Brian Branch, president and CEO of World Council of Credit Unions (WOCCU), U.S., visited India for the first time since he assumed office in 2011, recently. Headquartered in Madison, WOCCU is the leading international body representing 75,000 credit unions in 90 countries, serving 260 million people. He explains why cooperatives in India are failing to attract youth as members. Excerpts:
What are the major challenges for credit cooperative societies in India and elsewhere?
Generally, credit cooperatives face three challenges. First, increased regulation and supervision that financial institutions have to comply with. There is a cost in doing so. We have to see that the cost is reasonable and ensure that cooperatives continue to serve people of low income groups. Second challenge is technological innovation. It is very important to adopt new technology for providing new online services. Third challenge is membership growth, particularly in the age group between 18 and 35 years. Regulation, technological disruptions and membership are major challenges of cooperatives in the context of increased competition from banks in the globalised economy.
What measures you do suggest to attract more youth to become members of cooperatives?
To enrol new members aged between 18 and 35, cooperatives must provide digital services. Many e-commerce firms have been providing online services to the doorstep s of people. To enrol the younger generation, cooperatives must provide financial services for construction of houses and purchase of consumer durables in the digital form. Cooperatives need to adopt digital technologies and computerisation in a big way to attract youth as well as reach out to marginalised and needy people. India has large digital innovation, a high quality technological resources, well-educated people, and we think there is natural match for credit cooperatives.
What is the trend like, on this front in the U.S.? Is the younger generation interested in becoming members of cooperatives in the U.S.?
In the U.S., we have had very strong growth in credit. People have trusted credit unions more than other financial institutions. Credit unions are growing fastest among those offering services online and mobile channels and they attract young adults. Every one in three persons in the U.S. is a member of a cooperative union. This is a gift India gave to the United States.
Do you believe that credit cooperatives are playing a vital role in increasing income of the poor?
Of course. Cooperative societies can help in increasing farmers’ income and eliminate poverty. Only cooperatives, mutual banks and community-based institutions are catering to the marginalised sections of the people. There are many big domestic and multinational banks. But they are not thinking about the poor. They are doing business with big companies.
Indian cooperative federation is not a member of WOCCU. How will India benefit by becoming a member?
The World Council represents credit cooperatives across the globe. By becoming a member, a country participates in the exchange of networking of other credit cooperative systems around the world. Indian cooperatives can exchange ideas for solutions and address challenges they face. A national-level cooperative federation can become a member by paying a fee.
Unlike the banking system, in India, cooperatives in the government and private sector are not regulated properly. What is your view?
India has a large number of cooperatives. It should be a challenge. Regulation can cause confusion in market prices when some are regulated and some are not. However, it’s a lot of work. It is expensive to regulate all cooperatives. There are a number of countries facing similar challenges and they have found solutions. They can have more streamlined regimes for simple institutions and they can work with partner organisations which provide monitoring and reporting to the regulator.
Many government-run credit cooperatives have become financially unviable after waiver of farm loans by states. Your comments...
I have to understand exactly what is happening India. I can speak about other countries. In other countries, farm loan waivers from cooperatives have destroyed cooperatives. This resulted in lack of access to credit. Lack of control over non-performance assets (NPAs) makes cooperatives or banks bankrupt. But there a lot of best practices around the world that Indian cooperatives can apply.
Does WOCCU have a tie-up with World Bank and other multilateral organisations?
Yes, we have tie-up with World Bank. There are occasions when bilateral and multilateral organisations may have objectives on how to empower cooperatives. Then, they may contract us seeking services. For example, World Bank works with Mexico and provides substantial services to rural areas. But Mexico hired us to introduce digital technology to enable credit cooperatives extend services in areas where they could not open branches. We did that in Columbia in the 1980s and in Kenya.
