Will Uganda’s bank for cooperatives be a reality?

Yasin Nnume, the Chairman Board of Uganda Cooperative Savings and Credit Union Ltd agrees with Muhumuza’s views. He suggests that the country’s 18,000 cooperatives societies buy shares in the bank even as it strives to look for a strategic investor within or outside the country.

“We saw this long time ago,” he said. “For instance, when we wanted to open up an insurance company, we partnered with Cooperative Insurance Company of Kenya.”

He says the cooperative societies in the country only need to come up with a committee to carry out the feasibility studies, analyse the financing modalities and look for a strategic investor as it was the case with the establishment of an insurance company.

Uganda Cooperative Savings and Credit Union Ltd (UCSCUL) and the Uganda Cooperative Alliance Ltd partnered with the CIC Insurance Kenya in 2015.

 UCSCUL and UCAL own 51% of the business while CIC Africa, the parent company of CIC Insurance Kenya, owns the remaining shares.

This new development comes at the time when cooperative societies in Tanzania and Rwanda are also laying down strategies to unveil cooperative banks. Tanzania Federation of Cooperatives revealed end of last year that they are seeking Tshs 22bn to establish a cooperative bank.

TFC Executive Secretary, Willigis Mbogoro, said the lender to be known as, Tanzania Cooperative Bank, was mobilising the funds from its 37 cooperative unions and individual members to raise the funds.  This will follow Kilimanjaro Cooperative Bank Ltd that was established in 1996, serving the country’s Kilimanjaro region.

Rwanda plans to do the same soon after President Paul Kageme ordered the Trade and Industry Minister in 2014 to establish a cooperative bank to be known as Rwanda Cooperative Bank.

Research carried out by The Independent in the region and the globe indicates that cooperative banks were financed by cooperatives societies and individuals.

For instance, in Kenya, the Cooperative Bank of Kenya, which was initially a cooperative society in 1965, was granted a bank licence in 1968.  This was followed up by a directive from the government instructing all cooperative societies in the country to transfer their deposits to the Cooperative Bank of Kenya and that all cooperatives buy the bank’s shares. It was until 1989 that the established bank converted to a fully-fledged commercial bank and increased its products menu.

In Ethiopia, the Cooperative Bank of Oromia, registered in 2004, is fully owned by the cooperative societies, individuals, organisations and associations.

Cooperative banks elsewhere

In Europe, savings and cooperative banks started as far as 19th century after communities especially farmers failed to secure capital from conventional banks.

And since then, some of the cooperative banks have been able to prosper and at times even outperform the commercial and purely shareholder oriented banks.

For instance, in Austria, savings and cooperative banks’ total assets, loans and deposits stands at around 50% in terms of market share of the entire banking industry, according to a paper presented at Goethe University, Frankfurt/Germany in 2013 dubbed ‘Savings Banks and Cooperative Banks in Europe.’

The paper co-authored by Dilek Bulbul says there are two groups of cooperative banks in Austria, the larger group of Raiffeisen banks operating mainly in rural areas and the smaller Österreichische Volksbanken-Gruppe (ÖVB group) with an urban business focus.

In France, Banques Populaires Caisses d’Épargne (BPCE) Group is owned by nine million cooperative shareholders, and serving more than 31.2million customers while Crédit Mutuel (CM), with 7.4million customers, is owned by association of cooperatives. Similarly, Crédit Agricole (CA), sometimes called the “Green Bank” because of its historical ties to farming, consists of 39 cooperatives and small banks.

 “Together they hold market shares of nearly half of total banking assets, loans to households and businesses and customer deposits,” the paper says in part.

In Spain, the savings and cooperative banks are said have had an impressive and growing market share of around 50 % and were so profitable and efficient that one would not be able to see any difference in their performance to the private banks including the giant Spanish banks Santander and BBVA.

However, cooperative banks have disappeared in some parts of Europe. For instance, in Great Britain, the former public savings bank (TSB) was sold to Lloyds Banking Group, and several cooperative banks, the so-called building societies, were converted into corporations and some of them sold to large private commercial banks.

Similarly in Netherlands, savings banks have disappeared and the formerly independent cooperative banks have been amalgamated into one big national bank – Rabobank. Rabobank is traditionally a farmers’ bank and it still holds 85% – 90% market share in the agrarian sector in the Netherlands.