Working with Savings and Credit Cooperatives

This short brief begins by highlighting that savings and credit cooperatives provide financial services to millions, including poor and low-income people in many countries. As a result, it notes, donors who want to increase access to financial services, especially savings, often support savings and credit cooperatives. Despite the advantages, the paper also suggests that to be effective, donors must learn how to overcome several unique challenges.

The brief begins by considering the advantages that savings and credit cooperatives offer for increasing microfinance outreach. It then sets out and discusses four key challenges faced by savings and credit cooperatives:

  1. Governance weaknesses
  2. Inadequate regulation and supervision
  3. Limited menu of products
  4. Damage done by external credit

The final section of the brief sets out key recommendations for what donors can do to strengthen savings and credit cooperatives:

  • Focus on deposit mobilisation first
  • Invest in building capacity rather injecting external funds for lending
  • Encourage sound governance policies
  • Support savings and credit cooperatives that want to learn new techniques to reach poorer customers
  • Keep financial standards at the core of internal management and external supervision
  • Support competent, independent external supervision of savings and credit cooperatives
  • Concentrate resources on savings and credit cooperatives that are willing to implement sound policies and standards

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