Fast Tracking Financial Inclusion through Innovative Cooperative Models-Existing Scenario and Future Prospects

Finding microfinance, an important component for inclusion, Dr. C Rangarajan's Committee report on financial inclusion has focused on strategies, technologies and a delivery mechanism for reaching the poor and providing them timely, adequate and affordable financial services. This certainly requires shifting from the 'Supply led approach' to a 'Demand let approach' by the mFIs and other players of microfinance sector. The paper recognises the existence of a wide network of cooperatives at various levels/ environments - Micro (internal), Meso (intermediary) and Macro (external). All the three levels are elaborated in the paper to provide a clear understanding of the structures and organisational setup of cooperatives in context of microfinance and financial inclusion.

While examples of international experiments of undertaking microfinance through cooperatives like Raiffeisen Model developed in Germany, is taken as a base to discuss the issue at international level, Indian models of micro financing through cooperatives have also been elaborated.

The paper discusses the examples of microfinance initiatives in rural areas such as Cooperative Development Foundation Model, Hyderabad; SHG - PACS linkage Model - (Examples - Bidar DCCB/ DCCBs of West Bengal and other states); Cooperative Banks - SHG-linkage model and SHG - Federation Models at one end. It also elaborates the key features of urban cooperative models like SEWA BANK, Gujarat; Cuttack Urban Cooperative Bank, Orissa; Bhagini Nivedita Sahakari Bank Limited, Pune, and other examples of Thrift and Credit Cooperatives.

In India, a variety of SHG-federations have also emerged at various levels with a legal entity of cooperatives. Some of the federations registered under cooperative Acts are engaged in non-financial intermediation whereas others have also undertaken financial intermediation services. The paper covers the existing models at one side and also provides ideas and potential models of Self-Help Promotion Systems in the cooperative domain. The paper incorporates a brief analysis of cooperative legal scenario existing in different states and at the national level, in order to exhibit the issues associated with various cooperative Acts and rules. It is a fact that the Cooperative Societies Acts of various states differ from each other in context of various provisions relevant for the development of microfinance and financial inclusion.

The paper identifies various subsets within the cooperative framework in context of financial inclusion. These subsets include - SHG federations registered or registering under cooperative Act, Primary Agriculture Cooperative Societies (PACS) / Mini Banks of PACS, Sub-Sectoral cooperatives like handloom cooperatives/Handicraft Cooperatives/ Agro Processing Cooperatives, Urban Cooperative banks / Thrift and Credit cooperatives and Salary Earners Cooperative Societies.

Finally, the paper provide a holistic strategy to take forward the agenda of financial inclusion through variety of cooperatives through adoption of innovative methods/ product and services, changes in legal framework and cooperative Acts as well as proposing new replicable models.