Saving and Credit Cooperatives: a New Conceptual Approach

In the view of the author, credit and saving cooperatives around the world are facing serious and fundamental problems. These include basic concepts relating to the nature and aim of the cooperatives, their structure and the principles under which they operate. Mr Galor explains his view of the nature of credit and savings cooperatives and how they should set interest rates, safeguard members savings, deal with surpluses and, if possible, provide marketing services to ensure loan recoveries.

After describing how he thinks a savings and credit cooperative should work, the author continues to analyse problems that have arisen in other countries because they do not follow fundamental principles. He highlights issues such as failure to pay proper interest on savings, lack of incentive to reduce operating costs, misunderstanding of share capital and surpluses, interest charges on loans being too low, etc. He gives particular attention to the remuneration of the cooperative manager and recommends paying a percentage of the cooperative’s revenue to provide motivation for good management, including adequate loan recovery.

Mr Galor concludes this paper by reviewing his commitment to cooperatives playing a comprehensive role in rural development. He outlines different forms of cooperative, including multi-purpose societies and federations and the role each can play. He believes credit and saving cooperatives are a vital form of organization in the particularly in the developing countries of the world.

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