Library

Mixtlan Rural Cooperative, Mexico: Does Being Federated Help Remote Outreach?

Cooperatives have long been recognized for their ability to reach rural populations. Legitimate concerns, however, have been raised regarding cooperative performance: Low repayment rates, problematic governance linked to over-subsidization, and domination by local elites, among others. Smaller, more decentralized member owned institutions (MOIs) can face liquidity shortages and demand for more diverse products than local management can handle. In this context, large cooperatives or federations of cooperatives with economies of scale and a stable asset base could be one solution to these concerns. Mixtlan, a rural cooperative within a largely urban federation in Mexico, illustrates this scenario.

In Mexico, there is a trend towards the creation of bigger cooperatives and cooperative federations that reach formalization and scale, through regulation. While this policy is an important step to reduce risk in the sector given past fraud, there are some worries about the viability of remote cooperatives under the new rules. However, Mixtlan case proves that the situation could be different. Mixtlan has shown strong rural outreach that could not have been achieved to the same extent as a savings and credit cooperative (SACCO) on its own.

Related Resources