The cooperative banking is the segment of the financial system that brings together cooperatives of savings and credit , central cooperative banks and similar entities. These companies seek a greater approach and understanding of the client than that of commercial banking .
Cooperative banks receive deposits , extend loans , provide advice and offer other financial intermediation services. However, its business model is different from that of banks .
Characteristics of cooperative banking
Among the characteristics of cooperative banking include:
- Rooting:There is an important link between the entity and the territory of origin. Therefore, many cooperatives bear in their name the locality or region where they were founded.
- Market knowledge:They have studied the sectors where they are directed. In this way, they seek to design products that adapt to the needs of the client. For example, in the case of farmers, it should be taken into account that in periods where there is no harvest they receive less income and will not have as much capacity to face their debts .
- Involvement:The financier is interested in advising the user, for example, in the search for business partners. You can also sponsor cultural and social activities that are important in the community life of the target audience.
Cooperative Banking Entities
The types of entities that are part of the cooperative banking are mainly two:
- Savings and credit cooperatives: These are organizations that provide financial intermediation services. Unlike banks , their owners are not shareholders, but partners. This means that the decision power in management does not depend on the level of participation. Instead, each member of the cooperative is entitled to one vote, regardless of how much they have contributed.
- Central cooperative banks:These are entities made up of several cooperatives that usually become their shareholders. That is, they are commonly corporations. Its function is to centralize activities with the objective of saving costs. We refer to the concentration, for example, of transactions in international financial markets. Then, instead of each cooperative performing these operations separately, this will be done jointly from a central cooperative bank.