Reaching Rural Areas with Financial Services: Lessons from Financial Cooperatives in Brazil, Burkina Faso, Kenya, and Sri Lanka
This paper studies four financial cooperative networks with significant outreach in developing countries.
Financial cooperatives (FCs) in most developing countries are underdeveloped and have negligible market shares. Sistema de Cooperativa de Crédito (SICREDI) in Brazil, SANASA in Sri Lanka, Réseau des Caisses Populaires du Burkina (RCPB) in Burkina Faso, and Kenya Rural Savings and Credit Cooperative Society Union (KERUSSU) in Kenya, have, however, succeeded in achieving significant outreach in rural areas, although they operate in widely varying economic contexts.
The study examines the profitability, outreach to low-income clients and effect of the regulatory environment on these FCs performance. Findings indicate that:
- FCs can provide financial services in rural areas in developing countries and be profitable;
- Diversification, based on geography and clients income levels, seems to have helped all the FC networks grow their clientele;
- Integration among FCs and between FCs and their federations appears to determine the level of support services available;
- FCs operate better in environments with prudential regulation and financial supervision.