A New Way of Life in Cooperative Banking

cooperative bank
Community-based cooperatives are usually found in residential areas where most of its members are based

A cooperative is a voluntary and autonomous association people who decide to come together for the purpose of gaining mutual benefits that may be economic, social, or cultural in nature.  The operation of any cooperative is based on at least seven cooperative principles including voluntary and open membership, democratic member control, economic participation by members, autonomy and independence, education/training and information, cooperation among cooperatives, and concern for the community.  The Rochdale Society of Equitable Pioneers which was founded in 1844 is considered as the first successful enterprise fashioned under the cooperative principles.

There are various kind of cooperatives existing today including housing cooperatives, utility cooperatives, agricultural cooperatives, and credit unions, among others. Credit unions are the precursors of what is now known as cooperative banking.  Cooperative banking is credited by many people for their new-found financial freedom, allowing them to possess an entirely rejuvenated financial life.

What is a Credit Cooperative?

Credit cooperatives or credit unions are financial institutions which are owned and controlled by the members themselves.  They offer services similar to a bank but are categorized as not-for-profit organizations.  It has to be noted that not-for-profit organizations put emphasis on serving members instead of maximizing profits. However, it is not to be confused with non-profit organizations which rely on donations to exist.  The operation of credit cooperatives is supported by the funds coming from the members themselves in the form of deposits and share capitals.

Since funding emanates from members themselves, they are also the primary beneficiaries of the cooperative’s operation.  Among the services offered by cooperatives that include savings and time deposits, loan products are probably the most popular.  Financial wellness in cooperative standards is sought to be provided by higher interest rates in deposits and lower interest rates in loans.  At the end of each fiscal year, members are entitled to their share of whatever profit that results from the cooperative’s operation in the form of dividends. However, the cooperative must have profitable operations first for this to happen.

What Differentiates Credit Cooperatives from Banks?

The operation of Credit Cooperatives and Banks are both guided by decisions of a Board of Directors.  In the cooperative scenario, directors should be members themselves and are elected  based on a “one member-one vote” policy regardless of the amount of investment.  They usually function on a voluntary basis which means that they work without pay although members can decide to provide them with some means of support in the performance of their official duties.  Credit Cooperatives are able to provide superior financial products to their members since products and services are only provided to members.

Credit Cooperatives have defined territories within which they are allowed to operate. Unlike banks which can accept clients from any geographical location, Credit Cooperatives are limited by their specific purpose in relation to accepting members.  Some define the limitation through geographical areas while others define it through association with an established entity such as the regular employees of a certain company.

What do Credit Cooperatives Offer?

Credit Cooperatives offer members the option to have access to savings products with higher interest yields.  It also offers members more affordable loan products that are designed to help them achieve financial health rather them burying them in debts.  The expanded operation of many Credit Cooperatives has made it possible for members to gain access to related products at the best cost such as insurance and medical services.  This is because cooperatives can use the big number of their members to negotiate for better pricing.  This is something which members usually cannot accomplish individually.

If there is one thing that banks can never offer to its customers is the sense of camaraderie that cooperatives provide their members.  This camaraderie comes from knowing that success is only possible when members work together for the common good.  Cooperatives which have already attained solid financial standing go beyond the expected services by extending assistance to their members in times of unexpected financial distress brought upon by natural calamities, sickness, or death.

My Say

Cooperative banking  offers people a viable option to save and have access to business capitalization by being co-owners of the Cooperative. When its services are used in the right way, members stand the chance to take better control of their lives financially. There is also great satisfaction derived from being part of a productive and progressive organization.

75 Comment

  1. thanks for sharing these information. i am lucky to be a member of one back then (when i was still working) and like other members, they were able to help me somehow. just nice to be part of a good cooperative and i always admired people handling it. 🙂

  2. There’s a lot of reason why we transfer into cooperative first the interest they give us is high and our money market is very reasonable compare to the banks. We just thankful hubby is working in corporation and we can open an account easily without any problem though we transfer States often.

  3. been a member of credit cooperative in Davao too and they serve its members very well. It sure does look after the welfare of it’s members and we always look forward to Cooperative’s Christmas party and other events giving away lots of goodies for its members:)

  4. “extending assistance to their members in times of unexpected financial distress brought upon by natural calamities, sickness, or death,” – now that is truly amazing about cooperative banking…we used to have one in our community unfortunately it was dissolved eventually because of mismanagement and lack of oh well, cooperation…thanks for writing on this, makes me want to seriously work on one with my co-workers…this time perhaps we could make it succeed….have a blessed day 🙂

  5. very informative! thank you for the information. I am glad we are a member of a cooperative institution here in our place. For some reason i feel more safe saving in a cooperative than in the bank..policies are not as complicated also with those of banks.

  6. My grandmother is a member of a cooperative in Pasig. I even wanted to be a member too unfortunately, they don’t allow outsiders to join. I mean it’s a requirement that the members should be a bonafide resident of their community.

  7. i’ve been hearing a lot about cooperative banking and the members’ successes but I am not very familiar with it. Thanks for your post. I learned something new today.

  8. this is nice. i’ve got a lot of colleagues who are members of a cooperative.. and they say the benefits of being a member is great… might have to check them out.. 🙂 thanks for sharing 🙂

  9. my mom used to participate in this kind of organization. I don’t really know how this works but i know they do meet up and weekly meetings, i believe. And discuss the things they need to be discussed.

  10. When I was still working in Pinas I joined coops as well and they are great in helping its members. Here in the US credit unions have usually higher yields compare to banks, and also have a lot of micro-finance programs for the members too.

  11. I don’t have much of an information when it comes to cooperative but I heard it was good. It is an organization that helps people in need especially if the person is the member of the coop. However, this can also trigger people to be drowning in debt which I think need to be in control. Well, I never join any cooperative clubs here in US as well just to avoid any debts in the future.

    1. Running a cooperative is quite challenging but once a dedicated group such as co-employees decide to work on it seriously, they can expect to derive benefits from its existence.

  12. thank you for the clarifications… not many people knew this, even those members of a cooperative. i know of some established coop in our place, and people do have a lot of good stuff to tell about them. Yahweh bless.

    1. The only probable risk in investing in a cooperative is when it is allowed to go bankrupt. That is why members are highly encouraged to play active roles in running it by electing trustworthy officers and patronizing cooperative products such as savings and loans.

    1. Cooperative membership usually results to having a group of friends to share cooperative concerns and personal things as well.

  13. Credit cooperative is good in pooling of interest of members and loaning out to the member. You can actually earn more or save on interest as its not as private driven as banks.

    1. There is much sense in joining credit cooperatives not only in the financial aspect but in understanding how it is run and operated.

    1. I don’t think they are similar since mutual funds are essentially collective investment schemes which pool money from investors to buy securities while cooperatives pool the resources of members for use in productive loans. Cooperative investments very seldom involve securities, if at all. Although both options provide a higher yield for their respective investors, they do so in a different manner.

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