The cooperative movement in the financial sector fosters financial inclusion, promotes savings, and supports community development. While credit unions exist worldwide, the National Credit Union Federation of Korea (NACUFOK) stands out as an exemplar of an integrated system in Asia. Other examples of integrated networks include Desjardins in Quebec, Canada, and the Sicredi in Brazil.
In contrast, many countries in Asia have a fragmented or atomized credit union landscape. This article explores the integrated system that highlights its benefits compared to the atomized structures found in other countries, and with the learning from integrated networks, ACCU, and its members chartered our vision as Integrated and Sustainable Credit Union Networks in Asia.
By examining the strengths of an integrated approach, we can glean valuable insights for the cooperative movement.
The federation in an integrated network operates as an apex organization that unifies and supports credit unions throughout the system. This integrated system brings together credit unions under a centralized umbrella, promoting collaboration, shared resources, and collective representation. In contrast, atomized credit union systems consist of individual, autonomous entities that operate independently, often needing more cohesion and joint strength.
Benefits of an Integrated System:
Strength in Unity: The integrated structure fosters unity and collective action among credit unions. The unified voice of the federation carries significant weight in shaping the financial sector and ensuring the well-being of credit unions and their members. By pooling resources and expertise, credit unions can tackle common challenges more effectively, advocate for favorable policies, and negotiate better terms with external partners, particularly regulatory bodies.
Economies of Scale: The integrated system enables credit unions to benefit from economies of scale. Credit unions can access cost-effective technologies, shared back-office services, and enhanced risk management tools by consolidating resources. An integrated system allows credit unions to operate more efficiently, lower operational costs, and offer their members competitive financial products and services.
Enhanced Risk Management:
Integrated systems like NACUFOK can establish robust risk management frameworks that help credit unions navigate potential challenges. The in-house supervision of NACUFOK can monitor risks before causing severe damage to the system. Credit unions can collectively strengthen their resilience and mitigate risks by sharing risk assessment methodologies, developing common standards, conducting joint monitoring and supervision, ensuring the safety of members' deposits, and contributing to the cooperative sector's overall stability. For example, the Stabilization Fund or the national reserve fund for credit unions is paramount as it safeguards depositor confidence, mitigates systemic risks, enhances financial resilience, promotes regulatory compliance, supports member assistance, and preserves cooperative values. By establishing and maintaining such a fund, credit unions demonstrate their commitment to maintaining a stable and secure financial environment for their members, contributing to the overall strength and sustainability of the cooperative sector.
Collective Learning and Innovation: An integrated system encourages the exchange of knowledge, best practices, and innovative ideas among credit unions. NACUFOK facilitates networking opportunities, organizes training programs, and fosters a culture of collaboration. This promotes continuous learning, encourages the adoption of technological advancements, and stimulates innovation within the cooperative sector. Credit unions can leverage their peers' collective wisdom and experiences to improve their operations and member services. The NACUFOK Training Institute serves as the center to develop competent and value-oriented leaders and employees of credit unions.
Unified Branding and Marketing: An integrated system allows for unified branding and marketing efforts. Credit unions operating under NACUFOK can collectively promote the benefits of cooperative membership, strengthen their market presence, and build a recognized and trusted brand. Unified marketing campaigns and coordinated outreach activities enhance the visibility of credit unions, attract new members, and reinforce the cooperative values of financial democracy and member empowerment.
Credit unions operate independently in many countries without a centralized federation or integrated structure. This atomized approach poses challenges in coordination, resource sharing, and collective representation. Atomized systems often result in fragmented operations, varying service standards, and limited bargaining power, hindering the growth and influence of individual credit unions and the cooperative movement. Based on our studies of credit union systems, the atomized system works well in the presence of an enabling regulatory environment that sets financial disciplines, governance standards, and operational controls.
Nepal's Savings and Credit Cooperative Societies (SACCOS) movement is crucial in providing financial services, promoting savings, and supporting economic empowerment at the grassroots level. As the SACCOS movement continues to evolve, integration has gained prominence, aiming to enhance collaboration, efficiency, and member benefits. By examining the potential obstacles and highlighting the benefits, we can better understand how integration can shape the future of SACCOS, empower members, and contribute to sustainable community development.
Challenges of Integration:
Organizational Culture and Governance: Integrating diverse SACCOS with varying corporate cultures and governance structures can be a significant challenge. Differences in decision-making processes, risk appetite, and member representation need to be reconciled to establish a unified approach. Building a solid governance framework that respects the autonomy of individual SACCOS while promoting integration is crucial for successful consolidation. Standardization of operations is essential for integration.
Regulatory Compliance: The regulatory environment governing SACCOS may vary across jurisdictions, especially now that Nepal has become a federal government. SACCOS under different regulatory jurisdictions varies from province to province or district to district. Ensuring compliance with regulatory requirements, licensing, and reporting standards can be complex. Harmonizing legal and regulatory frameworks is essential to facilitate integration while maintaining compliance and protecting member interests.
Information Technology and Infrastructure: SACCOS often needs to improve technological infrastructure and information management systems. Unified technology requires substantial investment in IT infrastructure, training, and capacity building. Integration necessitates upgrading and streamlining technology platforms to enable seamless operations, efficient data management, and enhanced member services. The big question is whether SACCOS are willing to share the cost of technology for the good of all. If not, SACCOS would always be behind in technological development.
Human Resources and Skill Gaps: Integration may involve workforce realignment, skill gaps, and the need for retraining and capacity building. Balancing personnel requirements, identifying redundancies, and providing adequate training and development opportunities are crucial for a successful transition. Managing potential resistance to change and fostering a culture of collaboration and adaptability is critical.
The disconnect between primary credit unions and national federations: The disconnect can manifest in various forms, including communication gaps, misalignment of priorities, and inadequate representation. Primary credit unions, as grassroots entities, are often deeply connected to their local communities, while national federations represent the broader interests of the cooperative movement. This disparity can result in challenges that must be addressed for seamless collaboration and collective success.
Limited Communication Channels: There must be more channels for effective communication between primary credit unions and national federations to ensure the flow of information, shared knowledge, and best practices. This disconnect can lead to missed opportunities for collaboration, limited understanding of everyday challenges, ineffective policy advocacy, and a sense of belonging.
Misalignment of Priorities: Primary credit unions may prioritize local concerns and community-specific initiatives, while national federations focus on broader policy issues and advocacy efforts. The resulting misalignment can impede coordinated efforts and prevent the leveraging of collective strengths for the benefit of all credit unions and their members. Leaders and employees must have a network mindset. Even though they are legally independent, they are responsible for the network because they use the same "cooperative" brand.
Inadequate Representation: The disconnect between primary credit unions and national federations may result in insufficient representation and meaningful participation in decision-making processes. When primary credit unions' voices are not adequately heard and their perspectives are not fully considered, the cooperative movement may miss valuable insights and innovative ideas.
Varied Capacity and Resources: Primary credit unions operate on different scales, with varying capacities, resources, and levels of expertise. National federations have the potential to provide essential support, training, and technical assistance. However, when a disconnect exists, access to these resources may be limited, hindering the growth and development of primary credit unions.
Opportunities for Integration:
Enhanced Financial Stability: Integrated SACCOS benefit from a larger capital base, increased liquidity, and improved risk management capabilities. This stability strengthens their ability to provide loans, support entrepreneurial initiatives, and withstand economic shocks. Integrated SACCOS can access financial markets more effectively, diversify investment portfolios, and offer members competitive interest rates and terms. SACCOS Movement has the capacity to manage the liquidity of the system. They should earn the trust of SACCOS to pool the system's financial resources for the benefit of all.
Improved Product and Service Offerings: Integration enables SACCOS to offer competitive products and services tailored to the evolving needs of its diverse membership. With professionally designed financial products carefully studied and developed by the federation, members receive the same quality of service across the network. Integrated SACCOS can provide a broader suite of savings accounts, loan products, insurance offerings, and digital banking solutions. By leveraging economies of scale, they can negotiate better rates with service providers, offer cost-effective remittance services, and invest in innovative technology platforms.
Risk Diversification: Integration allows risk diversification across a more extensive member base and geographical reach. Integrated SACCOS can allocate resources efficiently, reduce non-performing loans, and enhance risk management practices to ensure the long-term sustainability of their operations. By operating in diverse regions and industries, SACCOS can minimize exposure to localized economic downturns and sector-specific risks.
Increased Member Benefits: Integrated SACCOS can offer members access to a broader network of branches and service points, ensuring convenience and accessibility. Integration facilitates the pooling of resources for member welfare, such as scholarships, healthcare schemes, and community development projects. Members can benefit from shared knowledge and expertise, improved financial literacy programs, and enhanced social initiatives.
Advocacy and Influence: Integrated SACCOS movement has a stronger collective voice and can advocate for policy reforms, favorable regulations, and financial inclusion initiatives. They can actively engage with government agencies, international organizations, and other stakeholders to shape the cooperative movement's agenda. Integration amplifies the impact of SACCOS in influencing public discourse, social responsibility, and sustainable development.
The Integrated SACCOS Movement presents both challenges and opportunities for the cooperative sector. While navigating through obstacles related to organizational culture, governance, compliance, technology, and human resources, the potential benefits are significant. Enhanced financial stability, improved product offerings, risk diversification, increased member benefits, and amplified advocacy and influence are just a few of the advantages that integration can bring to SACCOS.
By embracing the spirit of collaboration and seizing the opportunities offered by integration, SACCOS can achieve sustainable growth, empower its members, and contribute to the socioeconomic development of the communities they serve.
(The write-up was published on the quinquennial publication of the NEFSCUN.)
नेपालमा हाल १९ वटा सिस्टर सोसाईटी छन् । आज भन्दा ३ वर्ष अघि सन् २०१७ को जुलाई ४ मा गठन भएको नेफ्स्कून च्याप्टर पहिलो सिस्टर सोसाईटी हो भने २०२० अगष्ट मा थप ६ सँगै नेपालमा सिस्टर सोसाईटीहरुको संख्या १९ पुगेको हो ।
सहकारीकर्मीहरुले राष्ट्रकविको निधनप्रति गहिरो शोक व्यक्त गर्दै राष्ट्रले अमुल्य निधि गुमाएको धारणा राख्नुभएको छ । सहकारी र साहित्य दुवै समाजको उन्नयनसँग जोडिएको भन्दै उहाँहरुले नेपाली साहित्य त्यसमा पनि विशेषतः काव्य र गीति जगतले एक सिद्धहस्त शिल्पी गुमाएको भन्दै श्रद्धाभाव व्यक्त गर्नुभएको छ ।
