Landscape Cooperative Financial Institutions

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Landscape Cooperative Financial Institutions

• Gerard van Empel
• Washington DC, April 2007

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Key Figures Rabobank Group
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Key figures Rabobank Group (1)

• (in EUR billions) 31-12-2006 31-12-2005 31-12-20
  04
• Total Assets 556 506 475
• Reserves 29,3 26,3 18,1
• Private Sector Lending 324 278 253
• Funds Entrusted 215,9 186,5 192,1
• Net Profit 2,3 2,1 1,5

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Key figures Rabobank Group (2)

• (in EUR billions) 31-12-2006
  31-12-2005 31-12-2004
• Member banks 188 248 288
• Offices
• - branches 1,214 1,249 1,299
• - contact points 3,091 3,031 2,965
• Cash dispensing machines 3,139 3,116 3,062
• Foreign offices 330 267 244
• Employees
• - Total Employees 56,209 50,998 56,324

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Consultation and decision structure
local bank
local bank
local bank
local bank
local bank
local bank
local bank
local bank
local bank
Regional meeting
Regional meeting
Regional meeting
local bank
local bank
local bank
local bank
local bank
local bank
local bank
local bank
local bank
Central Delegate Meeting
Right to vote
Rabobank Nederland
General Meeting
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Observations Cooperative Banking

• Traditional coop banks in many countries become
  marginalized
• Global players are entering emerging markets an
  developing countries
• Many coop banks lack scale and adequate
  capitalization structure
• Need to think more out of the box including
  donors, governments etc
• Cooperative legislation too restrictive in many
  cases

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Strategic Issues

• World-wide pure agricultural retail banks are not
  sustainable
• Rural banks also need good urban presence
• Financial sector is consolidating rapidly. Real
  retail bank also coop. bank needs retail market
  share of 10 plus
• Capitalization model needs to be flexible and
  governance model needs to reflect that

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Our preferred approach for Coop. Banks

• Strategy Client driven, partly client owned,
  full retail bank with a rural orientation with
  cooperative characteristics
• Based on shares
• Internal trading mechanism
• Voting system proportional not necessary linear
• One tier operational structure, possibly multi
  tier governance structure

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Hubs and Spoke Distribution Network
Sub Branche
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Example Capital Structure

• Clients and employees are invited to be
  shareholders
• Minimum number of shares, for instance 10,
  maximum number of shares 1000
• Semi-linear voting system, for example 10 shares
  one vote, 1000 shares 10-20 votes
• Development of internal share trading mechanism

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Example Corporate Governance Structure
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Main challenges for the next 5 years

• Transform coop financial institutions into full
  fledges retail banks based on cooperative
  characteristics
• Adequate capitalization and flexibility using
  other capital instruments like member
  certificates etc.
• Separate operations from governance structure
• Operations based on efficiency
• Governance based on bottom-up democracy control

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What are we doing in developing countries

• Provide technology and expertise
• Investment into retail banks with rural
  orientation,currently
• NMB, Tanzania
• ZNCB, Zambia
• Banco Terra, Mozambique
• URCB, China