observed sheds light on fundamental issues not only on the character of entrepreneurship, but also on the various forms that economic development may take at the local level. Moreover the ethnographic analysis of the embeddedness of the economy calls into question neoclassical economic models which appear to be ideological and unable to represent the local context. And so we are brought back to Polanyi's original

*(Material-collateral)* 

*formal access to credit) (Symbolic)* 

• excellent skills

*(Social)* 

• house

• home workshop • severance pay • family savings

• entrepreneur's family involvement

• religious/political belief

An Ethnographic Analysis of Social Embeddedness in the Access to Capital and Credit 253

As I have described there is a wide range of types of financing that, incidentally, recent literature on business studies has termed "financial bootstrapping" or "bootstrapping methods" (Winborg and Landström, 2000). Alongside the well known government assisted financing, bank credit, and leasing, there are other less studied and more informal practices of credit, that cannot be merely reduced to money lending and that seem to work properly only in contests of embeddedness, within forms of exchange that are culturally engendered and facilitated by the social networks built by workers, entrepreneurs and local brokers (see Table 1). For example, barter as a form of exchange between two parties was an effective way to provide machines in exchange for labour because of a shortage of liquidity on behalf of one party; in addition it allowed the work relation to continue in the long run. Informally deferred payments were also adopted to meet the initial difficulties of new entrepreneurs, as well as the setting of lower than average prices for machines and rental space. Others shunned indebtedness of any kind for fear of external control over their activities, and therefore relied on their own (or family) capital and labour, keeping a low profile of risk taking. In their view capital market and other sources of financing were seen suspiciously. In accordance to this principle entrepreneurs with low risk profiles rely more on skilled and
