What is a Financial Cooperative?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 20 August 2019
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Financial cooperatives are banks or other types of financial institutions that are fully owned and operated by individuals who hold membership in those institutions. This type of cooperative venture is often established among a group of members who share some type of common bond, such as being involved in a particular industry. The typical financial cooperative will offer a full range of banking services, including checking and savings accounts, as well as loans that carry a rate of interest that is highly competitive with other institutions.

With a financial cooperative, members have the opportunity to pool resources and create institutions that make it possible to offer financial services to customers, based on some type of common interest or profession. For example, there are several nations around the world with cooperatives based on industry are found. One of the more common examples is the agricultural cooperative, where individuals and companies involved with farming and food production come together. A cooperative of this type is likely to include basic banking services, mortgages, business loans, educational and other training opportunities, and general networking capabilities through annual and semiannual gatherings that are open to all members.


Another benefit of the financial cooperative is that there is usually some type of central support organization that actively seeks discounted benefits for all members. The central organization is granted authority to negotiate and enter into contracts with various vendors, based on the combined buying power of the members of the cooperative. This often allows the organization to command highly competitive discounted rates that each member can utilize if desired. By securing these rates through the financial cooperative, even members who would only make use of particular goods or services on a sporadic basis can enjoy the benefits of discounted pricing that would normally be available only to consumers who generated much larger volumes of business.

A financial cooperative does more than simply provide financial benefits to its members. The networking possibilities also help to create an atmosphere of mutual support that allows members to share information with one another with relative freedom. This exchange of information is sometimes funneled through the central support organization, but can also take place at annual and semiannual conferences, where members gather to confer on matters of interest to the cooperative as a whole. Along with these nationwide gatherings, most cooperatives will offer regional gatherings that allow members located within a certain area to confer on matters of local interest with relative ease. In addition, it is not unusual for various members to develop strong rapport with one another and exchange ideas and resources with one another when and as they see a need to do so.


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