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Landscape Cooperative Financial Institutions

Landscape Cooperative Financial Institutions. Gerard van Empel Washington DC, April 2007. Key Figures Rabobank Group. Key figures Rabobank Group (1). (in EUR billions) 31-12-2006 31-12-2005 31-12-2004 Total Assets 556 506 475 Reserves 29,3 26,3 18,1 Private Sector Lending 324 278 253

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Landscape Cooperative Financial Institutions

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  1. Landscape Cooperative Financial Institutions Gerard van Empel Washington DC, April 2007

  2. Key Figures Rabobank Group

  3. Key figures Rabobank Group (1) (in EUR billions) 31-12-200631-12-2005 31-12-2004 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

  4. 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

  5. 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 Right to vote Central Delegate Meeting Rabobank Nederland General Meeting

  6. 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

  7. 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

  8. 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

  9. Sub Branche Sub Branche Sub Branche Sub Branche Sub Branche Sub branches offering basic financial products Sub Branche Sub Branche Sub Branche Sub Branche Branch Branch Branches Head Office Head Office Hubs and Spoke Distribution Network Sub Branche

  10. 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

  11. …… …… …… ….. Local Level Share Holders Information Exchange Sub Branch Sub Branch Sub Branch Sub Branch 3 3 3 3 Branch assembly Branch assembly Branch 5 5 General assembly Central Level Non Executive Board Election Example Corporate Governance Structure

  12. 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

  13. 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

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