Creating “co-operative capital”: a challenge for co-operative financial institutions

"Co-operatives need to develop a ‘breed of capital’ – ‘co-operative capital’ – that appeals to their members' values and is consistent with and nurtures the co-operative business model....

“Co-operatives need to develop a ‘breed of capital’ – ‘co-operative capital’ – that appeals to their members’ values and is consistent with and nurtures the co-operative business model. Millions of co-operative members are looking for investments that do not harm the planet and their children and grand-children. It is time to meet our members’ needs.” That’s the challenge raised by Tom Webb (in photo), Manager of the Master of Management, Co-operatives and Credit Unions Program at Saint Mary’s University in Halifax, Canada, and his colleagues Alan J. Robb and James H. Smith, the co-authors of a paper titled “Co-operative Capital: What It Is and Why Our World Needs It”¹, which they presented at the EURICSE² and NCBA³ conferences. Cooperative capital vs. investor capital According to Webb and his colleagues, one of the things that characterize banking institutions that use investor capital is the actual purpose of investors, which is not simply to make profits, but “to continually increase the profits that are made.” Another characteristic of these institutions is how little power shareholders have over the enterprise. This power is directly related to the amount of capital invested and based on the rule of “one dollar, one vote”. Cooperative businesses are one of the answers to the unfairness and injustices of the prevailing economic model and the single-minded quest for prof The cooperative capital that these businesses have comes from members committed to the principles of meeting members’ needs and the sustainable development needs of their community. All members are equally important in a cooperative’s directional plan. That’s the rule of democracy: “one member, one vote”. What do you do with cooperative capital? It’s estimated that cooperative financial institutions around the world together have assets in excess of $2.5 billion reported Webb and his colleagues. These figures indicate how successful these institutions are, whether they’re credit unions, cooperative banks, cooperative insurers or mutual insurance companies. “The question now is, where do we go from here?” In their paper, Webb, Robb and Smith explore the options available to cooperative financial institutions given their structures, capital requirements and investment needs. On that front, they believe there is a growing need to offer co-operative capital funds, for example, or socially responsible funds because “the risks associated with such new vehicles can be mitigated by risk sharing among such funds at the national and even international level.” With such funds, co-operative investors would no longer be forced to invest “in obscure financial instruments that offend their values and finance investor capital endeavours in distant places.” Instead they will be able “to see their savings used to meet real economic needs closer to home”, say the authors. To view the paper, click here. European Research Institute on Cooperative and Social Enterprises (EURICSE). The conference took place in Trento, Italy, in June 2011. National Cooperative Business Association (NCBA). The conference took place in October 2011.

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