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Rabo International Advisory Services (RIAS) BV
Landscape Cooperative Financial Institutions
Gerard van EmpelWashington DC, April 2007
Rabo International Advisory Services (RIAS) BV
Key Figures Rabobank Group
3 Rabo International Advisory Services (RIAS) BV
Key figures Rabobank Group (1)
(in EUR billions) 31-12-2006 31-12-2005 31-12-2004
Total Assets 556 506 475Reserves 29,3 26,3 18,1Private Sector Lending 324 278 253
Funds Entrusted 215,9 186,5 192,1 Net Profit 2,3 2,1 1,5
4 Rabo International Advisory Services (RIAS) BV
Key figures Rabobank Group (2)
(in EUR billions) 31-12-2006 31-12-2005 31-12-2004
Member banks 188 248 288Offices:- branches 1,214 1,249 1,299
- contact points 3,091 3,031 2,965
Cash dispensing machines 3,139 3,116 3,062Foreign offices 330 267 244Employees- Total Employees 56,209 50,998 56,324
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Consultation and decision structure
localbank
CentralDelegate Meeting
General Meeting
Regional meeting Regional meeting Regional meeting
localbank
localbank
localbank
localbank
localbank
localbank
localbank
localbank
localbank
localbank
localbank
localbank
localbank
localbank
localbank
localbank
localbank
Rabobank Nederland
Right to vote
6 Rabo International Advisory Services (RIAS) BV
Observations Cooperative Banking
• Traditional coop banks in many countries become marginalized
• Global players are entering emerging markets an developing countries
• Many coop banks lack scale and adequate capitalization structure
• Need to think more “out of the box” including donors, governments etc
• Cooperative legislation too restrictive in many cases
7 Rabo International Advisory Services (RIAS) BV
Strategic Issues
• World-wide pure agricultural retail banks are not sustainable• Rural banks also need good urban presence• Financial sector is consolidating rapidly. Real retail bank also
coop. bank needs retail market share of 10% plus• Capitalization model needs to be flexible and governance
model needs to reflect that
8 Rabo International Advisory Services (RIAS) BV
Our preferred approach for Coop. Banks
• Strategy: Client driven, partly client owned, full retail bank with a rural orientation with cooperative characteristics
– Based on shares– Internal trading mechanism– Voting system proportional not necessary linear– One tier operational structure, possibly multi tier governance
structure
9 Rabo International Advisory Services (RIAS) BV
Hubs and Spoke Distribution Network
Branch
Sub
Branche
Sub Branche
Branches
Sub Branche
Sub Branche
Branch
Head Office
Sub branches offering basic financial products
Head Office
Sub
Branche
Sub Branche
Sub Branche
Sub Branche
Sub Branche
Sub Branche
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Example Capital Structure
• Clients and employees are invited to be shareholders• Minimum number of shares, for instance 10, maximum
number of shares 1000 • Semi-linear voting system, for example 10 shares one vote,
1000 shares 10-20 votes• Development of internal share trading mechanism
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Example Corporate Governance Structure
Local LevelShare Holders
Branch assembly
Sub Branch
Central LevelGeneral assembly
Non Executive Board
Branch
…… …… …… …..Sub Branch Sub Branch Sub Branch
Branch assembly
3 3 3 3
5 5
Election
Information
Exchange
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Main challenges for the next 5 years
• Transform coop financial institutions into full fledges retail banks based on cooperative characteristics
• Adequate capitalization and flexibility using other capital instruments like member certificates etc.
• Separate operations from governance structure– Operations based on efficiency– Governance based on bottom-up democracy control
13 Rabo International Advisory Services (RIAS) BV
What are we doing in developing countries
• Provide technology and expertise• Investment into retail banks with rural orientation,
currently:– NMB, Tanzania– ZNCB, Zambia– Banco Terra, Mozambique– URCB, China
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