Co-op financial institutions 'not registering enough'

Thursday, October 20, 2011
Francis Hweshe

Cape Town - The 2010/11 Co-operative Banks Development Agency's unqualified report has indicated that co-operative financial institutions (CFIs) were not registering fast enough with the agency.

The report said the number of CFIs eligible for registration as co-operative banks had increased from the prior reporting year by one to 18. Two additional CFIs had met minimum requirements - R1 million in deposits and 200 members - and one could not register as its value of deposits fell below R1 million.

As of 31 March 2011, eligible CFIs had 28 034 members and approximately R160 million. The report highlighted that the agency had developed and piloted its regulatory and supervisory processes, resulting in the pre-registration assessment of (all) 11 received applications.

During the period under review, one CFI had been registered as a co-operative bank, another received approval for registration, while nine applications were rejected.

"A full scope, risk based examination of the registered co-operative banks was conducted during the period under review.

"Operational and governance weaknesses militated against the registration of more co-operative banks during the year, with weaknesses and shortcomings being communicated to the CFIs," the report said.

Looking ahead, the report said that the "prognosis of the sector remained mixed".

While the sector had grown in term of total assets, "governance and operational metrics remained depressing," and membership had not grown as forecast.

"There has also been a proliferation of small registered CFIs without sufficient supervisory and regulatory oversight. These small CFIs have been used as channels for development funding, to the detriment of the CFIs as deposit mobilisation vehicles.

"In the year ahead, the Agency will proactively increase and deepen its partnerships in order to play a more vigorous role in ensuring a sustainable and viable CFI sector focused on sustainable and inclusive economic growth.

"This will be done without compromising the supervisory mandate of the agency so as not to undermine financial stability," the report said.

This report was distributed on Thursday during a CFI Indaba organized by CBDA.

Deputy Finance Minister Nhlanhla Nene addressed the delegates, calling on the sector to get more organised and change its mindset if it aimed to grow.

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