Key Takeaways from the Symposium
Cooperative Financial Institutions in Rural Development: Promise and Challenges

By Carlos E. Cuevas and Anne M. Sivley

The World Bank’s Center of Excellence (CoE) for Cooperative Financial Institutions (CFIs) along with five organizing partners – Rabo Partnerships, DGRV, DID, ICURN, and WOCCU – convened a unique gathering of CFI practitioners, regulators, supervisors, development policy experts, and industry leaders to examine the role of CFIs in rural development. Panelists and moderators from 25 global, national, and regional entities shared their knowledge and experience through seven sessions held over two weeks. Over 375 attendees from 59 countries participated in the virtual sessions. The following summarizes the outcomes of these sessions along six cross-cutting themes, and a few concluding “way-forward” messages.

Image 1 — Opening Session

1.    The nature of CFIs
The unique nature of CFIs allows them to be central players in expanding rural access to finance. Key elements of that unique nature are:
•    Trust and confidence: The client proximity and community involvement of CFIs gives them an advantage in rural financial inclusion. However, building and maintaining trust and confidence requires solid governance and sound financial management. 
•    Resilience: Participants highlighted the resilience of CFIs in the face of crises, such as the COVID-19 pandemic. Kenya’s Peter Njuguna (SASRA) commented, “SACCOs retained sustained double-digit growth…showing the resilience of CFIs even in the face of pandemic.” 
•    Client-centric and adaptable: CFIs adapt products and adjust terms to better serve diverse member and client profiles, a point made by Mathieu Soglonou of CIF, West Africa, in the opening session and emphasized in the Women and Youth session organized by WOCCU.

2.    Digitization and Information Systems
Panelists highlighted that developing or acquiring digital tools is a priority for CFIs. Digital tools support many important areas of the functioning of CFIs, notably: 
•    Governance: Digital tools enable virtual meetings of governing bodies, a crucial capacity for CFIs as the pandemic prevents safe in-person gatherings. Survey findings in the ICURN/DGRV panel showed a sharp increase of virtual meetings in CFIs in 2020 relative to previous years.
•    Operations: Digitization enables increased outreach to member/clients, the extension of services beyond payments, and reduced transaction costs for agricultural financing 
•  Supervision: Accurate off-site supervision tools are crucial for supervisors to adequately cover many small, geographically dispersed CFIs. 
Panel discussions also highlighted issues associated with digitization for CFIs: 
•    Inadequate infrastructure and interoperability: Successful digitization depends on critical pre-conditions that are often (wrongly) assumed to exist everywhere, as described by Mastercard’s Daniel Huba. 
•    Relationship with FinTechs: For CFIs, FinTechs can be market disruptors or allies. Some CFIs have partnered with tech providers, while others are creating their own platforms (e.g. ACCU). 
•    Preserving the cooperative spirit:  as the availability of digital tools engenders individualistic tendencies, CFIs are working to maintain core cooperative values of solidarity, and community. 
•  Protecting clients’ information and assets: While this challenge is not unique to CFIs, client protection is particularly paramount when dealing with rural households, as their financial literacy tends to be lower than average.

Image 2 — Panel 2: Keys to Promoting Successful and Contributive CFIs in Rural Areas

3.    Access to Capital
Discussions reached beyond the central financing facilities that characterize many CFI systems. As these systems grow and modernize, the typical sources of loanable funds (member shares, deposits) become insufficient to satisfy increased demand for credit by member/clients running rural enterprises of growing scale. Key questions discussed in several panels are:
•    Making outside capital consistent with cooperative governance. To what extent can external investments in CFIs alter the composition of governance bodies? If so, what arrangements are desirable?
•    What instruments are appropriate for CFIs? Examples brought up included subordinated debt (DID panel, IDB in Peru), where investor’s covenants emphasized sound financial management and did not involve governance changes.
•    Which investors align with the cooperative model?

4.    Regulation and Supervision
Aspects of regulation and supervision (R&S) surfaced in all sessions in the symposium. Common themes included:
•    Proportional regulation and its implementation: While the principle is widely accepted, DGRV’s Matthias Arzbach noted that, “implementation is difficult in practice.” 
•    Issues with auxiliary mechanisms: While cost considerations suggest some advantages, effectiveness of existing mechanisms in developing countries is still under debate.
•    Compliance: Ecuador’s Margarita Hernández emphasized the importance of, and challenges with, compliance in the CFI sector. 
Panelists also touched on challenges for CFIs associated with regulation and supervision, including:
•   Supervising large numbers of CFIs, particularly in highly atomized CFI systems (e.g., Ethiopia, Uganda). Integration is a potential avenue to solve the “large-numbers” challenge, along with some form of auxiliary mechanism. 
•     Balancing protection of member deposits versus regulatory burden. Implementing regulations (via supervision) involves both enforcement costs (for the supervisor) and compliance costs (for the supervisee). In small rural CFIs there is often a scarcity of qualified people (e.g., accountants) to ensure compliant record keeping and reporting.
•   Financing the supervisory agency. Discussion on R&S included contrasting approaches to funding regulatory agencies, which in G-20 countries are primarily funded by the supervised entities, while regulators in other countries are funded primarily by the government and internal resources of the regulator (i.e., indirectly also the country’s budget). 

Image 3 — Panel 3: Regulation and Supervision for Small Rural CFIs

5.    Incorporating CFIs into the financial system
Several sessions highlighted the varying ways in which CFIs are incorporated into a country’s financial system and the associated benefits and challenges, including:  
•    Access to payment systems: Direct access to the payments platform is essential for CFIs to be able to provide valuable services to their member/clients, and engage in fair competition with other providers. Short of creating a cooperative bank (e.g., Albania, Brazil, Rwanda, and others), regulatory reforms are essential for CFIs to move in this direction. 
•    Correspondent agent banking and other innovations: CFI participation in agent banking has often been hindered by regulatory constraints. When these constraints are lifted, CFIs’ uptake of the innovation seem to be slow, pointing to further challenges (e.g. the case of correspondent banking in Colombia, as discussed by Marelvi Bernal).
•    Connecting with sustainable food chains and “Green” Finance innovations: With CFIs’ rural presence and diversity of membership/clientele, they are well-positioned to adopt these innovations in the financial system. 
•    Rural enterprises and inclusion of women and minorities: Making women and minorities integral participants in rural enterprises facilitates and complements their inclusion in formal finance. 
•    Managing risk: As highlighted by Gerardo Almaguer of DID, small rural CFIs can manage risk through approaches such as integration and diversifying their exposure.

Image 4 — Panel 4: Involving Rural Women and Youth in Strengthening and Expanding CFIs

6.    Women and Youth
Across panels, speakers emphasized the inclusion of women and youth in CFIs. “Inclusion, inclusion, …, and particularly inclusion of women, that is a top priority” (Jean Pesme).
•    Remoteness generates barriers for rural women and youth that include transportation costs, time barriers, and financial literacy disadvantages.
•    Panelists in the WOCCU session highlighted the importance of capacity building and leadership development that goes beyond financial literacy to expanding the participation of women and youth in CFIs. Leadership programs at Brazil’s Sicredi were described by actual leaders (Ivete Schoffen, Vinícius Mattia), part of the World Council’s global networks.
•    Real inclusion, with women as member-owners and in management and governance roles in CFIs was a clear point made by Diattou Coulibaly of Senegal.
•   A memorable quote came from Ivete discussing diversity versus inclusion: “diversity is inviting me to a party – inclusion is asking me to dance.” As Pim Mol articulated in the closing, we (the CFI people) are aiming for a “busy dancing floor “going forward.
•   Attention to youth ensures the future of CFI membership. Marianne Schoemaker underscored this point in the opening session, as part of “keeping pace with market changes.”

The Way Forward is hereby reflected in selected quotes, and highlights from the Working Session:

“We cannot maximize the value to our members and impact to community without achieving a sustainable growth that means solid capital base, strong efficiency and profitability, by using smart technology.” Zana Konini, Chairwoman, FED Invest, Albania. A full sentence with all the keywords.

Creating favorable conditions for women and youth participation: [it is] “more work but it’s worth it.” Manfred Dasenbrock, Central Sicredi. Point enthusiastically endorsed by Pim Mol.

“Somos todos actores de cambio” “We are all agents of change” Maximiliano Sainz, DID. An expression of both optimism and commitment.

“Solve the R&S challenges; is it doable” Carlos E. Cuevas, World Bank Group. Point inspired by the exchange between two regulators: Edith Tusuubira of Uganda, and Margarita Hernández of Ecuador.

The Working Session of the CoE confirmed its relevance and objectives, and supported continuing and expanding collaboration among partners and stakeholders. Information exchange through working sessions on specific subjects such as digitization and environmentally sustainable finance was encouraged as part of the work plan, as well as strengthening the links with country work and collaboration with other relevant networks.
 

Key Takeaways from the Symposium
Cooperative Financial Institutions in Rural Development: Promise and Challenges

By Carlos E. Cuevas and Anne M. Sivley

The World Bank’s Center of Excellence (CoE) for Cooperative Financial Institutions (CFIs) along with five organizing partners – Rabo Partnerships, DGRV, DID, ICURN, and WOCCU – convened a unique gathering of CFI practitioners, regulators, supervisors, development policy experts, and industry leaders to examine the role of CFIs in rural development. Panelists and moderators from 25 global, national, and regional entities shared their knowledge and experience through seven sessions held over two weeks. Over 375 attendees from 59 countries participated in the virtual sessions. The following summarizes the outcomes of these sessions along six cross-cutting themes, and a few concluding “way-forward” messages.

Image 1 — Opening Session

1.    The nature of CFIs
The unique nature of CFIs allows them to be central players in expanding rural access to finance. Key elements of that unique nature are:
•    Trust and confidence: The client proximity and community involvement of CFIs gives them an advantage in rural financial inclusion. However, building and maintaining trust and confidence requires solid governance and sound financial management. 
•    Resilience: Participants highlighted the resilience of CFIs in the face of crises, such as the COVID-19 pandemic. Kenya’s Peter Njuguna (SASRA) commented, “SACCOs retained sustained double-digit growth…showing the resilience of CFIs even in the face of pandemic.” 
•    Client-centric and adaptable: CFIs adapt products and adjust terms to better serve diverse member and client profiles, a point made by Mathieu Soglonou of CIF, West Africa, in the opening session and emphasized in the Women and Youth session organized by WOCCU.

2.    Digitization and Information Systems
Panelists highlighted that developing or acquiring digital tools is a priority for CFIs. Digital tools support many important areas of the functioning of CFIs, notably: 
•    Governance: Digital tools enable virtual meetings of governing bodies, a crucial capacity for CFIs as the pandemic prevents safe in-person gatherings. Survey findings in the ICURN/DGRV panel showed a sharp increase of virtual meetings in CFIs in 2020 relative to previous years.
•    Operations: Digitization enables increased outreach to member/clients, the extension of services beyond payments, and reduced transaction costs for agricultural financing 
•  Supervision: Accurate off-site supervision tools are crucial for supervisors to adequately cover many small, geographically dispersed CFIs. 
Panel discussions also highlighted issues associated with digitization for CFIs: 
•    Inadequate infrastructure and interoperability: Successful digitization depends on critical pre-conditions that are often (wrongly) assumed to exist everywhere, as described by Mastercard’s Daniel Huba. 
•    Relationship with FinTechs: For CFIs, FinTechs can be market disruptors or allies. Some CFIs have partnered with tech providers, while others are creating their own platforms (e.g. ACCU). 
•    Preserving the cooperative spirit:  as the availability of digital tools engenders individualistic tendencies, CFIs are working to maintain core cooperative values of solidarity, and community. 
•    Protecting clients’ information and assets: While this challenge is not unique to CFIs, client protection is particularly paramount when dealing with rural households, as their financial literacy tends to be lower than average.

Image 2 — Panel 2: Keys to Promoting Successful and Contributive CFIs in Rural Areas

3.    Access to Capital
Discussions reached beyond the central financing facilities that characterize many CFI systems. As these systems grow and modernize, the typical sources of loanable funds (member shares, deposits) become insufficient to satisfy increased demand for credit by member/clients running rural enterprises of growing scale. Key questions discussed in several panels are:
•    Making outside capital consistent with cooperative governance. To what extent can external investments in CFIs alter the composition of governance bodies? If so, what arrangements are desirable?
•    What instruments are appropriate for CFIs? Examples brought up included subordinated debt (DID panel, IDB in Peru), where investor’s covenants emphasized sound financial management and did not involve governance changes.
•    Which investors align with the cooperative model?

4.    Regulation and Supervision
Aspects of regulation and supervision (R&S) surfaced in all sessions in the symposium. Common themes included:
•    Proportional regulation and its implementation: While the principle is widely accepted, DGRV’s Matthias Arzbach noted that, “implementation is difficult in practice.” 
•    Issues with auxiliary mechanisms: While cost considerations suggest some advantages, effectiveness of existing mechanisms in developing countries is still under debate.
•    Compliance: Ecuador’s Margarita Hernández emphasized the importance of, and challenges with, compliance in the CFI sector. 
Panelists also touched on challenges for CFIs associated with regulation and supervision, including:
•   Supervising large numbers of CFIs, particularly in highly atomized CFI systems (e.g., Ethiopia, Uganda). Integration is a potential avenue to solve the “large-numbers” challenge, along with some form of auxiliary mechanism. 
•     Balancing protection of member deposits versus regulatory burden. Implementing regulations (via supervision) involves both enforcement costs (for the supervisor) and compliance costs (for the supervisee). In small rural CFIs there is often a scarcity of qualified people (e.g., accountants) to ensure compliant record keeping and reporting.
•   Financing the supervisory agency. Discussion on R&S included contrasting approaches to funding regulatory agencies, which in G-20 countries are primarily funded by the supervised entities, while regulators in other countries are funded primarily by the government and internal resources of the regulator (i.e., indirectly also the country’s budget). 

Image 3 — Panel 3: Regulation and Supervision for Small Rural CFIs

5.    Incorporating CFIs into the financial system
Several sessions highlighted the varying ways in which CFIs are incorporated into a country’s financial system and the associated benefits and challenges, including:  
•    Access to payment systems: Direct access to the payments platform is essential for CFIs to be able to provide valuable services to their member/clients, and engage in fair competition with other providers. Short of creating a cooperative bank (e.g., Albania, Brazil, Rwanda, and others), regulatory reforms are essential for CFIs to move in this direction. 
•    Correspondent agent banking and other innovations: CFI participation in agent banking has often been hindered by regulatory constraints. When these constraints are lifted, CFIs’ uptake of the innovation seem to be slow, pointing to further challenges (e.g. the case of correspondent banking in Colombia, as discussed by Marelvi Bernal).
•    Connecting with sustainable food chains and “Green” Finance innovations: With CFIs’ rural presence and diversity of membership/clientele, they are well-positioned to adopt these innovations in the financial system. 
•    Rural enterprises and inclusion of women and minorities: Making women and minorities integral participants in rural enterprises facilitates and complements their inclusion in formal finance. 
•    Managing risk: As highlighted by Gerardo Almaguer of DID, small rural CFIs can manage risk through approaches such as integration and diversifying their exposure.

Image 4 — Panel 4: Involving Rural Women and Youth in Strengthening and Expanding CFIs

6.    Women and Youth
Across panels, speakers emphasized the inclusion of women and youth in CFIs. “Inclusion, inclusion, …, and particularly inclusion of women, that is a top priority” (Jean Pesme).
•    Remoteness generates barriers for rural women and youth that include transportation costs, time barriers, and financial literacy disadvantages.
•    Panelists in the WOCCU session highlighted the importance of capacity building and leadership development that goes beyond financial literacy to expanding the participation of women and youth in CFIs. Leadership programs at Brazil’s Sicredi were described by actual leaders (Ivete Schoffen, Vinícius Mattia), part of the World Council’s global networks.
•    Real inclusion, with women as member-owners and in management and governance roles in CFIs was a clear point made by Diattou Coulibaly of Senegal.
•    A memorable quote came from Ivete discussing diversity versus inclusion: “diversity is inviting me to a party – inclusion is asking me to dance.” As Pim Mol articulated in the closing, we (the CFI people) are aiming for a “busy dancing floor “going forward.
•    Attention to youth ensures the future of CFI membership. Marianne Schoemaker underscored this point in the opening session, as part of “keeping pace with market changes.”

The Way Forward is hereby reflected in selected quotes, and highlights from the Working Session:

“We cannot maximize the value to our members and impact to community without achieving a sustainable growth that means solid capital base, strong efficiency and profitability, by using smart technology.” Zana Konini, Chairwoman, FED Invest, Albania. A full sentence with all the keywords.

Creating favorable conditions for women and youth participation: [it is] “more work but it’s worth it.” Manfred Dasenbrock, Central Sicredi. Point enthusiastically endorsed by Pim Mol.

“Somos todos actores de cambio” “We are all agents of change” Maximiliano Sainz, DID. An expression of both optimism and commitment.

“Solve the R&S challenges; is it doable” Carlos E. Cuevas, World Bank Group. Point inspired by the exchange between two regulators: Edith Tusuubira of Uganda, and Margarita Hernández of Ecuador.

The Working Session of the CoE confirmed its relevance and objectives, and supported continuing and expanding collaboration among partners and stakeholders. Information exchange through working sessions on specific subjects such as digitization and environmentally sustainable finance was encouraged as part of the work plan, as well as strengthening the links with country work and collaboration with other relevant networks.
 

Key Takeaways from the Symposium
Cooperative Financial Institutions in Rural Development: Promise and Challenges

By Carlos E. Cuevas and Anne M. Sivley

The World Bank’s Center of Excellence (CoE) for Cooperative Financial Institutions (CFIs) along with five organizing partners – Rabo Partnerships, DGRV, DID, ICURN, and WOCCU – convened a unique gathering of CFI practitioners, regulators, supervisors, development policy experts, and industry leaders to examine the role of CFIs in rural development. Panelists and moderators from 25 global, national, and regional entities shared their knowledge and experience through seven sessions held over two weeks. Over 375 attendees from 59 countries participated in the virtual sessions. The following summarizes the outcomes of these sessions along six cross-cutting themes, and a few concluding “way-forward” messages.

Image 1 — Opening Session

1.    The nature of CFIs
The unique nature of CFIs allows them to be central players in expanding rural access to finance. Key elements of that unique nature are:
•    Trust and confidence: The client proximity and community involvement of CFIs gives them an advantage in rural financial inclusion. However, building and maintaining trust and confidence requires solid governance and sound financial management. 
•    Resilience: Participants highlighted the resilience of CFIs in the face of crises, such as the COVID-19 pandemic. Kenya’s Peter Njuguna (SASRA) commented, “SACCOs retained sustained double-digit growth…showing the resilience of CFIs even in the face of pandemic.” 
•    Client-centric and adaptable: CFIs adapt products and adjust terms to better serve diverse member and client profiles, a point made by Mathieu Soglonou of CIF, West Africa, in the opening session and emphasized in the Women and Youth session organized by WOCCU.

2.    Digitization and Information Systems
Panelists highlighted that developing or acquiring digital tools is a priority for CFIs. Digital tools support many important areas of the functioning of CFIs, notably: 
•    Governance: Digital tools enable virtual meetings of governing bodies, a crucial capacity for CFIs as the pandemic prevents safe in-person gatherings. Survey findings in the ICURN/DGRV panel showed a sharp increase of virtual meetings in CFIs in 2020 relative to previous years.
•    Operations: Digitization enables increased outreach to member/clients, the extension of services beyond payments, and reduced transaction costs for agricultural financing 
•  Supervision: Accurate off-site supervision tools are crucial for supervisors to adequately cover many small, geographically dispersed CFIs. 
Panel discussions also highlighted issues associated with digitization for CFIs: 
•    Inadequate infrastructure and interoperability: Successful digitization depends on critical pre-conditions that are often (wrongly) assumed to exist everywhere, as described by Mastercard’s Daniel Huba. 
•    Relationship with FinTechs: For CFIs, FinTechs can be market disruptors or allies. Some CFIs have partnered with tech providers, while others are creating their own platforms (e.g., ACCU). 
•    Preserving the cooperative spirit:  as the availability of digital tools engenders individualistic tendencies, CFIs are working to maintain core cooperative values of solidarity, and community. 
•  Protecting clients’ information and assets: While this challenge is not unique to CFIs, client protection is particularly paramount when dealing with rural households, as their financial literacy tends to be lower than average.

Image 2 — Panel 2: Keys to Promoting Successful and Contributive CFIs in Rural Areas

3.    Access to Capital
Discussions reached beyond the central financing facilities that characterize many CFI systems. As these systems grow and modernize, the typical sources of loanable funds (member shares, deposits) become insufficient to satisfy increased demand for credit by member/clients running rural enterprises of growing scale. Key questions discussed in several panels are:
•    Making outside capital consistent with cooperative governance. To what extent can external investments in CFIs alter the composition of governance bodies? If so, what arrangements are desirable?
•    What instruments are appropriate for CFIs? Examples brought up included subordinated debt (DID panel, IDB in Peru), where investor’s covenants emphasized sound financial management and did not involve governance changes.
•    Which investors align with the cooperative model?

4.    Regulation and Supervision
Aspects of regulation and supervision (R&S) surfaced in all sessions in the symposium. Common themes included:
•    Proportional regulation and its implementation: While the principle is widely accepted, DGRV’s Matthias Arzbach noted that, “implementation is difficult in practice.” 
•    Issues with auxiliary mechanisms: While cost considerations suggest some advantages, effectiveness of existing mechanisms in developing countries is still under debate.
•    Compliance: Ecuador’s Margarita Hernández emphasized the importance of, and challenges with, compliance in the CFI sector. 
Panelists also touched on challenges for CFIs associated with regulation and supervision, including:
•   Supervising large numbers of CFIs, particularly in highly atomized CFI systems (e.g., Ethiopia, Uganda). Integration is a potential avenue to solve the “large-numbers” challenge, along with some form of auxiliary mechanism. 
•     Balancing protection of member deposits versus regulatory burden. Implementing regulations (via supervision) involves both enforcement costs (for the supervisor) and compliance costs (for the supervisee). In small rural CFIs there is often a scarcity of qualified people (e.g., accountants) to ensure compliant record keeping and reporting.
•   Financing the supervisory agency. Discussion on R&S included contrasting approaches to funding regulatory agencies, which in G-20 countries are primarily funded by the supervised entities, while regulators in other countries are funded primarily by the government and internal resources of the regulator (i.e., indirectly also the country’s budget). 

Image 3 — Panel 3: Regulation and Supervision for Small Rural CFIs

5.    Incorporating CFIs into the financial system
Several sessions highlighted the varying ways in which CFIs are incorporated into a country’s financial system and the associated benefits and challenges, including:  
•    Access to payment systems: Direct access to the payments platform is essential for CFIs to be able to provide valuable services to their member/clients and engage in fair competition with other providers. Short of creating a cooperative bank (e.g., Albania, Brazil, Rwanda, and others), regulatory reforms are essential for CFIs to move in this direction. 
•    Correspondent agent banking and other innovations: CFI participation in agent banking has often been hindered by regulatory constraints. When these constraints are lifted, CFIs’ uptake of the innovation seem to be slow, pointing to further challenges (e.g., the case of correspondent banking in Colombia, as discussed by Marelvi Bernal).
•    Connecting with sustainable food chains and “Green” Finance innovations: With CFIs’ rural presence and diversity of membership/clientele, they are well-positioned to adopt these innovations in the financial system. 
•    Rural enterprises and inclusion of women and minorities: Making women and minorities integral participants in rural enterprises facilitates and complements their inclusion in formal finance. 
•    Managing risk: As highlighted by Gerardo Almaguer of DID, small rural CFIs can manage risk through approaches such as integration and diversifying their exposure.

Image 4 — Panel 4: Involving Rural Women and Youth in Strengthening and Expanding CFIs

6.    Women and Youth
Across panels, speakers emphasized the inclusion of women and youth in CFIs. “Inclusion, inclusion, …, and particularly inclusion of women, that is a top priority” (Jean Pesme).
•    Remoteness generates barriers for rural women and youth that include transportation costs, time barriers, and financial literacy disadvantages.
•    Panelists in the WOCCU session highlighted the importance of capacity building and leadership development that goes beyond financial literacy to expanding the participation of women and youth in CFIs. Leadership programs at Brazil’s Sicredi were described by actual leaders (Ivete Schoffen, Vinícius Mattia), part of the World Council’s global networks.
•    Real inclusion, with women as member-owners and in management and governance roles in CFIs was a clear point made by Diattou Coulibaly of Senegal.
•   A memorable quote came from Ivete discussing diversity versus inclusion: “diversity is inviting me to a party – inclusion is asking me to dance.” As Pim Mol articulated in the closing, we (the CFI people) are aiming for a “busy dancing floor “going forward.
•   Attention to youth ensures the future of CFI membership. Marianne Schoemaker underscored this point in the opening session, as part of “keeping pace with market changes.”

Image 5 — Closing Session

The Way Forward is hereby reflected in selected quotes, and highlights from the Working Session:

“We cannot maximize the value to our members and impact to community without achieving a sustainable growth that means solid capital base, strong efficiency and profitability, by using smart technology.” Zana Konini, Chairwoman, FED Invest, Albania. A full sentence with all the keywords.

Creating favorable conditions for women and youth participation: [it is] “more work but it’s worth it.” Manfred Dasenbrock, Central Sicredi. Point enthusiastically endorsed by Pim Mol.

“Somos todos actores de cambio” “We are all agents of change” Maximiliano Sainz, DID. An expression of both optimism and commitment.

“Solve the R&S challenges; is it doable” Carlos E. Cuevas, World Bank Group. Point inspired by the exchange between two regulators: Edith Tusuubira of Uganda, and Margarita Hernández of Ecuador.

The Working Session of the CoE confirmed its relevance and objectives, and supported continuing and expanding collaboration among partners and stakeholders. Information exchange through working sessions on specific subjects such as digitization and environmentally sustainable finance was encouraged as part of the work plan, as well as strengthening the links with country work and collaboration with other relevant networks.
 

Key Takeaways from the Symposium
Cooperative Financial Institutions in Rural Development: Promise and Challenges

By Carlos E. Cuevas and Anne M. Sivley

The World Bank’s Center of Excellence (CoE) for Cooperative Financial Institutions (CFIs) along with five organizing partners – Rabo Partnerships, DGRV, DID, ICURN, and WOCCU – convened a unique gathering of CFI practitioners, regulators, supervisors, development policy experts, and industry leaders to examine the role of CFIs in rural development. Panelists and moderators from 25 global, national, and regional entities shared their knowledge and experience through seven sessions held over two weeks. Over 375 attendees from 59 countries participated in the virtual sessions. The following summarizes the outcomes of these sessions along six cross-cutting themes, and a few concluding “way-forward” messages.

Image 1 — Opening Session

1.    The nature of CFIs
The unique nature of CFIs allows them to be central players in expanding rural access to finance. Key elements of that unique nature are:
•    Trust and confidence: The client proximity and community involvement of CFIs gives them an advantage in rural financial inclusion. However, building and maintaining trust and confidence requires solid governance and sound financial management. 
•    Resilience: Participants highlighted the resilience of CFIs in the face of crises, such as the COVID-19 pandemic. Kenya’s Peter Njuguna (SASRA) commented, “SACCOs retained sustained double-digit growth…showing the resilience of CFIs even in the face of pandemic.” 
•    Client-centric and adaptable: CFIs adapt products and adjust terms to better serve diverse member and client profiles, a point made by Mathieu Soglonou of CIF, West Africa, in the opening session and emphasized in the Women and Youth session organized by WOCCU.

2.    Digitization and Information Systems
Panelists highlighted that developing or acquiring digital tools is a priority for CFIs. Digital tools support many important areas of the functioning of CFIs, notably: 
•    Governance: Digital tools enable virtual meetings of governing bodies, a crucial capacity for CFIs as the pandemic prevents safe in-person gatherings. Survey findings in the ICURN/DGRV panel showed a sharp increase of virtual meetings in CFIs in 2020 relative to previous years.
•    Operations: Digitization enables increased outreach to member/clients, the extension of services beyond payments, and reduced transaction costs for agricultural financing 
•  Supervision: Accurate off-site supervision tools are crucial for supervisors to adequately cover many small, geographically dispersed CFIs. 
Panel discussions also highlighted issues associated with digitization for CFIs: 
•    Inadequate infrastructure and interoperability: Successful digitization depends on critical pre-conditions that are often (wrongly) assumed to exist everywhere, as described by Mastercard’s Daniel Huba. 
•    Relationship with FinTechs: For CFIs, FinTechs can be market disruptors or allies. Some CFIs have partnered with tech providers, while others are creating their own platforms (e.g. ACCU). 
•    Preserving the cooperative spirit:  as the availability of digital tools engenders individualistic tendencies, CFIs are working to maintain core cooperative values of solidarity, and community. 
•  Protecting clients’ information and assets: While this challenge is not unique to CFIs, client protection is particularly paramount when dealing with rural households, as their financial literacy tends to be lower than average.

Image 2 — Panel 2: Keys to Promoting Successful and Contributive CFIs in Rural Areas

3.    Access to Capital
Discussions reached beyond the central financing facilities that characterize many CFI systems. As these systems grow and modernize, the typical sources of loanable funds (member shares, deposits) become insufficient to satisfy increased demand for credit by member/clients running rural enterprises of growing scale. Key questions discussed in several panels are:
•    Making outside capital consistent with cooperative governance. To what extent can external investments in CFIs alter the composition of governance bodies? If so, what arrangements are desirable?
•    What instruments are appropriate for CFIs? Examples brought up included subordinated debt (DID panel, IDB in Peru), where investor’s covenants emphasized sound financial management and did not involve governance changes.
•    Which investors align with the cooperative model?

4.    Regulation and Supervision
Aspects of regulation and supervision (R&S) surfaced in all sessions in the symposium. Common themes included:
•    Proportional regulation and its implementation: While the principle is widely accepted, DGRV’s Matthias Arzbach noted that, “implementation is difficult in practice.” 
•    Issues with auxiliary mechanisms: While cost considerations suggest some advantages, effectiveness of existing mechanisms in developing countries is still under debate.
•    Compliance: Ecuador’s Margarita Hernández emphasized the importance of, and challenges with, compliance in the CFI sector. 
Panelists also touched on challenges for CFIs associated with regulation and supervision, including:
•   Supervising large numbers of CFIs, particularly in highly atomized CFI systems (e.g., Ethiopia, Uganda). Integration is a potential avenue to solve the “large-numbers” challenge, along with some form of auxiliary mechanism. 
•     Balancing protection of member deposits versus regulatory burden. Implementing regulations (via supervision) involves both enforcement costs (for the supervisor) and compliance costs (for the supervisee). In small rural CFIs there is often a scarcity of qualified people (e.g., accountants) to ensure compliant record keeping and reporting.
•   Financing the supervisory agency. Discussion on R&S included contrasting approaches to funding regulatory agencies, which in G-20 countries are primarily funded by the supervised entities, while regulators in other countries are funded primarily by the government and internal resources of the regulator (i.e., indirectly also the country’s budget). 

Image 3 — Panel 3: Regulation and Supervision for Small Rural CFIs

5.    Incorporating CFIs into the financial system
Several sessions highlighted the varying ways in which CFIs are incorporated into a country’s financial system and the associated benefits and challenges, including:  
•    Access to payment systems: Direct access to the payments platform is essential for CFIs to be able to provide valuable services to their member/clients, and engage in fair competition with other providers. Short of creating a cooperative bank (e.g., Albania, Brazil, Rwanda, and others), regulatory reforms are essential for CFIs to move in this direction. 
•    Correspondent agent banking and other innovations: CFI participation in agent banking has often been hindered by regulatory constraints. When these constraints are lifted, CFIs’ uptake of the innovation seem to be slow, pointing to further challenges (e.g. the case of correspondent banking in Colombia, as discussed by Marelvi Bernal).
•    Connecting with sustainable food chains and “Green” Finance innovations: With CFIs’ rural presence and diversity of membership/clientele, they are well-positioned to adopt these innovations in the financial system. 
•    Rural enterprises and inclusion of women and minorities: Making women and minorities integral participants in rural enterprises facilitates and complements their inclusion in formal finance. 
•    Managing risk: As highlighted by Gerardo Almaguer of DID, small rural CFIs can manage risk through approaches such as integration and diversifying their exposure.

Image 4 — Panel 4: Involving Rural Women and Youth in Strengthening and Expanding CFIs

6.    Women and Youth
Across panels, speakers emphasized the inclusion of women and youth in CFIs. “Inclusion, inclusion, …, and particularly inclusion of women, that is a top priority” (Jean Pesme).
•    Remoteness generates barriers for rural women and youth that include transportation costs, time barriers, and financial literacy disadvantages.
•    Panelists in the WOCCU session highlighted the importance of capacity building and leadership development that goes beyond financial literacy to expanding the participation of women and youth in CFIs. Leadership programs at Brazil’s Sicredi were described by actual leaders (Ivete Schoffen, Vinícius Mattia), part of the World Council’s global networks.
•    Real inclusion, with women as member-owners and in management and governance roles in CFIs was a clear point made by Diattou Coulibaly of Senegal.
•   A memorable quote came from Ivete discussing diversity versus inclusion: “diversity is inviting me to a party – inclusion is asking me to dance.” As Pim Mol articulated in the closing, we (the CFI people) are aiming for a “busy dancing floor “going forward.
•   Attention to youth ensures the future of CFI membership. Marianne Schoemaker underscored this point in the opening session, as part of “keeping pace with market changes.”

Image 5 — Closing Session

The Way Forward is hereby reflected in selected quotes, and highlights from the Working Session:

“We cannot maximize the value to our members and impact to community without achieving a sustainable growth that means solid capital base, strong efficiency and profitability, by using smart technology.” Zana Konini, Chairwoman, FED Invest, Albania. A full sentence with all the keywords.

Creating favorable conditions for women and youth participation: [it is] “more work but it’s worth it.” Manfred Dasenbrock, Central Sicredi. Point enthusiastically endorsed by Pim Mol.

“Somos todos actores de cambio” “We are all agents of change” Maximiliano Sainz, DID. An expression of both optimism and commitment.

“Solve the R&S challenges; is it doable” Carlos E. Cuevas, World Bank Group. Point inspired by the exchange between two regulators: Edith Tusuubira of Uganda, and Margarita Hernández of Ecuador.

The Working Session of the CoE confirmed its relevance and objectives, and supported continuing and expanding collaboration among partners and stakeholders. Information exchange through working sessions on specific subjects such as digitization and environmentally sustainable finance was encouraged as part of the work plan, as well as strengthening the links with country work and collaboration with other relevant networks.
 

Key Takeaways from the Symposium
Cooperative Financial Institutions in Rural Development: Promise and Challenges

By Carlos E. Cuevas and Anne M. Sivley

The World Bank’s Center of Excellence (CoE) for Cooperative Financial Institutions (CFIs) along with five organizing partners – Rabo Partnerships, DGRV, DID, ICURN, and WOCCU – convened a unique gathering of CFI practitioners, regulators, supervisors, development policy experts, and industry leaders to examine the role of CFIs in rural development. Panelists and moderators from 25 global, national, and regional entities shared their knowledge and experience through seven sessions held over two weeks. Over 375 attendees from 60 countries participated in the virtual sessions. The following summarizes the outcomes of these sessions along six cross-cutting themes, and a few concluding “way-forward” messages.

Image 1 — Opening Session

1.    The nature of CFIs
The unique nature of CFIs allows them to be central players in expanding rural access to finance. Key elements of that unique nature are:
•    Trust and confidence: The client proximity and community involvement of CFIs gives them an advantage in rural financial inclusion. However, building and maintaining trust and confidence requires solid governance and sound financial management. 
•    Resilience: Participants highlighted the resilience of CFIs in the face of crises, such as the COVID-19 pandemic. Kenya’s Peter Njuguna (SASRA) commented, “SACCOs retained sustained double-digit growth…showing the resilience of CFIs even in the face of pandemic.” 
•    Client-centric and adaptable: CFIs adapt products and adjust terms to better serve diverse member and client profiles, a point made by Mathieu Soglonou of CIF, West Africa, in the opening session and emphasized in the Women and Youth session organized by WOCCU.

2.    Digitization and Information Systems
Panelists highlighted that developing or acquiring digital tools is a priority for CFIs. Digital tools support many important areas of the functioning of CFIs, notably: 
•    Governance: Digital tools enable virtual meetings of governing bodies, a crucial capacity for CFIs as the pandemic prevents safe in-person gatherings. Survey findings in the ICURN/DGRV panel showed a sharp increase of virtual meetings in CFIs in 2020 relative to previous years.
•    Operations: Digitization enables increased outreach to member/clients, the extension of services beyond payments, and reduced transaction costs for agricultural financing 
•  Supervision: Accurate off-site supervision tools are crucial for supervisors to adequately cover many small, geographically dispersed CFIs. 
Panel discussions also highlighted issues associated with digitization for CFIs: 
•    Inadequate infrastructure and interoperability: Successful digitization depends on critical pre-conditions that are often (wrongly) assumed to exist everywhere, as described by Mastercard’s Daniel Huba. 
•    Relationship with FinTechs: For CFIs, FinTechs can be market disruptors or allies. Some CFIs have partnered with tech providers, while others are creating their own platforms (e.g., ACCU). 
•    Preserving the cooperative spirit:  as the availability of digital tools engenders individualistic tendencies, CFIs are working to maintain core cooperative values of solidarity, and community. 
•  Protecting clients’ information and assets: While this challenge is not unique to CFIs, client protection is particularly paramount when dealing with rural households, as their financial literacy tends to be lower than average.

Image 2 — Panel 2: Keys to Promoting Successful and Contributive CFIs in Rural Areas

3.    Access to Capital
Discussions reached beyond the central financing facilities that characterize many CFI systems. As these systems grow and modernize, the typical sources of loanable funds (member shares, deposits) become insufficient to satisfy increased demand for credit by member/clients running rural enterprises of growing scale. Key questions discussed in several panels are:
•    Making outside capital consistent with cooperative governance. To what extent can external investments in CFIs alter the composition of governance bodies? If so, what arrangements are desirable?
•    What instruments are appropriate for CFIs? Examples brought up included subordinated debt (DID panel, IDB in Peru), where investor’s covenants emphasized sound financial management and did not involve governance changes.
•    Which investors align with the cooperative model?

4.    Regulation and Supervision
Aspects of regulation and supervision (R&S) surfaced in all sessions in the symposium. Common themes included:
•    Proportional regulation and its implementation: While the principle is widely accepted, DGRV’s Matthias Arzbach noted that, “implementation is difficult in practice.” 
•    Issues with auxiliary mechanisms: While cost considerations suggest some advantages, effectiveness of existing mechanisms in developing countries is still under debate.
•    Compliance: Ecuador’s Margarita Hernández emphasized the importance of, and challenges with, compliance in the CFI sector. 
Panelists also touched on challenges for CFIs associated with regulation and supervision, including:
•   Supervising large numbers of CFIs, particularly in highly atomized CFI systems (e.g., Ethiopia, Uganda). Integration is a potential avenue to solve the “large-numbers” challenge, along with some form of auxiliary mechanism. 
•     Balancing protection of member deposits versus regulatory burden. Implementing regulations (via supervision) involves both enforcement costs (for the supervisor) and compliance costs (for the supervisee). In small rural CFIs there is often a scarcity of qualified people (e.g., accountants) to ensure compliant record keeping and reporting.
•   Financing the supervisory agency. Discussion on R&S included contrasting approaches to funding regulatory agencies, which in G-20 countries are primarily funded by the supervised entities, while regulators in other countries are funded primarily by the government and internal resources of the regulator (i.e., indirectly also the country’s budget). 

Image 3 — Panel 3: Regulation and Supervision for Small Rural CFIs

5.    Incorporating CFIs into the financial system
Several sessions highlighted the varying ways in which CFIs are incorporated into a country’s financial system and the associated benefits and challenges, including:  
•    Access to payment systems: Direct access to the payments platform is essential for CFIs to be able to provide valuable services to their member/clients and engage in fair competition with other providers. Short of creating a cooperative bank (e.g., Albania, Brazil, Rwanda, and others), regulatory reforms are essential for CFIs to move in this direction. 
•    Correspondent agent banking and other innovations: CFI participation in agent banking has often been hindered by regulatory constraints. When these constraints are lifted, CFIs’ uptake of the innovation seem to be slow, pointing to further challenges (e.g., the case of correspondent banking in Colombia, as discussed by Marelvi Bernal).
•    Connecting with sustainable food chains and “Green” Finance innovations: With CFIs’ rural presence and diversity of membership/clientele, they are well-positioned to adopt these innovations in the financial system. 
•    Rural enterprises and inclusion of women and minorities: Making women and minorities integral participants in rural enterprises facilitates and complements their inclusion in formal finance. 
•    Managing risk: As highlighted by Gerardo Almaguer of DID, small rural CFIs can manage risk through approaches such as integration and diversifying their exposure.

Image 4 — Panel 4: Involving Rural Women and Youth in Strengthening and Expanding CFIs

6.    Women and Youth
Across panels, speakers emphasized the inclusion of women and youth in CFIs. “Inclusion, inclusion, …, and particularly inclusion of women, that is a top priority” (Jean Pesme).
•    Remoteness generates barriers for rural women and youth that include transportation costs, time barriers, and financial literacy disadvantages.
•    Panelists in the WOCCU session highlighted the importance of capacity building and leadership development that goes beyond financial literacy to expanding the participation of women and youth in CFIs. Leadership programs at Brazil’s Sicredi were described by actual leaders (Ivete Schoffen, Vinícius Mattia), part of the World Council’s global networks.
•    Real inclusion, with women as member-owners and in management and governance roles in CFIs was a clear point made by Diattou Coulibaly of Senegal.
•   A memorable quote came from Ivete discussing diversity versus inclusion: “diversity is inviting me to a party – inclusion is asking me to dance.” As Pim Mol articulated in the closing, we (the CFI people) are aiming for a “busy dancing floor “going forward.
•   Attention to youth ensures the future of CFI membership. Marianne Schoemaker underscored this point in the opening session, as part of “keeping pace with market changes.”

Image 5 — Closing Session

The Way Forward is hereby reflected in selected quotes, and highlights from the Working Session:

“We cannot maximize the value to our members and impact to community without achieving a sustainable growth that means solid capital base, strong efficiency and profitability, by using smart technology.” Zana Konini, Chairwoman, FED Invest, Albania. A full sentence with all the keywords.

Creating favorable conditions for women and youth participation: [it is] “more work but it’s worth it.” Manfred Dasenbrock, Central Sicredi. Point enthusiastically endorsed by Pim Mol.

“Somos todos actores de cambio” “We are all agents of change” Maximiliano Sainz, DID. An expression of both optimism and commitment.

“Solve the R&S challenges; is it doable” Carlos E. Cuevas, World Bank Group. Point inspired by the exchange between two regulators: Edith Tusuubira of Uganda, and Margarita Hernández of Ecuador.

The Working Session of the CoE confirmed its relevance and objectives, and supported continuing and expanding collaboration among partners and stakeholders. Information exchange through working sessions on specific subjects such as digitization and environmentally sustainable finance was encouraged as part of the work plan, as well as strengthening the links with country work and collaboration with other relevant networks.
 

Key Takeaways from the Symposium
Cooperative Financial Institutions in Rural Development: Promise and Challenges

By Carlos E. Cuevas and Anne M. Sivley

The World Bank’s Center of Excellence (CoE) for Cooperative Financial Institutions (CFIs) along with five organizing partners – Rabo Partnerships, DGRV, DID, ICURN, and WOCCU – convened a unique gathering of CFI practitioners, regulators, supervisors, development policy experts, and industry leaders to examine the role of CFIs in rural development. Panelists and moderators from 25 global, national, and regional entities shared their knowledge and experience through seven sessions held over two weeks. Over 375 attendees from 59 countries participated in the virtual sessions. The following summarizes the outcomes of these sessions along six cross-cutting themes, and a few concluding “way-forward” messages.

Image 1 — Opening Session

1.    The nature of CFIs
The unique nature of CFIs allows them to be central players in expanding rural access to finance. Key elements of that unique nature are:
•    Trust and confidence: The client proximity and community involvement of CFIs gives them an advantage in rural financial inclusion. However, building and maintaining trust and confidence requires solid governance and sound financial management. 
•    Resilience: Participants highlighted the resilience of CFIs in the face of crises, such as the COVID-19 pandemic. Kenya’s Peter Njuguna (SASRA) commented, “SACCOs retained sustained double-digit growth…showing the resilience of CFIs even in the face of pandemic.” 
•    Client-centric and adaptable: CFIs adapt products and adjust terms to better serve diverse member and client profiles, a point made by Mathieu Soglonou of CIF, West Africa, in the opening session and emphasized in the Women and Youth session organized by WOCCU.

2.    Digitization and Information Systems
Panelists highlighted that developing or acquiring digital tools is a priority for CFIs. Digital tools support many important areas of the functioning of CFIs, notably: 
•    Governance: Digital tools enable virtual meetings of governing bodies, a crucial capacity for CFIs as the pandemic prevents safe in-person gatherings. Survey findings in the ICURN/DGRV panel showed a sharp increase of virtual meetings in CFIs in 2020 relative to previous years.
•    Operations: Digitization enables increased outreach to member/clients, the extension of services beyond payments, and reduced transaction costs for agricultural financing 
•  Supervision: Accurate off-site supervision tools are crucial for supervisors to adequately cover many small, geographically dispersed CFIs. 
Panel discussions also highlighted issues associated with digitization for CFIs: 
•    Inadequate infrastructure and interoperability: Successful digitization depends on critical pre-conditions that are often (wrongly) assumed to exist everywhere, as described by Mastercard’s Daniel Huba. 
•    Relationship with FinTechs: For CFIs, FinTechs can be market disruptors or allies. Some CFIs have partnered with tech providers, while others are creating their own platforms (e.g. ACCU). 
•    Preserving the cooperative spirit:  as the availability of digital tools engenders individualistic tendencies, CFIs are working to maintain core cooperative values of solidarity, and community. 
•  Protecting clients’ information and assets: While this challenge is not unique to CFIs, client protection is particularly paramount when dealing with rural households, as their financial literacy tends to be lower than average.

Image 2 — Panel 2: Keys to Promoting Successful and Contributive CFIs in Rural Areas

3.    Access to Capital
Discussions reached beyond the central financing facilities that characterize many CFI systems. As these systems grow and modernize, the typical sources of loanable funds (member shares, deposits) become insufficient to satisfy increased demand for credit by member/clients running rural enterprises of growing scale. Key questions discussed in several panels are:
•    Making outside capital consistent with cooperative governance. To what extent can external investments in CFIs alter the composition of governance bodies? If so, what arrangements are desirable?
•    What instruments are appropriate for CFIs? Examples brought up included subordinated debt (DID panel, IDB in Peru), where investor’s covenants emphasized sound financial management and did not involve governance changes.
•    Which investors align with the cooperative model?

4.    Regulation and Supervision
Aspects of regulation and supervision (R&S) surfaced in all sessions in the symposium. Common themes included:
•    Proportional regulation and its implementation: While the principle is widely accepted, DGRV’s Matthias Arzbach noted that, “implementation is difficult in practice.” 
•    Issues with auxiliary mechanisms: While cost considerations suggest some advantages, effectiveness of existing mechanisms in developing countries is still under debate.
•    Compliance: Ecuador’s Margarita Hernández emphasized the importance of, and challenges with, compliance in the CFI sector. 
Panelists also touched on challenges for CFIs associated with regulation and supervision, including:
•   Supervising large numbers of CFIs, particularly in highly atomized CFI systems (e.g., Ethiopia, Uganda). Integration is a potential avenue to solve the “large-numbers” challenge, along with some form of auxiliary mechanism. 
•     Balancing protection of member deposits versus regulatory burden. Implementing regulations (via supervision) involves both enforcement costs (for the supervisor) and compliance costs (for the supervisee). In small rural CFIs there is often a scarcity of qualified people (e.g., accountants) to ensure compliant record keeping and reporting.
•   Financing the supervisory agency. Discussion on R&S included contrasting approaches to funding regulatory agencies, which in G-20 countries are primarily funded by the supervised entities, while regulators in other countries are funded primarily by the government and internal resources of the regulator (i.e., indirectly also the country’s budget). 

Image 3 — Panel 3: Regulation and Supervision for Small Rural CFIs

5.    Incorporating CFIs into the financial system
Several sessions highlighted the varying ways in which CFIs are incorporated into a country’s financial system and the associated benefits and challenges, including:  
•    Access to payment systems: Direct access to the payments platform is essential for CFIs to be able to provide valuable services to their member/clients, and engage in fair competition with other providers. Short of creating a cooperative bank (e.g., Albania, Brazil, Rwanda, and others), regulatory reforms are essential for CFIs to move in this direction. 
•    Correspondent agent banking and other innovations: CFI participation in agent banking has often been hindered by regulatory constraints. When these constraints are lifted, CFIs’ uptake of the innovation seem to be slow, pointing to further challenges (e.g. the case of correspondent banking in Colombia, as discussed by Marelvi Bernal).
•    Connecting with sustainable food chains and “Green” Finance innovations: With CFIs’ rural presence and diversity of membership/clientele, they are well-positioned to adopt these innovations in the financial system. 
•    Rural enterprises and inclusion of women and minorities: Making women and minorities integral participants in rural enterprises facilitates and complements their inclusion in formal finance. 
•    Managing risk: As highlighted by Gerardo Almaguer of DID, small rural CFIs can manage risk through approaches such as integration and diversifying their exposure.

Image 4 — Panel 4: Involving Rural Women and Youth in Strengthening and Expanding CFIs

6.    Women and Youth
Across panels, speakers emphasized the inclusion of women and youth in CFIs. “Inclusion, inclusion, …, and particularly inclusion of women, that is a top priority” (Jean Pesme).
•    Remoteness generates barriers for rural women and youth that include transportation costs, time barriers, and financial literacy disadvantages.
•    Panelists in the WOCCU session highlighted the importance of capacity building and leadership development that goes beyond financial literacy to expanding the participation of women and youth in CFIs. Leadership programs at Brazil’s Sicredi were described by actual leaders (Ivete Schoffen, Vinícius Mattia), part of the World Council’s global networks.
•    Real inclusion, with women as member-owners and in management and governance roles in CFIs was a clear point made by Diattou Coulibaly of Senegal.
•   A memorable quote came from Ivete discussing diversity versus inclusion: “diversity is inviting me to a party – inclusion is asking me to dance.” As Pim Mol articulated in the closing, we (the CFI people) are aiming for a “busy dancing floor “going forward.
•   Attention to youth ensures the future of CFI membership. Marianne Schoemaker underscored this point in the opening session, as part of “keeping pace with market changes.”

Image 5 — Screengrab from Closing Session

The Way Forward is hereby reflected in selected quotes, and highlights from the Working Session:

“We cannot maximize the value to our members and impact to community without achieving a sustainable growth that means solid capital base, strong efficiency and profitability, by using smart technology.” Zana Konini, Chairwoman, FED Invest, Albania. A full sentence with all the keywords.

Creating favorable conditions for women and youth participation: [it is] “more work but it’s worth it.” Manfred Dasenbrock, Central Sicredi. Point enthusiastically endorsed by Pim Mol.

“Somos todos actores de cambio” “We are all agents of change” Maximiliano Sainz, DID. An expression of both optimism and commitment.

“Solve the R&S challenges; is it doable” Carlos E. Cuevas, World Bank Group. Point inspired by the exchange between two regulators: Edith Tusuubira of Uganda, and Margarita Hernández of Ecuador.

The Working Session of the CoE confirmed its relevance and objectives, and supported continuing and expanding collaboration among partners and stakeholders. Information exchange through working sessions on specific subjects such as digitization and environmentally sustainable finance was encouraged as part of the work plan, as well as strengthening the links with country work and collaboration with other relevant networks.
 

Key Takeaways from the Symposium
Cooperative Financial Institutions in Rural Development: Promise and Challenges

By Carlos E. Cuevas and Anne M. Sivley

The World Bank’s Center of Excellence (CoE) for Cooperative Financial Institutions (CFIs) along with five organizing partners – Rabo Partnerships, DGRV, DID, ICURN, and WOCCU – convened a unique gathering of CFI practitioners, regulators, supervisors, development policy experts, and industry leaders to examine the role of CFIs in rural development. Panelists and moderators from 25 global, national, and regional entities shared their knowledge and experience through seven sessions held over two weeks. Over 375 attendees from 59 countries participated in the virtual sessions. The following summarizes the outcomes of these sessions along six cross-cutting themes, and a few concluding “way-forward” messages.

Image 1 — Opening Session

1.    The nature of CFIs
The unique nature of CFIs allows them to be central players in expanding rural access to finance. Key elements of that unique nature are:
•    Trust and confidence: The client proximity and community involvement of CFIs gives them an advantage in rural financial inclusion. However, building and maintaining trust and confidence requires solid governance and sound financial management. 
•    Resilience: Participants highlighted the resilience of CFIs in the face of crises, such as the COVID-19 pandemic. Kenya’s Peter Njuguna (SASRA) commented, “SACCOs retained sustained double-digit growth…showing the resilience of CFIs even in the face of pandemic.” 
•    Client-centric and adaptable: CFIs adapt products and adjust terms to better serve diverse member and client profiles, a point made by Mathieu Soglonou of CIF, West Africa, in the opening session and emphasized in the Women and Youth session organized by WOCCU.

2.    Digitization and Information Systems
Panelists highlighted that developing or acquiring digital tools is a priority for CFIs. Digital tools support many important areas of the functioning of CFIs, notably: 
•    Governance: Digital tools enable virtual meetings of governing bodies, a crucial capacity for CFIs as the pandemic prevents safe in-person gatherings. Survey findings in the ICURN/DGRV panel showed a sharp increase of virtual meetings in CFIs in 2020 relative to previous years.
•    Operations: Digitization enables increased outreach to member/clients, the extension of services beyond payments, and reduced transaction costs for agricultural financing 
•  Supervision: Accurate off-site supervision tools are crucial for supervisors to adequately cover many small, geographically dispersed CFIs. 
Panel discussions also highlighted issues associated with digitization for CFIs: 
•    Inadequate infrastructure and interoperability: Successful digitization depends on critical pre-conditions that are often (wrongly) assumed to exist everywhere, as described by Mastercard’s Daniel Huba. 
•    Relationship with FinTechs: For CFIs, FinTechs can be market disruptors or allies. Some CFIs have partnered with tech providers, while others are creating their own platforms (e.g. ACCU). 
•    Preserving the cooperative spirit:  as the availability of digital tools engenders individualistic tendencies, CFIs are working to maintain core cooperative values of solidarity, and community. 
•  Protecting clients’ information and assets: While this challenge is not unique to CFIs, client protection is particularly paramount when dealing with rural households, as their financial literacy tends to be lower than average.

Image 2 — Panel 2: Keys to Promoting Successful and Contributive CFIs in Rural Areas

3.    Access to Capital
Discussions reached beyond the central financing facilities that characterize many CFI systems. As these systems grow and modernize, the typical sources of loanable funds (member shares, deposits) become insufficient to satisfy increased demand for credit by member/clients running rural enterprises of growing scale. Key questions discussed in several panels are:
•    Making outside capital consistent with cooperative governance. To what extent can external investments in CFIs alter the composition of governance bodies? If so, what arrangements are desirable?
•    What instruments are appropriate for CFIs? Examples brought up included subordinated debt (DID panel, IDB in Peru), where investor’s covenants emphasized sound financial management and did not involve governance changes.
•    Which investors align with the cooperative model?

4.    Regulation and Supervision
Aspects of regulation and supervision (R&S) surfaced in all sessions in the symposium. Common themes included:
•    Proportional regulation and its implementation: While the principle is widely accepted, DGRV’s Matthias Arzbach noted that, “implementation is difficult in practice.” 
•    Issues with auxiliary mechanisms: While cost considerations suggest some advantages, effectiveness of existing mechanisms in developing countries is still under debate.
•    Compliance: Ecuador’s Margarita Hernández emphasized the importance of, and challenges with, compliance in the CFI sector. 
Panelists also touched on challenges for CFIs associated with regulation and supervision, including:
•   Supervising large numbers of CFIs, particularly in highly atomized CFI systems (e.g., Ethiopia, Uganda). Integration is a potential avenue to solve the “large-numbers” challenge, along with some form of auxiliary mechanism. 
•     Balancing protection of member deposits versus regulatory burden. Implementing regulations (via supervision) involves both enforcement costs (for the supervisor) and compliance costs (for the supervisee). In small rural CFIs there is often a scarcity of qualified people (e.g., accountants) to ensure compliant record keeping and reporting.
•   Financing the supervisory agency. Discussion on R&S included contrasting approaches to funding regulatory agencies, which in G-20 countries are primarily funded by the supervised entities, while regulators in other countries are funded primarily by the government and internal resources of the regulator (i.e., indirectly also the country’s budget). 

Image 3 — Panel 3: Regulation and Supervision for Small Rural CFIs

5.    Incorporating CFIs into the financial system
Several sessions highlighted the varying ways in which CFIs are incorporated into a country’s financial system and the associated benefits and challenges, including:  
•    Access to payment systems: Direct access to the payments platform is essential for CFIs to be able to provide valuable services to their member/clients, and engage in fair competition with other providers. Short of creating a cooperative bank (e.g., Albania, Brazil, Rwanda, and others), regulatory reforms are essential for CFIs to move in this direction. 
•    Correspondent agent banking and other innovations: CFI participation in agent banking has often been hindered by regulatory constraints. When these constraints are lifted, CFIs’ uptake of the innovation seem to be slow, pointing to further challenges (e.g. the case of correspondent banking in Colombia, as discussed by Marelvi Bernal).
•    Connecting with sustainable food chains and “Green” Finance innovations: With CFIs’ rural presence and diversity of membership/clientele, they are well-positioned to adopt these innovations in the financial system. 
•    Rural enterprises and inclusion of women and minorities: Making women and minorities integral participants in rural enterprises facilitates and complements their inclusion in formal finance. 
•    Managing risk: As highlighted by Gerardo Almaguer of DID, small rural CFIs can manage risk through approaches such as integration and diversifying their exposure.

Image 4 — Panel 4: Involving Rural Women and Youth in Strengthening and Expanding CFIs

6.    Women and Youth
Across panels, speakers emphasized the inclusion of women and youth in CFIs. “Inclusion, inclusion, …, and particularly inclusion of women, that is a top priority” (Jean Pesme).
•    Remoteness generates barriers for rural women and youth that include transportation costs, time barriers, and financial literacy disadvantages.
•    Panelists in the WOCCU session highlighted the importance of capacity building and leadership development that goes beyond financial literacy to expanding the participation of women and youth in CFIs. Leadership programs at Brazil’s Sicredi were described by actual leaders (Ivete Schoffen, Vinícius Mattia), part of the World Council’s global networks.
•    Real inclusion, with women as member-owners and in management and governance roles in CFIs was a clear point made by Diattou Coulibaly of Senegal.
•   A memorable quote came from Ivete discussing diversity versus inclusion: “diversity is inviting me to a party – inclusion is asking me to dance.” As Pim Mol articulated in the closing, we (the CFI people) are aiming for a “busy dancing floor “going forward.
•   Attention to youth ensures the future of CFI membership. Marianne Schoemaker underscored this point in the opening session, as part of “keeping pace with market changes.”

The Way Forward is hereby reflected in selected quotes, and highlights from the Working Session:

“We cannot maximize the value to our members and impact to community without achieving a sustainable growth that means solid capital base, strong efficiency and profitability, by using smart technology.” Zana Konini, Chairwoman, FED Invest, Albania. A full sentence with all the keywords.

Creating favorable conditions for women and youth participation: [it is] “more work but it’s worth it.” Manfred Dasenbrock, Central Sicredi. Point enthusiastically endorsed by Pim Mol.

“Somos todos actores de cambio” “We are all agents of change” Maximiliano Sainz, DID. An expression of both optimism and commitment.

“Solve the R&S challenges; is it doable” Carlos E. Cuevas, World Bank Group. Point inspired by the exchange between two regulators: Edith Tusuubira of Uganda, and Margarita Hernández of Ecuador.

The Working Session of the CoE confirmed its relevance and objectives, and supported continuing and expanding collaboration among partners and stakeholders. Information exchange through working sessions on specific subjects such as digitization and environmentally sustainable finance was encouraged as part of the work plan, as well as strengthening the links with country work and collaboration with other relevant networks.
 

Cooperatives financial institutions (CFIs) represent a diversity of institutional forms: cooperative banks, credit unions, building societies, savings and credit associations, self-help mutual credit systems and others. Their business model, enrooted in local economies and member-based governance structure, and cooperative values and principles, allowed them to become significant players in the banking sectors in all regions of the world. In Europe, cooperative banks provide access to finance through 43,000 outlets and employ approximately 705,000 people. In Italy, France, Germany and the Netherlands, cooperative banks’ market share in loans ranges between 25% and 45%. In other parts of the world, 85,000 credit unions improve the lives and communities of 274 million members.

Recent developments show that financial cooperatives are champions of sustainable development. They continue to play a significant role in promoting resilience in times of crisis (Birchall, Ketilson, 2009) and contribute to sustainable development in many ways: by committing to Sustainable Development Goals (ICBA, 2020), promoting solidarity finance (Balkenhol, 2019), engaging in green and sustainable finance and fight against climate change (EACB, 2020). Increasing pressure for sustainability reporting, therefore, represents an opportunity to make visible their cooperative difference. Still, it also represents a challenge for smaller institutions in emerging regulatory and supervisory environments.

Takeaways from Week One
"Cooperative Financial Institutions in Rural Development: Promise and Challenges"

By Anne M. Sivley and Carlos E. Cuevas

What role can cooperative financial institutions play in rural development?
The first week of the CFI International Symposium examined this question through the experiences of practitioners, regulators, and experts from around the world. 

In the opening session, we heard from leaders at the World Bank, Rabo Partnerships, Kenya's SACCO Societies Regulatory Authority (SASRA), and West Africa's Confédération des Institutions Financières (CIF) who spoke of the substantial role CFIs are positioned to play in rural development, and especially in financing agriculture. As Rabo’s Marianne Schoemaker put it “Cooperative financing has historically been at the core of agricultural and rural development.” Panelists highlighted the resilience CFIs have shown with important growth even in Covid-19 times (Peter Njuguna: “SACCOs retained sustained growth double digit … , showing the resilience of CFIs even in the face of pandemic,”)  as well as the  interplay of innovation with CFI principles and structure (Mathieu Soglonou: “Today, thanks to technology, there is a world that is more and more isolated sometimes and cooperatives must strengthen the solidarity aspect.” Jean Pesme of the World Bank summed up the motivating drive of this symposium, “CFIs have played and must continue to play a very significant role in terms of financial inclusion and access to financial services for part of the population which otherwise would be unbanked in particular in rural areas.”

The first technical panel explored the role of CFIs in promoting rural financial inclusion, the challenges they face, and their path forward through examples from three countries: Albania, Colombia, and Ethiopia. Albania experienced a transformative merger of CFIs in the country, and we learned how it impacted their ability to deliver services in rural areas. In Colombia, CFIs play a crucial role in providing financial services to remote rural areas where traditional banks do not go. As President of Fecolfin Enrique Valderrama described, “Whenever there have been crises [in Colombia], cooperatives have been present. Other banking institutions have left quickly whenever there is a grave development in our country and cooperatives have been left as the solo financial institution for small towns and medium sized cities.” Finally, we heard about the challenges presented by the structure of the CFI sector in Ethiopia and current efforts underway to build capacity and update regulatory frameworks. 

Développement International Desjardins (DID) organized the second technical panel, which explored keys to promoting successful and contributive CFIs in rural areas through the examples of Peru, Colombia, and members of the Asian Confederation of Credit Unions (ACCU). Across contexts, CFIs are helping their members strengthen capacity and build resilience, especially in the current context of the pandemic. As CEO of the Comultrasan Cooperative Isabel Pinto explained, “Cooperatives have played a fundamental role in helping people survive and thrive during the pandemic. Without these cooperatives, this development would not be present.” The discussion also explored access to capital for CFIs and the tradeoffs of bringing in external investors and financing.

Across the first three sessions, some common themes have emerged: 

• Role of digital tools in CFIs
• CFIs and women’s financial inclusion 
• Prudent regulation and supervision of cooperatives
• Access to capital for CFIs

The second week of the symposium will explore these themes in more detail through three panel session. Follow the links to register (free) and participate!
 

Takeaways from Week One
"Cooperative Financial Institutions in Rural Development: Promise and Challenges"

By Anne M. Sivley and Carlos E. Cuevas

What role can cooperative financial institutions play in rural development? The first week of the CFI International Symposium examined this question through the experiences of practitioners, regulators, and experts from around the world. 

In the opening session, we heard from leaders at the World Bank, Rabo Partnerships, Kenya's SACCO Societies Regulatory Authority (SASRA), and West Africa's Confédération des Institutions Financières (CIF) who spoke of the substantial role CFIs are positioned to play in rural development, and especially in financing agriculture. As Rabo’s Marianne Schoemaker put it “Cooperative financing has historically been at the core of agricultural and rural development.” Panelists highlighted the resilience CFIs have shown with important growth even in Covid-19 times (Peter Njuguna: “SACCOs retained sustained growth double digit … , showing the resilience of CFIs even in the face of pandemic,”)  as well as the  interplay of innovation with CFI principles and structure (Mathieu Soglonou: “Today, thanks to technology, there is a world that is more and more isolated sometimes and cooperatives must strengthen the solidarity aspect.” Jean Pesme of the World Bank summed up the motivating drive of this symposium, “CFIs have played and must continue to play a very significant role in terms of financial inclusion and access to financial services for part of the population which otherwise would be unbanked in particular in rural areas.”

The first technical panel explored the role of CFIs in promoting rural financial inclusion, the challenges they face, and their path forward through examples from three countries: Albania, Colombia, and Ethiopia. Albania experienced a transformative merger of CFIs in the country, and we learned how it impacted their ability to deliver services in rural areas. In Colombia, CFIs play a crucial role in providing financial services to remote rural areas where traditional banks do not go. As President of Fecolfin Enrique Valderrama described, “Whenever there have been crises [in Colombia], cooperatives have been present. Other banking institutions have left quickly whenever there is a grave development in our country and cooperatives have been left as the solo financial institution for small towns and medium sized cities.” Finally, we heard about the challenges presented by the structure of the CFI sector in Ethiopia and current efforts underway to build capacity and update regulatory frameworks. 

Développement International Desjardins (DID) organized the second technical panel, which explored keys to promoting successful and contributive CFIs in rural areas through the examples of Peru, Colombia, and members of the Asian Confederation of Credit Unions (ACCU). Across contexts, CFIs are helping their members strengthen capacity and build resilience, especially in the current context of the pandemic. As CEO of the Comultrasan Cooperative Isabel Pinto explained, “Cooperatives have played a fundamental role in helping people survive and thrive during the pandemic. Without these cooperatives, this development would not be present.” The discussion also explored access to capital for CFIs and the tradeoffs of bringing in external investors and financing.

Across the first three sessions, some common themes have emerged: 

• Role of digital tools in CFIs
• CFIs and women’s financial inclusion 
• Prudent regulation and supervision of cooperatives
• Access to capital for CFIs

The second week of the symposium will explore these themes in more detail through three panel session. Follow the links to register (free) and participate!