II 2 A COOPERATIVE TOWARDS THE
DEFINITION
II 2 1 DEFINITION
A co-operative bank is a financial entity which belongs to its
members, who are at the same time the owners and the customers of their bank.
Co-operative banks are often created by persons belonging to the same local or
professional community or sharing a common interest. Co-operative banks
generally provide their members with a wide range of banking and financial
services (loans, deposits, banking
accounts...)(www.wikipedia/cooperativebank).
Co-operative banks differ from stockholder banks by their
organization, their goals, their values and their governance. In most
countries, they are supervised and controlled by banking authorities and have
to respect prudential banking regulations, which put them at a level playing
field with stockholder banks. Depending on countries, this control and
supervision can be implemented directly by state entities or delegated to a
co-operative federation or central body (www.wikipedia/cooperativebank).
II
2 2 FEATURES OF COOPERATIVE BANKS
Even if their organizational rules can vary according to their
respective national legislations, co-operative banks share common features:
· Customer-owned entities: In a
co-operative bank, the needs of the customers meet the needs of the owners, as
co-operative bank members are both owners and customers. As a consequence, the
first aim of a co-operative bank is not to maximize profit but to provide the
best possible products and services to its members. Some co-operative banks
only operate with their members but most of them also admit non-member clients
to benefit from their banking and financial services.
· Democratic member control:
Co-operative banks are owned and controlled by their members, who
democratically elect the board of directors. Members usually have equal voting
rights, according to the co-operative principle of «one person, one
vote» (www.wikipedia/cooperativebank).
· Profit allocation: In a
co-operative bank, a significant part of the yearly profit, benefits or surplus
is usually allocated to constitute reserves. A part of this profit can also be
distributed to the co-operative members, with legal or statutory limitations in
most cases. Profit is usually allocated to members either through a patronage
dividend, which is related to the use of the co-operative's products and
services by each member, or through an interest or a dividend, which is related
to the number of shares subscribed by each
member(www.wikipedia/cooperativebank).
Co-operative banks are deeply rooted inside local areas and
communities. They are involved in local development and contribute to the
sustainable development of their communities, as their members and management
board usually belong to the communities in which they exercise their
activities. By increasing banking access in areas or markets where other banks
are less present - SMEs, farmers in rural areas, middle or low income
households in urban areas - co-operative banks reduce banking exclusion and
foster the economic ability of millions of people. They play an influential
role on the economic growth in the countries in which they work in and increase
the efficiency of the international financial system. Their specific form of
enterprise, relying on the above-mentioned principles of organization, has
proven successful both in developed and developing
countries(www.wikipedia/cooperativebank).
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