Cooperative banking

"Cooperative bank" redirects here. For banks by this name, see Co-operative Bank.

Cooperative banking is retail and commercial banking organized on a cooperative basis. Cooperative banking institutions take deposits and lend money in most parts of the world.

Cooperative banking, as discussed here, includes retail banking carried out by credit unions, mutual savings banks, building societies and cooperatives, as well as commercial banking services provided by mutual organizations (such as cooperative federations) to cooperative businesses.

Institutions

Credit unions

Main article: Credit union

Credit unions have the purpose of promoting thrift, providing credit at reasonable rates, and providing other financial services to its members.[1] Its members are usually required to share a common bond, such as locality, employer, religion or profession, and credit unions are usually funded entirely by member deposits, and avoid outside borrowing. They are typically (though not exclusively) the smaller form of cooperative banking institution. In some countries they are restricted to providing only unsecured personal loans, whereas in others, they can provide business loans to farmers, and mortgages.

Cooperative banks

Larger institutions are often called cooperative banks. Some are tightly integrated federations of credit unions, though those member credit unions may not subscribe to all nine of the strict principles of the World Council of Credit Unions (WOCCU).

Like credit unions, cooperative banks are owned by their customers and follow the cooperative principle of one person, one vote. Unlike credit unions, however, cooperative banks are often regulated under both banking and cooperative legislation. They provide services such as savings and loans to non-members as well as to members, and some participate in the wholesale markets for bonds, money and even equities.[2] Many cooperative banks are traded on public stock markets, with the result that they are partly owned by non-members. Member control is diluted by these outside stakes, so they may be regarded as semi-cooperative.

Cooperative banking systems are also usually more integrated than credit union systems. Local branches of cooperative banks select their own boards of directors and manage their own operations, but most strategic decisions require approval from a central office. Credit unions usually retain strategic decision-making at a local level, though they share back-office functions, such as access to the global payments system, by federating.

Some cooperative banks are criticized for diluting their cooperative principles. Principles 2-4 of the "Statement on the Co-operative Identity" can be interpreted to require that members must control both the governance systems and capital of their cooperatives. A cooperative bank that raises capital on public stock markets creates a second class of shareholders who compete with the members for control. In some circumstances, the members may lose control. This effectively means that the bank ceases to be a cooperative. Accepting deposits from non-members may also lead to a dilution of member control.

Land development banks

The special banks providing Long Term Loans are called Land Development Banks, in the short, LDB. The history of LDB is quite old. The first LDB was started at Jhang in Punjab in 1920. This bank is also based on Co-operative. The main objective of the LDBs are to promote the development of land, agriculture and increase the agricultural production. The LDBs provide long-term finance to members directly through their branches.[3]

Building societies

Main article: Building society

Building societies exist in Britain, Ireland and several Commonwealth countries. They are similar to credit unions in organisation, though few enforce a common bond. However, rather than promoting thrift and offering unsecured and business loans, their purpose is to provide home mortgages for members. Borrowers and depositors are society members, setting policy and appointing directors on a one-member, one-vote basis. Building societies often provide other retail banking services, such as current accounts, credit cards and personal loans. In the United Kingdom, regulations permit up to half of their lending to be funded by debt to non-members, allowing societies to access wholesale bond and money markets to fund mortgages. The world's largest building society is Britain's Nationwide Building Society.

Others

Mutual savings banks and mutual savings and loan associations were very common in the 19th and 20th centuries, but declined in number and market share in the late 20th century, becoming globally less significant than cooperative banks, building societies and credit unions.

Trustee savings banks are similar to other savings banks, but they are not cooperatives, as they are controlled by trustees, rather than their depositors.

International associations

The most important international associations of cooperative banks are the Paris-based International Cooperative Banking Association (ICBA), which has member institutions from around the world, the Brussels-based European Association of Co-operative Banks and the Brussels-based Unico Banking Group.

By region

Canada

In Canada, cooperative banking is provided by credit unions (caisses populaires in French). As of September 30, 2012, there were 357 credit unions and caisses populaires affiliated with Credit Union Central of Canada. They operated 1,761 branches across the country with 5.3 million members and $149.7 billion in assets.[4]

Quebec

The caisse populaire movement started by Alphonse Desjardins in Quebec, Canada, pioneered credit unions. Desjardins opened the first credit union in North America in 1900, from his home in Lévis, Quebec, marking the beginning of the Mouvement Desjardins. He was interested in bringing financial protection to working people.

United Kingdom

British building societies developed into general-purpose savings and banking institutions with ‘one member, one vote’ ownership and can be seen as a form of financial cooperative (although many de-mutualised into conventionally owned banks in the 1980s and 1990s). The UK Co-operative Group includes both an insurance provider, The Co-operative Insurance, and The Co-operative Bank, both noted for promoting ethical investment.

Continental Europe

Important continental cooperative banking systems include the Crédit Agricole, Crédit Mutuel, Banque Populaire and Caisse d'épargne in France, Rabobank in the Netherlands, BVR/DZ Bank in Germany, Banco Popolare, UBI Banca and Banca Popolare di Milano in Italy, Migros and Coop Bank in Switzerland, and the Raiffeisen system in several countries in central and eastern Europe. The cooperative banks that are members of the European Association of Co-operative Banks have 130 million customers, 4 trillion euros in assets, and 17% of Europe's deposits. The International Confederation of Cooperative Banks (CIBP) is the oldest association of cooperative banks at international level.

In Scandinavia, there is a clear distinction between mutual savings banks (Sparbank) and true credit unions (Andelsbank).

United States

Credit unions in the United States had 96.3 million members in 2013 and assets of $1.06 trillion.[5][6]

India

Cooperative banks serve an important role in the Indian economy, especially in rural areas. In urban areas, they mainly serve small industry and self-employed workers. They are registered under the Cooperative Societies Act, 1912. They are regulated by the Reserve Bank of India under the Banking Regulation Act, 1949 and Banking Laws (Application to Co-operative Societies) Act, 1965.[7] Anyonya Sahakari Mandali, established in 1889 in the province of Baroda, is the earliest known cooperative credit union in India.[8]

Israel

Ofek (Hebrew: אופק) is a cooperative initiative founded in mid-2012 that intended to establish the first cooperative bank in Israel.[9]

Cyprus

The Co-operative Central Bank Ltd (CCB)[10] was established in 1937 under the Co-operative Societies Laws and Rules having as its main purpose the provision of banking and other ancillary services to member co-operative societies which form the backbone of the agricultural community of Cyprus. Over the years the Bank has seen the need to expand and diversify its activities and is now in a position to provide the full range of services normally offered by comprehensive rural banks. The establishment of the Bank was a major event and turning point in the development of the Co-operative Movement and has proved instrumental in eradicating the then prevalent usury and exploitation of farmers. Its progress has been rapid and its success beyond the expectation of the pioneers of the Co-operative Movement. In mid 2013, Cyprus’ Co-operative banking system announced a major restructuring, where a list of 18 companies would be created by merging the existing 93 Cooperative Banks.[11]

Microcredit and microfinance

The more recent phenomena of microcredit and microfinance are often based on a cooperative model. These focus on small business lending. In 2006, Muhammad Yunus, founder of the Grameen Bank in Bangladesh, won the Nobel Peace Prize for his ideas regarding development and his pursuit of the microcredit concept. In this concept the institution provide micro loan to requires.

List of cooperative banking institutions

Cooperative banking institutions
Name Country Members
(2010)[12] 		Assets
(2010 US$ millions)[12]		 Type Alternative name Notes
Crédit Agricole France [13] Joint stock bank CASA Majority owned by federation of credit unions
Crelan Belgium 288,000[14] Bank formerly Landbouwkrediet (agricultural) Independent from Crédit Agricole since 2015[14]
DZ Bank Germany 17,700,000[15] Bank Deutsche Zentralgenossenschaftbank
German Central Cooperative Bank		 Owned by three quarters of all Volksbank and Raiffeisenbank (cooperative banks) in Germany and Austria
Caisse d'EpargneFrance literally “savings bank” Credit union federation
RabobankNetherlands 1,500,000+ Credit union federation
Nationwide Building SocietyUK Building society World's largest building society
Groupe Banque Populaire France 3,400,000
Desjardins Group Canada 5,795,277[16] Credit union federation Leading bank in Quebec
Raiffeisen Zentralbank Austria Bank RZB Österreich Credit union federation
Progoti Co-operative Land Development Bank Limited Bangladesh Bank Progoti Bank The largest Land Development Bank in Bangladesh
Nonghyup South Korea Banking division of agricultural cooperativeNational Agricultural Cooperative Federation (NACF) Approx US$230 billion in loans
Iccrea Banca Italy Bank Istituto Centrale del Credito Cooperativo
Cassa Centrale Banca - Credito Cooperativo del Nord Est Italy Bank CCB
Raiffeisen Landesbank Südtirol Italy Bank Cassa Centrale Raiffeisen dell'Alto Adige
Raiffeisen (Switzerland) Switzerland Credit union federation
Banco Cooperativo Español and Caja Rural Spain
OP Financial GroupFinland 31% share of Finnish credit market, and 32% share of savings and deposit market[17]
bankmecuAustralia 125,000+ $3b bank Australia's first customer owned bank
Bank Persatuan Malaysia 46,135 86,375,542.97 Bank Koperasi Bank Persatuan Malaysia Berhad 2nd national cooperative bank in Malaysia
Bank Rakyat Malaysia Islamic cooperative bank Bank Kerjasama Rakyat Malaysia Berhad
Co-operative Bank UK Not applicable[18] [19] Bank Subsidiary of consumer cooperative
Navy Federal Credit UnionUS 3,004,35233012 Credit union
Shared Interest UK [20] Cooperative lending society Finance for fair trade
GLS Bank Germany
The Cooperative Bank New Zealand 120,000+ Bank Customer owned bank
Banco Credicoop Argentina

See also

References

  1. ↑ E.g., 12 U.S.C. § 1752(1), available at http://www.ncua.gov/RegulationsOpinionsLaws/fcu_act/fcu_act.pdf; CUNA Model Credit Union Act § 0.20 (2007); see also 12 U.S.C. § 1757, available at http://www.ncua.gov/RegulationsOpinionsLaws/fcu_act/fcu_act.pdf; CUNA Model Credit Union Act § 3.10 (2007).
  2. ↑ The Co-operative Bank of the UK strictly limits its borrowing from the markets, according to an October 2008 statement : “... we do not borrow in the financial markets in order to lend. Our lending capital is generated from customers' investments and savings, leaving us a good deal less exposed to the vagaries of the market than many of the major lenders.”
  3. ↑ TNAU. "LAND DEVELOPMENT BANK". TNAU Agritech Portal. Retrieved 8 January 2014.
  4. ↑ Credit Union Central of Canada. "System Results: National System Review, Third Quarter, 2012" (PDF). Retrieved 12 December 2012.
  5. ↑ "2013 Annual Report" (PDF). www.ncua.gov. National Credit Union Administration. Retrieved 6 September 2014.
  6. ↑ Marte, Jonnelle (August 5, 2014). "About 100 million Americans are now using credit unions. Should you join them?". The Washington Post. Retrieved September 5, 2014.
  7. ↑ D. Muraleedharan (2009). Modern Banking: Theory And Practice. PHI Learning Pvt. Ltd. p. 9. ISBN 978-81-203-3655-1. Retrieved 3 March 2015.
  8. ↑ "Brief History of Urban Cooperative Banks in India". Reserve Bank of India. Retrieved 3 March 2015.
  9. ↑ http://www.jpost.com/Business/Business-News/Ofek-aims-to-bring-social-banking-to-Israel-as-first-credit-union-331207
  10. ↑ "Cyprus Co-operative Central Bank Ltd", 7 March 2014
  11. ↑ "Merge of Cooperative Institutions". Cyprus Real Estate. urban-keys.com. 7 March 2014. Retrieved 25 August 2013.
  12. 1 2 Figures at close of institution's 2007 financial year, from organization's annual report. If no US$ equivalent given in annual report, exchange rate of December 31, 2007, used.
  13. ↑ EUR 31 billion
  14. 1 2 http://www.crelan.be/nl/algemeen/artikelen/de-geschiedenis-van-crelan
  15. ↑ http://www.bvr.de/Presse/Zahlen_Daten_Fakten
  16. ↑ Desjardins Group figures — Information as at December 31, 2008. Available at http://www.desjardins.com/en/a_propos/qui-nous-sommes/chiffres.jsp
  17. ↑ "Key figures". Unico Banking Institute. 2006.
  18. ↑ Co-operative Bank customers are eligible to join its parent Co-operative Group
  19. ↑ 13.1 billion GBP
  20. ↑ GBP 25.1 million

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