Cooperative credit banks and sustainability: towards a social credit scoring

Cooperative Credit Banks (CCBs) play a significant role in fostering social sustainability through lending decisions. In particular, CCBs are interested in supporting socially conscious cooperatives, provided that the credit scoring process classifies them as "credit-worthy". However, existing literature overlooks how cooperatives’ balance sheet equilibriums, driven by their social mission rather than profit maximization, impact credit scoring. To bridge this gap, this paper examines the influence of cooperatives’ unique balance sheet equilibriums on credit scoring. Specifically, it investigates the potential risk of sub-optimal creditworthiness assessment when CCBs use a "onesize-fits-all" model for cooperatives and non-cooperatives alike. The findings demonstrate that "tailor-made" credit scoring models for cooperatives and non-cooperatives outperform a generic one, enhancing credit classification specificity and sensitivity. These models allow for more effective credit allocation, resulting in improved economic outcomes.