Financing co-operatives

Dr Linda Shaw

The Starting Point

Findings from a 2010 study, which was commissioned by the UK Co-operative Bank, and carried out by the UK Co-operative College, which assessed the financing needs of co-operatives in developing countries in order to: ‘to inform the potential establishment of a global co-operative development fund’ Backdrop of the global co-operative revival coupled with a recognition of the need to scale up development assistance for co-operatives

Methodology

Interviews and questionnaires Literature review Focus on movement views plus some external stakeholdersHigh level survey which did not investigate in any depth at barriers and needs at country level

Key findings

Some good investment funds for co-ops existed but they were nowhere near meeting financing needs of co-operatives Financing needs varied according to sector - eg utilities and housing co-ops needed large upfront capital requirementsBut for agricultural and financial co-operatives there was a clear lack of availability of mid-range and long term financing – particularly loans between $250k to $750k Typically such funding was needed by secondary co-operatives such as unions, federations or consortia rather than by individual co-operatives These findings were in line with other studies which had identified the ‘missing middle’ in agricultural finance

Main types of finance required

Lines of credit for liquidity managementLong term loans for infrastructure investmentMedium term loans for technology upgrading On-lending funds for financial cooperatives such as SACCOs

Why the lack of provision for co-operatives?

Lack of access to financial intermediaries Too large for micro-finance programmes and regarded as risky by commercial banksHigh interest ratesLack of fixed assets Skills gap in co-operatives themselves – especially business planning and capacity to prepare a credible business case

Since then

Need for ‘missing middle’ finance further corroborated by more recent studies Growing local and regional market opportunities in Africa makes need for financing even more imperative Mobilising more resources within the movement (such as stronger links between financial and agricultural co-operatives at the local level) could complement any external loan financing Based on my own experience, financing gap has become more evident for:

For the tea smallholders in Kericho, Kenya

For the coffee union at Mzuzu, Malawi

For the Meat Producers Co-op Union, Uganda

Thank you

• The needs are pressing, how can we to enable the financing to happen

Peter Couchman Chief Executive, Plunkett Foundation