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Financial Cooperatives: Issues in Regulation, Supervision, And Public Disclosure Authorized Financial Cooperatives Issues in Regulation, Supervision, and Institutional Strengthening Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized © 2018 The World Bank Group 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved. This volume is a product of the staff and external authors of the World Bank Group. The World Bank Group refers to the member institutions of the World Bank Group: The World Bank (International Bank for Reconstruction and Development); International Finance Corporation (IFC); and Multilateral Investment Guarantee Agency (MIGA), which are separate and distinct legal entities each organized under its respective Articles of Agreement. We encourage use for educational and non- commercial purposes. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Directors or Executive Directors of the respective institutions of the World Bank Group or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. All queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. Photo Credits: World Bank Photo Library and Shutterstock WHEN AND HOW SHOULD AGRICULTURAL INSURANCE BE SUBSIDIZED? ISSUES AND GOOD PRACTICES Carlos E. Cuevas | University of Washington Evans School of Public Policy and Governance Juan Buchenau | Finance, Competitiveness, and Innovation Global Practice | World Bank Group WHEN AND HOW SHOULD AGRICULTURAL INSURANCE BE SUBSIDIZED? ISSUES AND GOOD PRACTICES Table of Contents Abbreviations and Acronyms ................................................................................III Acknowledgments ................................................................................................... V Executive Summary .............................................................................................. VII Main Themes and the Way Forward ........................................................................ X 1. Introduction ........................................................................................................... 1 2. Overview – Financial Cooperatives Outreach and Potential .........................3 3. Issues in Regulation and Supervision ...............................................................5 Regulation Issues ......................................................................................................... 6 Supervision Issues ........................................................................................................ 8 4. Institutional Strengthening.............................................................................. 11 5. Combining Regulatory/Supervisory Reform with Institutional Strengthening .........................................................................................................13 6. An Agenda for Discussion and the Way Forward ..........................................15 The Way Forward ........................................................................................................17 Annex 1. Financial Cooperatives Growth ............................................................19 Annex 2. FC Regulation and Supervision Categories – Selected Countries ..21 Annex 3. Supervision of FCs ................................................................................ 23 Annex 4. Selected Country-Cases Highlights ....................................................27 Albania .......................................................................................................................... 27 Colombia ......................................................................................................................28 Guatemala ...................................................................................................................28 India ...............................................................................................................................29 Kenya ............................................................................................................................30 Mexico ........................................................................................................................... 31 Philippines ....................................................................................................................32 FINANCIAL COOPERATIVES — ISSUES IN REGULATION, SUPERVISION, AND INSTITUTIONAL STRENGTHENING I Rwanda ........................................................................................................................33 West Africa Monetary Union (WAMU) ..................................................................33 Endnotes ................................................................................................................. 35 References .............................................................................................................. 39 LIST OF BOXES Box 1. Agricultural and Other Multipurpose Cooperatives in Finance Provision ..................................................................................................................4 Box 2. Indirect – Delegated/Auxiliary – Supervision.........................................10 Box 3. Tiers for Supervision in Different Countries .......................................... 23 LIST OF FIGURES Figure 1. Credit Unions and Members Evolution, 1996 – 2003 .......................19 Figure 2. Savings and Loans Evolution, 1996 – 2003 .......................................19 Figure 3. WOCCU: FCs and Membership, 2007 – 2015 ................................... 20 Figure 4. WOCCU: FCs Savings and Loans, 2007 – 2015 ................................ 20 Figure 5. Mexico: FCs Authorized by CNBV 2001 – 2014 .................................31 TABLE OF CONTENTS II Abbreviations and Acronyms BANSEFI Banco del Ahorro Nacional y Servicios Financieros (México) BCBS Basel Committee on Banking Supervision BCEAO Banque Centrale des Etats de l’Afrique de l’Ouest (West Africa Central Bank) BIS Bank for International Settlements CAC Cooperativa de Ahorro y Crédito (savings and credit cooperative, Guatemala) CDA Cooperative Development Authority (Philippines) CNBV Comisión Nacional Bancaria y de Valores (Mexico Banking Commission) DiD Développement International Desjardins (Québec, Canada) FC Financial Cooperative ICURN International Credit Union Regulators’ Network IADI International Association of Deposit Insurers IFC International Finance Corporation LRASCAP Ley para Regular las Actividades de las Sociedades Cooperativas de Ahorro y Préstamo (Mexico Financial Cooperatives Law) SACCO Savings and Credit Cooperative (mainly East Africa) SCA Savings and Credit Association (Albania) WAMU West Africa Monetary Union (UMOA in the French acronym) WOCCU World Council of Credit Unions TABLE OF CONTENTS FINANCIAL COOPERATIVES — ISSUES IN REGULATION, SUPERVISION, AND INSTITUTIONAL STRENGTHENING III IV Acknowledgments The content of this document benefitted greatly from the presentations and comments made at the International Workshop on “Financial Cooperatives in Financial Inclusion: Challenges and Risks” held on April 17, 2018 in Washington DC and we would like to acknowledge especially: • Alceu de Albuquerque, Banco Sicredi, Brazil • Eleanor Astaphan, Eastern Caribbean Central Bank, St Vincent • Éric Bélanger, Desjardins International, Quebec, Canada • Michael Edwards, World Council of Credit Unions (WOCCU), USA • Martin Holtmann, IFC, USA • Nadeem Karmali, World Bank, USA • Zara Konini, FED Invest, Albania • Tara Lacey, Software Group, USA • Alan Moore, Irish League of Credit Unions Foundation, Ireland • John Mwaka, SACCO Societies Regulatory Authority (SASRA), Kenya • Korotoumou Ouattara, World Bank, Congo • Julien Reid, Autorité des marchés financiers, and International Association of Deposit Insurers, IADI, Canada • Fernando Restoy, Financial Stability Institute, Switzerland • Bjorn Schrijver, Rabo Partnerships B.V. Netherlands • Martin Stewart, ICURN and Bank of England The authors also gratefully acknowledge the insightful comments received from David Gerbrands (Rabo Bank Partnerships), from Dave Grace (ICURN), from Timothy Lyman (CGAP) as well as from Alfonso García Mora, Steen Byskov, Ilka Funke, and Juan Carlos Izaguirre (World Bank). Our appreciation is extended to Musakanyakombe Mwape for coordination and support during publication and to Aichin Lim Jones for the design and production services of this publication. FINANCIAL COOPERATIVES — ISSUES IN REGULATION, SUPERVISION, AND INSTITUTIONAL STRENGTHENING V VI Executive Summary Financial Cooperatives (FCs) are important providers of financial services to poor and middle-income people, and significant drivers of financial inclusion. Aside from their strong presence and relevance in developed economies, especially Europe and North America, the significance of financial cooperatives in terms of financial inclusion
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