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COOPFIN MICROCREDIT TO COOPERATIVES’ MEMBERS
Published on 27 March 2018
Italy
Sardegna
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About this good practice
The cooperative movement represents one of the most significant aspects of the Sardinia (IT) region’s economic and social progress. In the 1990s, COOPFIN was set-up following a public-private agreement between the cooperative business organizations (partners of the company) and the Sardinian regional government. During this period, COOPFIN received some EUR 30 Million of regional funds to support cooperatives through loans and equity investments.
From 1998 to 2014, COOPFIN financed nearly 800 cooperatives and members of cooperatives through loans, including 600 microfinance interventions under EUR 25,000. At the end of 2016, following the recent Italian banking system reform, COOPFIN was recognized by Bank of Italy as a Microcredit Operator.
The thin capitalization of micro cooperatives is one of the main constraints to growth due to the low financial capacity of cooperative members and their difficulty to access traditional credit channels. For this reason, from 2001 to 2013, COOPFIN implemented this initiative to reinforce the assets of small cooperatives through the provision of microcredits to cooperative members. The program has the following characteristics: i) microloans up to EUR 10,000 to each member transferred to the cooperative in a unique solution; ii) payback period: 7 years with 2 year grace period; iii) 5% fixed interest rate iv) ex-ante and ex-post non-financial services provided by the cooperative business organisations.
From 1998 to 2014, COOPFIN financed nearly 800 cooperatives and members of cooperatives through loans, including 600 microfinance interventions under EUR 25,000. At the end of 2016, following the recent Italian banking system reform, COOPFIN was recognized by Bank of Italy as a Microcredit Operator.
The thin capitalization of micro cooperatives is one of the main constraints to growth due to the low financial capacity of cooperative members and their difficulty to access traditional credit channels. For this reason, from 2001 to 2013, COOPFIN implemented this initiative to reinforce the assets of small cooperatives through the provision of microcredits to cooperative members. The program has the following characteristics: i) microloans up to EUR 10,000 to each member transferred to the cooperative in a unique solution; ii) payback period: 7 years with 2 year grace period; iii) 5% fixed interest rate iv) ex-ante and ex-post non-financial services provided by the cooperative business organisations.
Expert opinion
As highlighted by this good practice, micro cooperative members tend to face difficulties in accessing traditional credit channels and thus their growth is hindered. As a solution, a public-private initiative COOPFIN was created and authorized to allocate a considerable amount of regional funds to support cooperative members through loans and equity investments. The evidence of success is convincing as some 600 beneficiaries have received micro-loans from this scheme. It is important to mention that besides financial support, the beneficiaries received non-financial services to help mitigate the related risks and improve their repayment capacity. As such, ensuring a solid network of business support organizations is crucial when considering replicating this model elsewhere.
Works at
Interreg Europe Policy Learning Platform
Resources needed
Depending on the national legal framework (e.g. in Italy an micro loan cannot overcome EUR 25.000), EUR 1 Million allows to support 40 small cooperatives.
Evidence of success
600 members of cooperatives have been financed by micro-loans from 2001 to 2013, in an amount of some EUR 5 Million. These cooperatives are mainly in the services sector.
The results of this program provided the model to start the new phase of COOPFIN activity in 2016 as Microcredit Financial Institutions under the new Italian legal framework.
The results of this program provided the model to start the new phase of COOPFIN activity in 2016 as Microcredit Financial Institutions under the new Italian legal framework.
Potential for learning or transfer
The scheme can be transferred to other areas, especially those with similar business models, but it is extremely important that a network of business support associations/organizations is already fully operational as they ensure the sustainability of non-financial services.
Good practice owner
You can contact the good practice owner below for more detailed information.
Organisation
COOPFIN S.p.A.
Italy
Sardegna
Contact