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THE 15TH SACCA CONGRESS 27-31 OCTOBER, 2014 MASERU - LESOTHO

PERSPECTIVES ON CO-OPERATIVE

FINANCIAL INSTITUTIONS IN WEST AFRICA

Mr Bless Kwame Darkey

CONTENT • What is Co-operative

• The Co-operative Movement in West Africa

• Co-operative Financial Institutions in West Africa

Francophone Countries

Anglophone Countries

• The Role of ACCOSCA in CFI Growth in W/Africa

• The Role of Development Partners in CFI Growth in W/Africa

• Impact of Co-operative Financial Institutions in Socio-Economic Development in West Africa

• Challenges

• Recommendations

What is Co-operative

Co-operative is “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.”(ICA,1995)

As a Business Model, Cooperatives have specific values, including self-help, self-responsibility, democracy, equality, equity and solidarity


In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others (ICA, 1995).

In pursuit of these values, the cooperative movement has developed principles that guide the transaction of their activities.


These principles are contained in the 1995 ICA Statement of the Cooperative Identity and they include: • voluntary and open membership, • democratic member control, • member economic participation, • cooperative autonomy and independence, • education, training and information, • cooperation among cooperatives, and • concern for community.

The Co-operative Movement in West Africa

Cooperatives in most West African countries have their origins in the colonial period.

The colonial governments instrumentalized the formation of these organizations for the purposes of achieving the interests of the colonial state, rather than the interests of the colonized people (Develtere,1994).


• The main intention in establishing these organizations was to enable the government implement its socio-economic policies.

• For instance, the British, particularly in their settler colonies, wished to promote and protect the interests of white settler farmers/merchants, so as to enhance productivity in order to generate the income needed to run the affairs of the colonies and also to export cash crops to Britain that were required to fuel industrialization


• The French wished to use cooperatives to implement their policy of “assimilation”, which sought to transform Africans into Frenchmen.

• To this end, cooperatives were regarded as modern institutions that could help to civilize and modernize Africans.

• It was for this reason that the French imperial government passed a Decree on 29th June 1910 that prescribed the establishment of cooperatives, formerly known as provident societies, in the French colonies of West Africa (Munkner, 1989).


Cooperatives were expected to modernize society by

• keeping a stock of selected goods;

• supplying farm implements;

• processing agricultural produce;

• serving as insurance against disaster and accidents;

• granting loans; and

• improving agricultural production methods.


However, the “modernization” that cooperatives were intended to advance was at odds with the African culture and heritage that the people cherished, for which they suffered throughout the colonial period for celebrating it.


• Most African countries continued with the colonial framework that enabled the state to intervene in cooperative affairs, thereby enabling it to control cooperative development.

• African leaders needed to control cooperatives due to their conviction that cooperatives were important instruments for developing new states that did not have adequate resources and were characterized by socio-economic diversity.


• The perceived potential of cooperatives to mobilize local human resources, to serve the entire nation and to transcend the existing class and/or ethnic divisions, saw cooperatives promoted by governments as part of their populist-nationalist strategy for nation-building.


• governments created and strengthened administrative structures specifically to spearhead cooperative development.

• In some countries, cooperative legislations were also enacted to regulate the development of these organizations and assign them prominent roles in the development process.


• While in most cases the role of promotion, control and guidance of the movement was vested in special cooperative development departments or ministries, state participation in cooperative affairs became a matter of general government policy (Develtere, 2008).


• Subsequently, the state quickly brought cooperatives under its control, not just to promote economic development, but also to create jobs for political supporters and use them for other political ends (Muenkner and Shah 1993: 16).

MAP OF WEST AFRICA

Co-operative Financial Institutions in West Africa

• CFIs include diverse member-owned financial intermediaries referred to as credit unions, savings and credit cooperatives, cooperative banks, and other terms that differ across regions of the world

Co-operative Financial Institutions in West Africa

• Their institutional structure and governance, legal and regulatory status, and scale and services portfolio also vary widely across regions and especially between industrialized countries and developing economies.

• A most basic common denominator is that they collect deposits and do business often solely with members

FRANCOPHONE WEST AFRICA

• There is a strong solidarity among six networks of financial cooperatives operating in five Francophone West African countries, which has led to the creation of the Confédération des institutions financières (the confederation of financial institutions, or CIF) in West Africa as a regional group designed to promote the sharing of expertise and resources in addition to taking on and developing a service offer and a regional market.


• The six networks making up the CIF are FECECAM in Benin, the Réseau des caisses populaires in Burkina Faso (RCPB), Nyèsigiso and Kafo Jiginew in Mali, PAMÉCAS in Senegal and FUCEC in Togo.

• Taken as a group, these financial cooperatives operate 726 service outlets, serve over four million members, have 4400 employees and hold assets equivalent to CAN $700 million.


• The main threat that led to creation of the CIF was the strong competition that now characterizes the microfinance market as it has expanded with many new players of all types (cooperatives and others). This increased competition requires the financial institutions currently in place to build capacity and improve performance to defend their market share.


• The six networks that make up the CIF operate throughout a region that has a single currency and regulatory framework and they share similar environments, characteristics and concerns.

• In addition, the West African population has a low rate of bank use and most of this population is excluded from traditional financial services.


• There is a vast market (coveted by the competitors) open to the region's financial cooperatives and it has both urban and rural areas.

• By creating the CIF, the member networks were seeking methods to respond to the varied and diversified needs of this market.

ANGLOPHONE WEST AFRICA

GHANA The Credit Union Movement in Ghana started

some fifty-five years ago.

The first credit union, the St. Joseph’s credit union, was established in 1955 at Jirapa in the Upper West Region.

From this beginning, the credit union idea spread throughout the three Northern Regions of Ghana.

In the late 1960s the idea was introduced in the south, but unlike the north where parish/community credit unions dominated, most of the credit unions here were work-place based.


Credit unions were initially organized as social institutions .

They were ad-hoc and unsustainable .

It was around the late 1990s that the ideology changed from welfare to business orientation.

Credit unions have become more stable and sustainable in terms of savings mobilisation, credit management and improved general services and service delivery to members


CUA was established in 1968 as the apex body of the Credit Union Movement in Ghana.

• CUA represents the interest of the Movement both at the national and international levels.

• CUA was established to develop itself into a sustainable financial institution and to create an enabling environment for credit unions to operate.

• In that commanding position as a credit union leader CUA is charged with the responsibility of Education and Training of the membership, leadership and staff of the credit union movement


CUA currently operates in eleven chapters.

There was a total of 435 credit unions, 531,543 Members and a total asset of 185.7 Million US Dollars by December 2013


THE GAMBIA NACCUG was formed in August 1991 as the

Apex body for all financial cooperatives in The Gambia.

It’s legally registered and has the mandate to promote and support the development of co-operative credit unions across the country.

It also represent credit unions and serves as their mouth piece.


As at December 2013 Total of 69 active Credit Unions in 7 Chapters

out of which 39 are rural based Total membership of 50, 000 out of which 11,

029 are rural based Total savings mobilized by CUs GMD 366 Million

(≈9.4 Million Euros) out of which 600,000 Euros is mobilized by Rural Credit Unions.

Loan portfolio of GMD 277 Million (≈7.1 Million Euros) of which 400,000 Euros is rural based


The regulatory environment is still very weak

No specific Regulations for Credit unions Two regulators

Central Bank of the Gambia Department of Cooperatives

A new micro finance policy is being developed

At NACCUG Level, there are very strong Policies Safety and soundness policy CFF Policy Share holding policy


NIGERIA • The National Association of Co-operative Credit Unions

was registered in 1978, with the responsibility of monitoring and coordinating the affairs of all Savings and Credit Cooperative Unions in Nigeria and represents them internationally.

• However, the association went moribund in 2009,but in

September 2012, the association was restructured and new set of leaders where elected, the association is fully in operations with its National Secretariat in Abuja.


• In 2002, Federal Ministry of Agriculture and Rural Development put the number of cooperative societies in Nigeria at fifty thousand and membership at five million. This number is more than double today.

• Lagos State cooperative apex alone has over two million cooperative members. Bauchi has over 1,000 viable Societies, Gombe 3,700, Abuja 2,000 Delta 1,000 all with large membership


• The Structure of the Cooperative Movement in Nigeria is in four tiers, the entry point is the primary society, individuals with common interest join the society on voluntary basis

• The next stage is at the local Government Level; Primary Societies with common interest form a Union

• The Unions Affiliate to the State Cooperative Financing Agency

• And all the Financing Agencies Affiliate to the National Association of Cooperative Credit Unions.


LIBERIA

The emergence of the Credit Union Movement of Liberia dates back to 1966 when the first credit union was established in the Catholic Church of Maryland County by Rev./Father Ted Heyden and Bishop Boniface Dalieh. Both pioneers are still alive, Bishop Dalieh is in Harper, Maryland County, Liberia and Father Heyden lives in the United States of America


• In 1969, Liberia Credit Union National Association (LCUNA), the Apex Body of the Credit Union Movement of Liberia was established in Monrovia with its Headquarters in Clara Town, Bushrod Island.

• In 1973, LCUNA was accredited by the Marketing Department of the Ministry of Agriculture.


The credit union movement grew rapidly in prewar Liberia registering 68 credit unions and a membership population of 20,000 by 1989, under the stewardship of LCUNA.

The movement thrived well until the Liberian Civil War devastated the entire economy and credit unions in 1990s


• LCUNA is a founding member of the African Confederation of Cooperative Savings and Credit Associations (ACCOSCA) and currently affiliate member of the World Council of Credit Unions (WOCCU).

• Presently, LCUNA in collaboration with Central Bank of Liberia (CBL),Cooperative Development Agency (CDA), UNDP/UNCDF, WOCCU,


• ILCUF (directly and through WACUPP) are working together to revitalize and modernize the credit union movement of Liberia.

• The Movement in Liberia is structured in three categories of primary credit unions namely:, Industrial,CommunityandEmployer Sectors.LCUNA provides advocacy and representation for credit unions to the Government of Liberia (GOL), development partners, donors and stakeholders.


• Additionally, LCUNA provides capacity building, education, training, sensitization and creates awareness about international best practice among credit unions.


SIERRA LEONE

• National Savings and Credit Co-operative League of Sierra Leone (NASCLOS) was established in 1974 but collapsed in 1999

• Attempted resurrection in 2000 failed

• A new Apex body for the movement was initiated by the six credit unions participating in SCUDSL. In November 2013 it approved its bye laws and elected its first Board from its 10 member CUs.


• The current governing legislation for co-operatives in Sierra Leone is The Co- operative Societies Act, 1977 (the “Act”). – Designed primarily for multi purpose agriculture co-

operatives – No specialized provisions within that law to address

the fiduciary responsibility of directors and managers – no standards against which to regulate Credit Unions.

• The Bank act does contain provisions to supervise larger Credit unions but the central Bank has not acted on this provision

THE ROLE OF ACCOSCA IN CFI

GROWTH IN W/AFRICA The following countries were among the 13

pioneering countries that subscribed to the constitution and bye laws of ACCOSCA in 1968:

• GHANA

• NIGERIA

• LIBERIA

• SIERRA LEONE

THE ROLE OF ACCOSCA IN CFI GROWTH IN W/AFRICA

The principal services which ACCOSCA provided were:

• Regional training programs where Government Inspectors, National Association Field Officers, Managers and volunteers from the Credit Union Movement received intensive training in credit union techniques.

• Project assistance in obtaining funds from international development and co-operative organizations for sponsorship of local training courses, field officers and stationery materials.


• Sponsoring an annual conference in Africa on credit union topics

• Publishing of newsletter which keeps national affiliates informed of activities of credit unions in Africa. ACCOSCA also publishes educational materials and model policies for National Associations.


• In 1993/94 a study was conducted by the World Council of Credit Unions and the African Confederation of Co-operative Savings and Credit Association (ACCOSCA) on the Credit Union System in Ghana.

• The result of the study indicated that there was a higher potential for credit union development in the country.

• ACCOSCA then solicited for an external partner to support Ghana credit unions.

• The result prompted the Canadian Co-operative Association to have interest in the expansion of the development of credit unions in the country.

• The Canadian have supported the credit union system since 1994 to date.

THE ROLE OF DEVELOPMENT PARTNERS IN CFI GROWTH IN W/AFRICA 1. WOCCU

Ghana - Revival and Sustainability of CUA in the 90s.

Liberia – Revitalization and Development of the Credit Union Movement and the Apex Body in collaboration with UNDP/UNCDF


2. Canadian Co-operative Association Ghana – Capacity and Infrastructural Development as well as Credit Union Growth and Expansion since 1994 to date Sierra Leone – Support for Credit Union Development in Sierra Leone(SCUDSL) Rehabilitation of six – existing CUs Promotion and establishment of more CUs in the country Assisting in the development of the Registrar of Co – operatives Promoted an Apex body set up and controlled by the movement itself in collaboration with the Registrar.


Irish League of Credit Union Foundation • West Africa Credit Union Program against Poverty

(WACUPP) - Ghana, The Gambia, Liberia and Sierra Leone Aimed at reducing poverty by expanding financial

inclusion through the credit union model. Financial Inclusion and Financial Education Capacity Building for CUs and for Apex Bodies Knowledge Management Expansion into underserved areas


• The Rural Finance Institute Building Programme (RUFIN) is an IFAD/FGN sponsored project to development rural finance through the Cooperative Societies, they are currently working in 12 states in Nigeria

IMPACT OF CO-OPERATIVE FINANCIAL INSTITUTIONS ON SOCIO-ECONOMIC

DEVELOPMENT IN WEST AFRICA • Increased access to financial services of the

economically active poor in all the countries

• Improved the savings and banking culture among low-income households through financial literacy and consumer and protection programmes

• Created employment opportunities for a number of the youthful population across West Africa

• CFIs have contributed largely towards poverty alleviation especially for the poor

IMPACT OF CO-OPERATIVE FINANCIAL INSTITUTIONS ON SOCIO-ECONOMIC DEVELOPMENT IN WEST AFRICA

• CFIs have played major advocacy roles by bringing into focus key cross cutting issues such as HIV/AIDS, Youth and Gender, Environment and until recently EBOLA

CHALLENGES • Absence of, or Inadequate or Outmoded

Regulatory Environment • Lack political will by various governments • Threat of political instability eg. Civil wars in

Liberia and Sierra Leone • Lack of effective data management for proper

impact assessment of CFIs’ services to members and general public

• Language barrier between Anglophone and francophone countries

• Proliferation of fake/portfolio CFIs which results from lack of coordination of activities.

RECOMMENDATIONS

• Development and promulgation into law new Regulatory Frameworks for CFIs to mitigate the contemporary challenges through effective monitoring

• Application and use of modern information technology/management for effective data management

• The need to strengthen national Apex Bodies to enable them be more innovative in income generation to sustain themselves

RECOMMENDATIONS

• Promotion of functional literacy as an aspect of member education

• The role of ACCOSCA is very critical in bridging the language barrier between Anglophone and francophone countries by creating an enabling platform for engagement

• CFIs should collaborate with state institutions to formalize the activities of the informal economy through the formation of co-operative groups to ensure social protection

THANK YOU

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