Last month, Ecuador’s national assembly adopted an Organic Law on Public Integrity which includes a requirement for the conversion of certain savings and credit co-operatives into companies.
The country’s saving and credit co-operatives have condemned the law, arguing it endangers their very existence as democratic financial institutions.
Under the law, certain saving and credit co-ops deemed to “represent a systemic risk” due to their scale would be required to convert the company model. The law’s text argues the move intends to “protect the savings and contributions” of Ecuadorians and preserve financial stability. This would also imply that the co-ops in question would be regulated by the country’s banking regulator, as opposed to the Social and Solidarity Economy regulator.
The International Cooperative Alliance (ICA), as well as its regional organisation Cooperatives of the Americas (ICA-Americas) have also hit out at the law.
The ICA General Assembly, which met on 2 July in Manchester, UK, unanimously adopted a resolution on the move, pointing out that co-operatives operate independently of state ownership or direct public participation.
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“Thus, the rationale for mandating such conversions appears insufficiently grounded in legal or economic necessity, undermines the guiding principles and vitiates the constitution of the Republic of Ecuador,” it reads.
The ICA also points out that this measure “appears to contradict the spirit of the United Nations General Assembly’s declaration of 2025 as the International Year of Cooperatives, which underscores the role of co-operatives as key partners in sustainable development and encourages their promotion and protection by national governments”.
Moreover, argues the ICA, the law contravenes the Fourth Cooperative Principle – Autonomy and Independence – and may undermine the ability of co-operative members to determine the future of their institutions through democratic means.
The ICA points out that the law appears inconsistent with several provisions of Ecuador’s constitution, which “recognise and uphold the plural nature of the country’s economic structure, including the co-op sector”.
The law is also incompatible with Ecuador’s commitment to creating a favorable legislative and policy environment for cooperatives, as a supporter of the International Labour Organization (ILO) Promotion of Cooperatives Recommendation of 2002.
“While the ICA acknowledges that effective oversight of the financial sector is necessary, any regulatory approach must be proportional, inclusive, and respectful of the unique nature of cooperative institutions. The proposed conversion of co-operatives into companies will have the unintended effect of excluding a trusted and historically rooted model from the national financial landscape,” reads the statement.
The ICA says it stands ready to engage in a constructive dialogue with the government and legislative assembly.
“We respectfully offer the expertise of our international co-operative law specialists to assist in designing a balanced legal and regulatory framework,” adds the statement, “one that strengthens the co-operative model while supporting transparency, accountability, and financial stability.
“We remain confident that the government of Ecuador will uphold its constitutional commitments, international obligations, and long-standing tradition of co-operative development in a manner that values the diversity and resilience of its economy.”
Juan Pablo Guerra, manager of the Unión de Cooperativas de Ahorro y Crédito del Sur (Ucacsur), told El Comercio publication the law could force co-ops to become banks, regardless of what their members want.
Moreover, he added, the move could lead to a lack of confidence among customers of saving and credit co-ops, leading to considerable losses.
“Ecuador needs to remind its political leaders that co-operatives are a real source of social and economic transformation; and they extend horizons with principles, solidarity and collective work,” Ucacsur said in a Linkedin post.
Ecuador’s saving and credit co-operatives have over six million members and account for 30% of the country’s financial system assets.
Photo: Ecuador’s National Assembly (Image: Fernando Lagla / Asamblea / Nacional /Wiki cc)
