Cooperatives show the way out of the crisis

Cooperatives have been more resilient to the global economic and jobs crisis than other sectors. The UN International Day of Cooperatives, which takes place this year on 7 July, offers a chance for cooperatives to reassert their position in the world economy. ILO News interviews Simel Esim, Chief of the ILO’s Cooperative Branch.

Analyse | 4 juillet 2012
Is the role that cooperatives play in the economy often underestimated?

Simel Esim:
The economic contribution of cooperatives, although substantial, is often undervalued, and sometimes completely ignored.

The top 300 cooperatives in the world in terms of turnover exceed US$1.6 trillion, more than the GDP of Canada. In Argentina, 58 per cent of rural electricity in 2005 was provided by cooperatives. In Colombia, Saludcoop, a health cooperative, provides health care services for 15.5 per cent of the population.

In Japan, 9.1 million family farmers are members of cooperatives who provide 257,000 jobs. In India, the needs of 67 per cent of rural households are covered by cooperatives, and in Switzerland, the largest retailers and largest private employer is a cooperative.

How prominent is the role of cooperatives in the international banking system?

Simel Esim:
Some of the largest banks in the world, including the Dutch Rabobank, Crédit Agricole and Crédit Mutuel in France and DG Bank in Germany, are cooperatives. In Europe alone, there are 4,200 local cooperative banks, around 60,000 branches and a market share of 20 per cent. In France, for example, 75 per cent of farmers are members of at least one agricultural co-operative MEC, while co-operative banks handle 60 per cent of retail banking operations. KUSCCO, a cooperative Bank in Kenya, is the fourth largest in the country with a capital of US$180 million.

  • Serve 1 billion members worldwide
  • Financial cooperatives serve over 857 million people – 13 per cent of the world population.
  • Provide 100 million jobs around the globe
  • Ensure the livelihoods of 50 per cent of the world’s population
  • Produce 50 per cent of global agriculture output
  • The top 300 cooperatives generate USD 1.6 trillion
Have cooperatives been more resilient to the crisis?

Simel Esim:
Available evidence suggests that cooperative enterprises across sectors and regions are proving to be relatively more resilient to the current market shocks than their capital-centred counterparts.

Financial cooperatives remain financially sound; consumer cooperatives are reporting increased turnover; and worker cooperatives are seeing growth as people choose the cooperative form of enterprise to respond to new economic realities.

To give you an example: While European co-operative banks have 21 per cent of the market share, they only accounted for 7 per cent of all the European banking industry’s write-downs and losses between the third quarter of 2007 and the first quarter of 2011.

Even in the current context of recession, the ILO has noted an increase of cooperative start-ups – especially savings and credit cooperatives or credit unions, which contribute to employment creation around the globe.

How do you explain the resilience of cooperatives?

Simel Esim:
Although they might have been less profitable than other financial institutions before, the profitability of cooperative banks went up during the crisis. Cooperative banks are more risk-averse and less driven by the need to make profits for investors and bonuses for managers.

In comparison to private banks, savings and credit cooperatives tend not to freeze credit, have lower increases in interest rates and are generally more stable due to lending practices. Cooperative banks stayed close to the roots of the banking system and the real economy. This made them more resilient to the global economic turmoil.

How can we ensure the promotion of cooperatives?

Simel Esim:
Successful cooperative promotion requires a consistent, clear, realistic and long-term cooperative development policy in line with national priorities. These policies need to recognize the economic and social importance, autonomy and distinctive identity of cooperatives.

Policy makers need to ensure a level playing field between customer-owned banking institutions and investor-owned banks, and the need to ensure that new banking regulations do not disadvantage the sector. They must also ensure current laws and administrative practices (registration procedures, taxation policies, accounting standards, etc.) do not hinder the development and growth of cooperatives.

And without cooperative credit, it will be even harder to keep or create the jobs needed and to ensure establishments stay afloat. 

ILO guidelines to promote cooperatives
ILO Recommendation 193 on the Promotion of Cooperatives (2002) provides guidance on cooperative policy and legislation stressing the need for a level playing field for cooperatives and other enterprises. Over 70 countries have revised their cooperative legislation since the adoption of the Recommendation ten years ago, in line with its provisions.

All cooperative laws adopted since then have reduced state influence over, and state sponsoring of, cooperatives, increased cooperative autonomy and self-reliance, and cut links that might have existed between cooperatives and political organizations.