Ministers say cooperative banking could promote social cohesion

Towards the end of 2011, the United Nations declared the year 2012 to be the International Year of Cooperatives, with the theme entitled ‘Cooperatives Build a Better World’.

During a cooperative banking seminar this morning, SME Minister Jason Azzopardi said that having an International Year for Cooperatives (IYC) provided an opportunity to draw the attention of governments, the business community and, most importantly, the general public to the advantages provided by the cooperative model.

“The IYC celebrates a different way of doing business, focused on human need rather than human greed, where members collectively enjoy the benefits of their activities, instead of seeing all of the profits going just to a small group of shareholders,” Azzopardi said.

Azzopardi hoped the seminar would raise public awareness of cooperatives in their diversity, especially among the young adult population. “I hope that through such activities people will recognise better the social and economic contribution cooperatives make worldwide.”

Through this awareness the minister hoped that the spirit of cooperation would grow and policymakers would encourage the formation and growth of cooperatives by enacting or improving the relevant enabling legislation.

The seminar focused on cooperative banking which has for some reason or other never taken root in Malta. 

“It is, nevertheless, something which the amendments to the Cooperatives Act intend to encourage, although this is only one of the innovations which the amendments I am proposing would incorporate.” Azzopardi said.

Cooperative banks have been described as the “submerged part” or even “Cinderella”, of the global banking system due to lack of media representation.

But following the recent financial crisis, Azzopardi said there is a renewed interest in them with the cooperative model seemingly coming into its own.

“It exemplifies as it does that social cohesion which, as many EU leaders have pointed out, Europe risks losing as a result of the general lack of confidence and the economic recession,” he said.

Azzopardi explained that the cooperative model is now considered worth studying because it favours social cohesion. “It may well be that the time has come to enable the cooperative model to be tried out in our banking system too – as it has in other sectors of our economy.”

The minister said the initiative also tied in with the government’s policy to create more jobs with better pay. “Over the past four years the minimum wage has increased by €1,000 and the Government will not stop at this. We simply believe it would be a huge mistake to freeze minimum wages,” he said.  

Finance Minister Tonio Fenech said the banking sector was crucial for the functioning of an economy.

“The stability and resilience shown by the Maltese banking sector has contributed in no small way to the positive performance of our economy throughout these difficult years probably due to the traditional business model operated by our banks, which for the most part are retail banks, accepting deposits and making loans to and from, mainly, small customers,” Fenech said.

Ranked as the 13th soundest banking sector in the world by the World Economic Forum’s Competitiveness Index 2011-2012, Fenech said banks in Malta were well capitalised and scored successfully in recent EU-wide stress testing.

“In Europe, the co-operative banks that are members of the European Association of Co-operative Banks have 130 million customers, €4 trillion in assets, and 17% of Europe’s deposits.  The International Confederation of Cooperative Banks (CIBP) is the oldest association of cooperative banks at the international level,” Fenech said.

Fenech believed that the thinking behind the cooperative movement should appeal to the Maltese people’s sense of community and solidarity.

“But our legal framework, as it has evolved so far, while providing for co-operatives and for commercial or joint stock banks, does not provide specifically for co-operative banks.” 

The finance minister said that the local Cooperatives Board is currently exploring possibilities where authorities can help create the necessary legislative framework for a cooperative bank to be set up locally.

“If a co-operative bank were to be set up in Malta, this would certainly contribute to the further diversification of our banking sector, and this would be a positive development. From experience around us, micro and smaller businesses could be primary beneficiaries of such a development,” Fenech said.