From 1998 to 2014 COOPFIN financed about 600 cooperatives members by microloans up to EUR 10,000 in order reinforce the assets of small cooperatives.
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.
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.
Ex-ante and ex-post non-financial service helped overcome “information asymmetries” and reduce the financing risk and default rate. The empowerment of the loan beneficiaries has been critical to success and the availability of non-financial services has proven to be important.
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.
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