The Department of Women, Youth and Persons with Disabilities (DWYPD) has applied to the Reserve Bank’s Prudential Authority to launch a new cooperative bank in South Africa.
Cooperative banks differ from commercial and mutual banks and are more akin to formalised, registered, and regulated stokvels.
A cooperative bank, part of the wider umbrella of cooperative financial institutions, is formed by a group of people who take deposits, mobilise savings, and give out loans.
These groups differ from a stokvel because they are formalised, registered, and required to meet certain criteria to operate.
Because cooperative banks are deposit-taking, they also need to register with the Prudential Authority.
Cooperative banks can operate at any level but are limited in their products and services – such as foreign exchange.
These banks are conservative in nature and do not speculate with members’ money and invest in stock exchanges. However, they can engage in secure funding and government bonds.
They also differ from mutual banks in that they operate under a common bond – either a group of people that work together or belong to a certain association or a certain geographical area.
Mutual banks require R10 million as a minimum capital requirement to start and do not require a common bond but are mutually owned and controlled by the members themselves.
The DWYPD said on Thursday that their cooperative bank will advance the inclusion of women, youth and persons with disabilities and their businesses, and other co-operatives.
The bank would serve in the department’s mandate of ensuring that these vulnerable groups can take control of their own “financial destiny” and free themselves from abuse.
The committee said that similar models have been adopted in other countries, where such banks could provide financing and financial freedom for millions of women, in particular.
DWYPD minister Nkosazana Dlamini-Zuma stressed that the cooperative bank being proposed is not a state bank or government bank – although it is a government initiative.
The plans for the bank were drawn up in cooperation with the Cooperative Banks Development Agency (CBDA) to ensure that no mistakes were made.
“We are not just doing this as fly-by-night. We are following the legal prescripts,” Dlamini-Zuma said.
“It’s not a government bank – it’s our (the government’s) initiative, but it’s not a government bank. It’s a co-operative bank that is owned and run by the members.”
To establish a cooperative bank, the law requires that co-operatives share a common bond, have a minimum of R100,000 in share capital and have at least 200 members.
Members need to have R5 million in deposits and demonstrate that they have the financial, operational and human capacity to operate as a bank.
Because of these more stringent requirements, the Prudential Authority has higher standards and expectations when establishing such a bank, the department said.
According to the DWYPD, the new South African Innovative Financial Services (SAIFS) bank meets the requirements.
It said there are 429 active members with R257,400 in shared capital, exceeding the minimum requirements.
It anticipates reaching 10,000 members and R5 million in deposits within 12 months of the date of the approval of the licence.
To this end, it has already submitted its registration package to the Prudential Authority and anticipates approval by the end of the year.
In terms of further implementation, if approval is granted, the ministry would officially launch the bank in January 2024, with operations commencing in July 2024 with savings and investments.