African village banks project shows renewed emphasis on international co-op development
By James Haskell
Assistant Deputy Administrator
USDA/RBS Cooperative Services
Although still in a rudimentary state, a string of more than 50 village bank cooperatives have been established to bring a measure of individual and community stability via financial services to the former “Homelands” of South Africa. Dozens more are in the development stage. All are operating with a small profit and have no delinquencies.
For the first time, thousands of these rural African residents have access to financial services. Project funding came principally from USAID, with development work administered by staff of USDA/RBS Cooperative Services and private firms under contract for specialized financial services. Cooperative Services developed models of a business plan, a marketing strategy and an operations manual for use by the cooperative banks. A twoweek study tour in the United States was conducted for two South African government officials to acquaint them with our systems for delivering financial services to rural areas.
This type of international development work is an adaptation of authority contained in the Cooperative Marketing Act of 1926 and the Agricultural Marketing Act of 1946. The 1926 law directed the Secretary of Agriculture “to work with institutions and international organizations throughout the world on subjects related to the development and operation of agricultural cooperatives.” That activity today is conducted by Cooperative Services .
One drawback to Cooperative Service’s international development work is that Congress has not provided a specific budget marks for the program’s international work. So most of our assistance over the years has either been through information exchanges and meetings, or through in-country technical assistance activities funded by international donor groups outside the appropriations process. This effort has tended to center around U.S. foreign policy directions at any given time (Central and South America in the 1960s and 1970s, the Pacific Rim in the 1980s, and Africa in the 1990s). Numerous requests for technical assistance came in from Eastern European countries following the fall of the Iron Curtain.
Each year, Cooperative Services hosts hundreds of foreign visitors who are interested in U.S. cooperatives and want additional information or advice on how our cooperative practices and operations might be adapted to their countries. These groups often involve farmers (or representatives of farmer associations), parliamentarians or other policy makers, and state or national government officials. Some of the initial contacts are received directly by Cooperative Services while others stem from a variety of donor agencies, such as the World Bank and USAID. In some cases, they come through foreign or U.S.- based economic development entities.
Cooperative Services publications that explain how U.S. cooperatives are structured and function are in high demand from these groups and through direct communications with other foreign and domestic entities. Many of these basic cooperative publications have been reprinted in several foreign languages and are widely distributed by governments, non-government organizations and through the Internet. The “U.S. style” of structure and operations, where farmers are the users, owners and beneficiaries of successful cooperatives, has obvious global appeal.
This is certainly true in South Africa. During the apartheid years in South Africa, the black population was shuttled into these remote rural “Homelands” areas with no services. They carved out a subsistence living. They had no access to financial services and had no place, for instance, to deposit their small monthly government pensions.
Although still small in terms of the size of the country, these locally owned cooperatives are located principally in agricultural areas and some are starting to make loans. The banks are self-regulated with no government interference. Their financial services include taking deposits, making loans, providing insurance and transferring funds. However, to fit into the country’s legal system, they were required to have a relationship with a commercial bank.
The local pattern was taken from three pilot village banks operating in the North West Province of South Africa. In time, the equivalent of our Farm Credit Administration will be developed to become a regulator of these village banks. RBS’ role in assisting with this growth was multifaceted. Initially, a short-term research project conducted by RBS and South Africa’s National Department of Agriculture (NDA) determined the “Village Bank” model was applicable for providing rural financial services.
The Cooperative Services staff helped gain an exemption to South Africa’s Banks Act for these financial services cooperatives (FSCs) by the Central Bank and the minister of finance. It allowed them to legally receive deposits, but exempted them from conforming to stringent requirements of the Central Bank for being recognized as a bank. Nearly as important was the registration of these village banks as FSCs, which was accomplished by working closely with the NDA’s Registrar of Cooperatives who is responsible for all cooperatives in South Africa. The licensing established the cooperatives as legal entities so they could purchase deposit insurance. It also raised their stature in the villages and made it easier to attract new members. Cooperative Services also provided extensive training for FSC directors and employees, as well as officials in the NDA.
A final component of the project by Cooperative Services was assistance in establishing a regulatory framework for use in providing supervisory oversight of the FSCs. This framework was considered essential, not only to preserve the character of the individual cooperatives, but more importantly to protect the fragile “system” of FSCs. Although the project is “officially” concluded, USDA continues to monitor the progress of FSC development because it holds so much promise for the economic growth of rural areas throughout South Africa.
