Cooperatives and Rural Financial Development Hans Groeneveld SVP Cooperative and Sustainable Business Rabobank Nederland 15 November 2012

Rural population in developing and emerging countries classified by available level of rural finance Source: estimations by Rabobank

Financial players Informal groups SACCO Cooperative bank MFIAGDB Commercial bank

Standalone formal SACCO Informal group Time SACCO network Rabobank Nederland (Credit led) MFI network Bank (licensed) Players and phases in rural financial development

From access to finance to access to financial services Skipping traditional development stages: technological innovations Overbanked in terms of institutions, underbanked in terms of products Broadening of product range: structured products, warehouse receipt financing, supply chain financing structures Consolidation of credit union type of institutions into banks with cooperative characteristics Recent developments

Cooperative beliefs of Rabobank 3. Connecting with society: community as shareholder - Locally rooted - Dialogue with many – local – stakeholders - Social goals - ‘Co-operative dividend’ - Sustainable business 4. Connecting with each other: Network organisation - Local meetings - Local boards of supervisors - Knowledge and information sharing - Virtual communities 2. Connecting with the future: Long term focus - Long term relationships - In good and bad times - Future proof products - Solid enterprise - Innovations Vision: Together WE achieve more 1. Connecting with the customer: Customer’s interests first - Corporate governance with members - Influence and say - Close (physical and virtual)

Determinants for successful and viable cooperatives Determinants Member attitude and commitment Policy and legal environment Governance Financial ability Knowledge Sustainability Scale and scope Market orientation

Scale and Scope Clear responsibi- lities and tasks of coopera-tive and members Sufficient scale of cooperative Financial Ability Capitaliza- tion Policies Zero-loss policy Principle of self- financing Service at cost Governance Proportiona- lity or OMOV principle Apex Statutes and regula- tions Member attitude and commitment Empower- ment Communi- cation Delivery duty of members Involvement Market orientation / cooperative as economic instrument Integration of value chain Quality of product Knowledge Education of members Business methods compe- tence Production compe- tence Policy and legal environment LegislationInstitutions Political Stability Regulation Donor influence Guarantee funds Cooperative support Sustainability Ecological impact Food Security Socio- economic impact Cooperative performance Determining Factors

Peru: access to producer finance (Norandino) Ecuador: financial inclusion for the lower segments of the F&A sector (COOPAC San Jose) India: linking the poor to the formal financial sector (BWDA, Tamil Nadu) Uganda: the added value of an APEX organization (UCCFS) Brazil: the importance of partnerships for APEX organizations (Sicredi) Rwanda: commercial bank with cooperative characteristics and background (Banque Populaire du Rwanda) Tanzania: a broad retail bank with a focus on rural finance (NMB) MINORITY STAKES!! Rabobank cases

Economic motives must be guiding principles No universal recipe: cooperative banks are not always solution Quick development of players: scale, APEX, new products, new technologies To ensure long-term focus by financial institutions on rural areas, both rural and urban clients should be represented in their corporate governance Concluding considerations

Thank you for your attention!