Co-operatives need to better impose their legitimacy on the world stage, according to Desjardins’ President and Chief Executive Officer Monique Leroux.
Leroux, who was speaking to global co-operative and banking leaders in New York on the occasion of the UN International Year of Co-operatives 2012 launch, said co-operatives were a concrete solution to the major challenges facing the global community – economic challenges, social challenges and environmental challenges.
In a global climate of anger towards traditional banking corporations, as elucidated by the Occupy Wall Street movement, co-operatives had a conservatism to their operations care of their membership-owned structures. They had been less exposed to excessive risk and have largely avoided the subprime lending fiasco.
Co-operatives were also not subject to the constant race for profits which typified stockmarket-listed companies, where financial gains were put in front of sensible capital management and community need.
Leroux said international regulatory authorities, particularly, needed to understand that co-operatives provided an effective alternative.
In a failing Europe, where sovereign debt problems have forced several rounds of country bail-outs, as well as in the United States where real economic recovery has found little support, a more co-operative form of governance is demanded, Leroux said.
A more plural economy – a better cooperation between leaders of governments, public companies and cooperatives would bring a balance between capitalist market economy and the social economy. Without it, economic and financial difficulties would further spiral.
However, the global financial crisis had not been without its opportunities for co-operatives, Leroux said.
It marked a significant turning in the previously insufficient understanding of co-operatives by government, in comparison with the traditional corporate model of business.
According to Leroux, this change in attitude should be made the most of by co-operatives by accelerating growth of co-operatives and the development of new co-operatives.
However, in the global banking environment, co-operatives had to be ever vigilant to ensure that regulators understood their structure. If not, any reforms might put co-operatives at a disadvantage to corporations.
Leroux elaborated extensively on the perpetual topic of capitalisation and the challenges co-operatives face in this area.
An inability to access capital as quickly as stock market-listed entities because it cannot issue equity securities had always been a central challenge, she said.
However, she pointed to the imaginative ways in which Desjardins had been able to access capital including offering permanent shares to members which a remunerated based on annual performance. The permanent nature of the capital was preserved while a secondary market was established to enable Desjardins’ 5.4 million members to take part in the investment scheme.
This was a development in the 1990s but more recently Desjardins’ members have received dividends in the form of a share. These shares generate returns in the same manner as its permanent shares and, of course, help build the caisses’ capitalisation.
Thirdly, Desjardins issues subordinate bonds that are eligible as Tier 2 capital.
Desjardins ranks twentieth amongst the safest financial institutions in the world and fourth in North America, according to Global Finance magazine. It has a Tier 1 capital ratio of 17.7 per cent. Put in the context of Europe, it is well above the 9 per cent that is being targeted by regulators in Europe as part of reforms of its fragile banking system.
Meanwhile, Leroux echoed the belief of ICA Director-General Charles Gould, that co-operatives are likely to be the fastest growing business model by 2020 to 2030.
She said it was time for the global co-operative sector itself to become aware of this possibility for growth and begin to educate economic and political players about its status as a global business model suitable for many financial and industrial sectors. She said it was not just limited to local or rural models, as was sometimes the common perception.
* Desjardins, ICA and Saint Mary’s University are organising a 2012 International Summit of Cooperatives www.2012intlsummit.coop to be held in Quebec City, Canada, from October 8 to 11.
The theme of the conference is The Amazing Power of Cooperatives, and will focus on ways to promote the development and performance of cooperatives around the world. Four key themes will be discussed:
- The role of cooperatives and mutuals in the global economy
- The performance of the cooperative and mutualist business model
- The evolution of the cooperative and mutualist business model
- The global socio-political influence of cooperatives and mutuals
Source: ICA News