Why We Can No Longer Afford to Ignore Financial Cooperatives in the Effort to Increase Access to Financial Services
This document aims to offer a number of elements to stimulate discussion on the role of powerful financial cooperatives as tools for increasing access by the poor to financial services. The paper suggests that in the wide-ranging debate within the microfinance community on sustainability and accessibility, financial cooperatives have never really entered the fray.
The authors argue that there of course problems within the cooperative sector but the problems lie mainly with specific institutions. For example, many cooperatives formed part of state policy to expand access to credit and have almost become “organs of the state”. Furthermore, there remains a lack of reliable supporting data on the extent of outreach of this sector and its performance.
Nevertheless, cooperatives are said here to be an “amazing” delivery mechanism when effectively networked. They are often organised in close proximity to the communities they serve and are often located in rural areas or in communities that are ignored by other institutions. The authors argue that when networked, each cooperative becomes a point of redistribution for the services and resources of the whole network (the effect of which multiplies the more the network is integrated and communication and interaction are facilitated.
The authors also note that cooperatives, by their nature, seek to increase local and collective wealth because they belong to their members. Furthermore, cooperatives often place more emphasis on savings mobilisation and the creation of local capital than do other institutions. The paper also discusses how the governance and performance of financial cooperatives is strengthened when they are organised into federated networks, as well as how cooperatives can be synonymous with sustainability and outreach.
Each section of the paper is illustrated with examples from different regions. The paper concludes by stating that those that will survive and effectively respond to the needs of the diversified clientele they serve are those that will:
- be reorganised and be effective;
- demonstrate transparency and rely on effective performance reporting and controls;
- offer quality services delivered by qualified and loyal employees;
- be interconnected and integrated in order to benefit fro the force of federation;
- be able to optimise their cooperative advantages;
- be rooted in their communities and look after their collective wealth;
- be effective in dlivering their products and services due to the optimisation of their distribution network and to a diversified and progressive offer of services.