Thursday, 26 July 2012

Establishing a Namibian Savings and Credit Cooperative


Introduction

The consistently increasing living cost has brought a big burden to Namibian as they never seem to earn enough to cover their daily needs. Many people tend to deal with this problem through the moneylenders such as banks and cash loans who charge them very high interest rates. By so doing their indebtedness is increased even more and the situation becomes more serious to them.

However, this money problem can be reduced if they join together under the cooperative principles of self-help and mutual help.

A cooperative is a business owned by its members for their mutual social economic and cultural benefit. There are two types of cooperatives namely,
1.       consumer or service  cooperative – owned and managed by the people who use its services; and
2.       workers’ cooperative – owned and managed by people who work in the business.

Namibia created an enabling environment for cooperatives through the Co-operatives Act 1996. In this Act, it defines various types of service cooperatives. These include Marketing & Supply cooperatives, Consumer cooperatives, Housing cooperatives and Savings & Credit cooperatives. The Act further stipulates that a service cooperative must also enter into at least 51 per cent of its transactions with its members.

The Namibia Consumer Protection Group is proposing the establishment of the Namibian Savings and Credit  Cooperative. The S&C Cooperative will act as a financial institution, and have the specific objectives to encourage savings and provide loan services.

About Namibia Consumer Protection Group (NCPG)

NCPG is a non-profit Namibian organisation that campaigns for customer rights. It focuses on illegal and unethical behaviour by Namibian companies. It also promotes the voluntary acceptance of the Namibian Consumer Charter by businesses and government entities.

Objectives of the Namibian Savings & Credit Cooperative

The Namibian S&C Cooperative shall:
a)      promote the economic and social interest of its members by providing effective services to its members according to sound business principles;
b)      have non-discriminatory voluntary membership;
c)       be democratic and controlled by its members;
d)      entitle every member to have one vote – regardless of the number of shares owned;
e)      provide services be primarily to members;
f)       limit the dividends so most profits are kept for the functioning of the cooperative; and
g)      provide ongoing membership education.

Establishing a Cooperative

Members must be
  • ·         at least 18
  • ·         a citizen of Namibia, or ordinarily resident of Namibia


A primary savings and credit service cooperative shall be formed by at least a seven members. The cooperative shall be governed by its by-laws. These by-laws include information regarding the name, address, type of cooperative, objectives, nature of business and place of business and other information as stipulated by the Act.

In addition the by-laws will include information on the liability of its members – in the case of the proposed Savings and Credit Cooperative the liability shall be limited.

Upon establishment of a cooperative, a “Cooperative Formation Committee” (minimum seven members) shall be present at a meeting to elect a Chairperson, Secretary and Treasurer. The Formation Committee shall be responsible for convening meetings with prospective members, draft the by-laws, and submit the application for registration as a cooperative. Within one year, a Cooperative Founders meeting shall be convened where a register of members must be completed to be submitted with the application.

Objectives of the Namibian Savings and Credit Cooperative

The Namibia Consumer Protection Group is proposing the establishment of the Namibian Savings & Credit cooperative (S&C Cooperative). The primary purpose of the Cooperative is to reduce banks costs and use discounts, loyalty rewards or any other form of remuneration normally received by a banking institution for the lessening of members costs.


The S&C Cooperative will be managed as a financial institution, and have the specific objectives to:
1.       Encourage thrift among members. To encourage a saving habit, the cooperative currently offers two types of savings:-
a.       Shares: All members are required to pay monthly shares at rates agreed by the members.
b.      Deposits: Both current and fixed deposits are generally offered to cooperative members.
2.       Provide loan services to members. Members' shares and deposits comprise significant part the loan funds made available to members with interest charged usually at rates lower than that of the prevailing market rates. The general three types of loans provided by this cooperative type are:
a.       Emergency loans: In crisis or emergency cases, a member may borrow up to half of his/her monthly income, depending on the cooperative financial status, without collateral. Repayment is normally made in two instalments.
b.      Ordinary loans: The cooperative can provide an ordinary loan, again, depending on its financial status. This can be between 4 to 15 times, of member monthly income.
c.       Special loans: When the cooperative extends its services to housing and investment purposes, a member may borrow the actual amount required for constructing or purchasing houses, land and other permanent investments

Legislation and Regulation vis-à-vis Financial Services

The Namibian Savings & Credit Cooperative is not a bank in the traditional sense of the word and as stated in the Cooperatives Act, “no provision of the Banks Act shall apply in relation to a cooperative”. The Banking Institutions Act, 1998, further states “This Act shall not shall not apply to … any co-operative society registered under the Co-operative Societies Act, 1996”.

Practical Application

It is proposed that the Cooperative shall work with a sponsor bank (preferably NamPost) and manage the accounts of its members as a virtual banking wallet. A technical management contract will be negotiated with a software development team to use a account management system via a cellular device. The software will be based on the technical USSD or similar standard.

The money in a members virtual wallet may be used for purchases at participating retail outlets. In addition, certain outlets will partner the Cooperative to provide cash disbursement at their business.

Additional Services

The Cooperative will also provide a personal data management system for its members. This will allow members to securely store a data about themselves and set permissions for others (government, legislative processes, private sector – for example potential employers, individuals, etc.) to access the information in a controlled way.

Registration

The Ministry responsible for cooperatives is the Ministry of Agriculture, Water and Forestry. Registration is submitted to the Deputy Director of Co-operatives in the Directorate of Planning.

Rights and Responsibilities

In its essence, a cooperative belongs to its members. Effective and efficient management of the cooperative is ensured when members exercise their rights and responsibilities properly. The most important responsibility of the individual member is attendance at the annual general Meeting (AGM). The AGA gives him/her the opportunity to protect their membership rights, a fair sharing of benefits and monitor the management of the operations. It provides also a forum to determine general policies, elect committee members and assign tasks to further benefit all the members.

Within the framework of cooperative principles, laws and regulations and procedures, members must discuss problems together, share ideas and exercise the right to vote on committees and meeting resolutions.

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