Today 700 million people live in extreme poverty. To respond to this challenge, in 2015 the world came together and agreed on a transformational agenda to address the needs of the poor and vulnerable:
-The adoption of the SDGs is tangible evidence of a growing political commitment to end extreme poverty in a single generation;
-And the successful COP21 Paris conference, if implemented even in part, can prevent millions of people from falling into poverty due to the effects of climate change.
The World Bank Group has made substantial financial and organizational pledges to help implement these goals -- and we’re collaborating with the other multilateral development banks, the private sector, governments, the private sector, the UN, and others to increase our joint impact.
A number of these have been combined into a variety of multi-stakeholder partnerships, based on a thematic area like health, education, or the environment. Yet one long-standing partnership model should not be ignored when our global goals are so daunting: cooperatives.
Cooperatives have a storied history, and distinct advantages when addressing the needs of low-income people. They reflect a sharing of group information, and trust in communities around a common purpose. Long before Uber or Airbnb, they capitalized on a sharing economy, but with an explicit mission to share benefits with everyone in society, especially the poor and vulnerable.
Cooperatives have a distinctive link with formal economy. They also have a unique inclusive governance and structure we can learn from, and they recently have begun to expand their reach through technology and innovation.
Over the decades, cooperatives have had successes in areas like agriculture, housing, or distribution of electricity. While there have been many improvements, they have faced challenges in areas such as tax policy, discriminatory regulation, achieving scale, and prevailing business attitudes toward their mission and business model.
Given the challenges we face in the 2030 agenda, we need to exploit the power of cooperatives to create change in people’s lives, and that means we need to address their challenges and build on their success.
To achieve our ambitious 2030 goals there are three major tasks, as I see it: Data, Implementation, and Finance. Cooperatives have a role to play in each of these areas.
First, collecting good data is one of the most powerful tools we have to end extreme poverty and promote accountability. We need improved data both to monitor progress, diagnose problems, and help design policies and programs that will be needed to find solutions and make progress towards the SDGs.
Cooperatives can support this agenda, given their relationships at the grass roots, their subnational character, focused on delivering results for their members. We should support them with technical advice and new technology to help them share data and information with their clients and with development practitioners.
Second, successful implementation of the SDGs will require support from many partners and sectors. We have to leverage a number of global partnerships to deliver on these commitments, particularly with the UN and the private sector. Given cooperatives ties with the people the SDGs are designed to serve -- the poor -- we need to integrate cooperatives into processes to achieve the SDGs at the national, regional, and local levels.
Finally, I want to spend some time talking about finance, and financial inclusion. While official development assistance is critical, especially in the poorest and most fragile countries, this isn’t enough to achieve the SDGs. We need to leverage ODA to bring in private investment, and help countries mobilize domestic resources, and reduce illicit financial flows, and attract private investment.
Finance is where we can be best placed to exploit cooperatives’ advantages in addressing poverty and its many corollary causes and impacts. In finance, they’ve used different modalities, including savings and credit unions.
Finance needs to be broad and sustained, but it also must be inclusive. We have made great progress in expanding financial inclusion. Yet as of 2014, only 62 percent of the world’s adult population had a financial account – leaving 2 billion adults without one.
Cooperatives are a practical way to promote financial inclusion while reducing poverty through increased growth.
The Consultative Group to Assist the Poor (or CGAP), which is housed at the World Bank, is a global partnership to advance financial inclusion and improve the lives of the poor. Their experience and research show that financial cooperatives and credit unions have a critical role in providing savings, while they have low operating costs and are located in remote, rural areas without no financial institutions.
For many of these member-owned institutions, the challenges to scaling up savings services are typically related to challenges related to management and staff capacity, governance, and oversight and supervision. Some financial cooperatives and credit unions cannot safely lend funds received as deposits due to lack of credit capacity and systems.
Cooperative Financial Institutions (or CFI’s) include Savings and credit cooperatives, credit unions, financial cooperatives, as well as savings and loan associations. They are key strategic partners in achieving both the goals of universal financial access, ending extreme poverty.
They are one of the main providers of financial services to low-income people, with 700 million members/ accountholders worldwide. CFIs have large constituencies in India, China, Indonesia, Brazil, Mexico, Kenya, Morocco, and over 35 smaller developing countries such as Togo or Haiti.
Last year the Bank Group’s private sector arm, the IFC, had an estimated $500 million dollars of investments in CFIs around the world. The World Bank has been active for decades in this area. Some of the most notable programs include the Indian Dairy Cooperative, which has created an estimated 250,000 jobs, mostly in rural areas. Similarly, Mexico’s National Savings and Financial Services Bank has helped to strengthen savings and credit institutions that serve millions of rural residents, who would otherwise have been relegated to the margins of the formal financial sector.
The Bank’s policy work has re-affirmed the notion that rural producer organizations are fundamental building blocks of agricultural development. And it has helped governments to supervise and regulate cooperative financial institutions.
For example, in 2009, the Bank Group worked with Rwanda to strengthen both the supervision and reach of Savings and Credit Cooperatives. By mid-2012 financial access in Rwanda increased from 47 percent to 72 percent. The newly created savings and credit cooperatives played an important role in this increase since they operated in 215 rural locations in which no financial institution existed previously. And the partnership with Rwanda also significantly increased the financial sustainability of the savings and credit cooperatives.
This year the World Bank and the Rabobank Foundation began a partnership to strengthen financial cooperatives in rural areas to improve financial services for both smallholder farmers and agricultural SMEs. They are considering this approach in a number of countries, including Colombia, Cote d’Ivoire, Democratic Republic Congo, Haiti, Madagascar, Myanmar, Philippines, and Tanzania.
Yet in a more mobile and urban world, cooperatives will need to adapt while maintaining their basic values and approach.
As seen in Sub-Saharan Africa, mobile money accounts can drive financial inclusion. While just 1 percent of adults globally say they use a mobile money account and nothing else, in Sub-Saharan Africa, 12 percent of adults (64 million adults) have mobile money accounts (compared to just 2 percent worldwide); 45 percent of them have only a mobile money account. Mobile money accounts can help narrow the gap in financial inclusion between men and women, which could have important effects on inequality and child welfare. CFIs will have to stay abreast of these developments and exploit these new technologies to maximize financial inclusion, particularly for the poor.
As we search for innovative solutions to today’s development challenges, we should consider what the cooperative movement can offer. Mindful of the existing challenges on things like taxes, regulation, governance, and management, as well as the dynamic nature of financial technology, we will continue to explore new potential partnerships in this area going forward. Coops have shown their value in the areas of finance, data and implementation, and present a partnership framework for implementation -- both south-south, south-north.
They can help to bring greater economic inclusion, higher agricultural productivity, strengthened food security, and financial stability, as well as share lessons concerning responsible and sustainable business practices, corporate governance, and community relations. We should consider how to facilitate the spread of cooperatives’ best practices while avoiding common pitfalls.
The cooperative movement can prompt us to think in new, inspired ways. Capitalizing on cooperatives’ successes and learning from their mistakes can help us to expand the menu of options as we search for more inclusive and sustainable models of development, and new ways of building and sharing knowledge, to help us reach our common goal of ending poverty in a single generation.