Financial cooperatives, including some of the top ten microfinance companies in India, have strived to ensure socio-economic development in several poverty-stricken regions across the world. They have managed to reduce poverty, create jobs and also integrate societies.
Within the microfinance sector, cooperatives end up reaching more individuals and families than any other financial institution. This saddles them with the responsibility of improving financial services for all which results in increasing local economic growth and alleviating poverty.
As formal financial institutions seem to go through cyclical upheavals, the cooperative model is turning out to be more pertinent than ever.
A comprehensive alternative to the traditional banking model
Poverty-stricken communities worldwide have managed to progress thanks to financial cooperatives. The latter has substantially contributed to financial development and social upliftment in such societies. In a globalized economy, cooperatives also tend to be an important centre of economic power.
Financial cooperatives are continuously looking to innovate for surmounting various challenges. However, they rarely end up operating beyond the limits of contemporary norms and systems.
Like all other enterprises in the private sector, financial cooperatives, to meet the challenges they face, they are constantly inclining on their capacity for innovation. Nonetheless, in doing this, they seldom find themselves operating outside the limits set by present norms and systems. These discrepancies call for openness and special efforts, both from cooperatives and lawmakers.
Recognizing significance and unique nature of cooperatives
The role of cooperatives in redefining the global financial sector need to be acknowledged. Some of the largest microfinance companies in India have transformed lives of struggling communities. This is being discussed on international platforms by renowned organizations and individuals.
Cooperatives can bounce back faster than banks
Everywhere around the world, financial cooperatives got through the financial crisis of 2008-2009 better than private banks. Unlike banks, cooperatives were not required to seek government aid anywhere. During this period, several firms shifted from dealing banks to cooperatives because the latter inspired more confidence. Therefore cooperatives found themselves enjoying an increased customer base as well as saving volumes. As banks had suffered and were slowing down when it came to lending activity, cooperatives continued to lend and recover.
The Cooperative model guarantees financial inclusion and financial literacy
- Collective ownership, local management and working with the community are integral aspects of cooperatives
- Cooperatives are concerned about the welfare of their members. Therefore they focus on a fair price for quality services rather than profiteering
- Members of the cooperative are responsible for governance. They carry it out in a transparent and democratic manner
- Members are educated, trained and informed by cooperatives. This enables them to be cognisant of credit, analyze their borrowing capabilities and be mindful of the commitments that have been made while availing a loan
A major contribution to global socio-economic development
- Cooperative institutions create sustainable local prosperity by constituting inalienable collective wealth.
- Their sound practices are a shield against excesses, risks, and harsh practices.
- Their dependence on the savings and capital of their members as sources of financing gives them the liberty which makes them more resilient to external shocks and is an assurance of stability on the global landscape.
- Taking an active part in the creation of quality jobs.
- Motivating innovation and sustainable development.
