Regulation, Supervision, Governance & Control in Cooperatives:
A Resource List
Savings and credit cooperatives provide financial services to millions worldwide, including poor and low-income people. Establishing effective regulation, supervision and governance of cooperatives is a key component in constructing inclusive financial systems that balance expanded access with appropriate risk controls. National regulators, policymakers, coop managers, coop board members, other local stakeholders, and international organizations active in financial sector development each have a role to play in this regard.
This document was compiled by the Consultative Group to Assist the Poor (CGAP) with input from a number of CGAP partners working on the strengthening of cooperatives. Although this should not be considered an exhaustive collection, it provides an annotated list of some of the more practical resources and tools available today. In many cases, they present state-of-the-art thinking for effective regulation, supervision and governance of cooperatives.
However, there is no 'one size fits all' prescription. Appropriate decisions depend upon the local context. The following resources can provide stakeholders with frameworks for considering some of the key issues which need special consideration. The document is divided into two sections: (i) regulation and supervision, (ii) governance and control. Within each section, key documents are highlighted, followed by a list of additional resources.
Regulation and Supervision of Cooperatives
CGAP. Consensus Guidelines on Regulation and Supervision of Microfinance. July 2003. Part I discusses terminology and preliminary issues. Part II outlines areas of regulatory concern that do not call for 'prudential' regulation. Part III discusses prudential treatment of microfinance, including cooperatives. Part IV briefly looks at the challenges surrounding supervision, and Part V summarizes some key policy recommendations.
Cuevas, Carlos and Klaus Fischer. Cooperative Financial Institutions: Issues in Governance, Regulation and Supervision. World Bank Working Paper, May 2006.
WOCCU. Guide to International Credit Union Legislation and Model Law for Credit Unions. Jan. 2005. Includes credit union legislative and regulatory summaries for over 100 countries and political provinces. The Model Law provides a sample legislative framework to aid in preparing and seeking approval of laws. Model law also available in Spanish.
WOCCU. Development Best Practices in Credit Union Regulation and Supervision Series. 2003. Series of concise briefing papers on key issues in credit union regulation and supervision.
Lhériau, Laurent. Précis de réglementation de la microfinance Tome I et II: Le droit financier et la microfinance. Agence Française de Développement. 2005. Part One is a primer on regulation, with applications to cooperatives. Part two progresses from description of prudential norms to specific types of challenges, cases, and structure of laws and regulatory regimes. Includes a French-language bibliography of laws in 21 countries.
Additional Resources on Regulation and Supervision
CGAP. Working with Savings and Credit Cooperatives. Donor Brief No. 25. August 2005. Provides recommendations to donors seeking to support savings and credit cooperatives.
CGAP. Comparative Database on Microfinance Regulation. The database contains a standardized analysis of the financial, legal and regulatory situation for microfinance in 50 different countries, compiled by the IRIS Center at the University of Maryland. Follow the link to begin a search on laws and regulations relevant to credit unions and cooperatives.
Martel, Diane. Reference Framework: Surveillance of Financial Institutions. Développement International Desjardins, April 2003. Describes three levels of supervision - internal control, inspection and external audit, and details differences as relates to internal and external surveillance authorities. Not available online. Also available in French.
Richardson, David C. Pearls Monitoring System. World Council of Credit Unions Toolkit Series No. 4. October 2002. PEARLS is a set of financial ratios developed by WOCCU to monitor the performance of credit unions - useful to both managers of individual credit unions as well as network supervisory organs which choose to use PEARLS as a basis for prudential norms and monitoring. Also available in Spanish and French.
Governance and Control in Cooperatives
CGAP. Disclosure Guidelines for Financial Reporting by Microfinance Institutions. July 2003. Establishes disclosure guidelines for information that should be included in financial reporting of institutions involved in microfinance, including cooperatives. Aimed at improving the quality of information available to supervisors, board members, institution managers, donors, and other investors. Based on field testing and input from the Financial Services Working Group of the Small Enterprise and Education and Promotion Network (SEEP).
CERISE & IRAM. Guide opérationnel d'analyse de la gouvernance d'une IMF. 2005.
An operational tool on governance, with reference to specific conditions for mutualist institutions. Based on joint IFAD and GTZ work to enhance earlier CERISE work. Forthcoming in English.
Martel, Diane. Reference Framework: Surveillance of Financial Institutions. Développement International Desjardins, April 2003. Describes three levels of supervision - internal control, inspection, and external audit, and details differences as relates to internal and external surveillance authorities. Not online. Also available in French.
Additional Resources on Governance and Control
Développement International Desjardins. Internal Control Evaluation Questionnaire. Jan. 2003. 15 page questionnaire designed to assist in the evaluation of the efficacy of the controls used by management. Not available online. Also published in French and Spanish.
Développement International Desjardins. Solemn Declaration by Elected Leaders. Undated. Template code of conduct for coop managers and board members. Not available online. Also published in French and Spanish.
Développement International Desjardins. Guide to Main Internal Controls of a Financial Cooperative: Section on Operational Controls. Undated. Table of operational control tasks, each with description, frequency and responsible staff member. Not available online. Also published in French and Spanish.
Développement International Desjardins. DID Microfinance Performance Report Reference Guidebook. Undated. Manual for calculation and interpretation of indicators for financial viability, efficiency, portfolio quality, growth and outreach. Not available online. Also published in French and Spanish.
Développement International Desjardins. Declaration of Interests and Declaration Relative to Persons with Close Ties. Undated. 2 page form to be completed by coop manager detailing their investments, external ties and potential conflicts of interest. Not available online. Also published in French and Spanish.
Additional Resources Relevant to Cooperatives
CGAP. AML/CFT Regulation: Implications for Financial Service Providers that Serve Low-Income People. Focus Note No. 29. July 2005. Discusses the application of anti-money laundering (AML) and combating financing of terrorism (CFT) rules to microfinance institutions.
CGAP. Protecting Microfinance Borrowers. Focus Note No. 27. May 2005. Describes consumer protection efforts and their relevance to microfinance regulation and supervision.