Cooperative banks ease access to capital

Accessing capital is a major struggle for black businesses across southern Africa. Two financial institutions, Khanya Cooperative Bank (KCB) and Eyesizwe Cooperative Bank, have been established in South Africa, highlighting the need for the country's banking sector to be transformed. Both banks are designed for black people, especially black entrepreneurs.

"At KCB, based in Johannesburg, our long-term vision is to create a progressive financial institution that is owned and manned by black professionals," said Sibonelo Radebe, co-owner of the KCB initiative. "It is an open membershipbased organisation."

Moeketsi Nchoba, another founding member of the bank, said KCB would start off as a cooperative financial institution (CFI) and be set up in accordance with relevant regulations and the Cooperative Banks Act. Its growth path will be guided by the regulatory framework for micro insurance. Black people across South Africa are frustrated at being unable to meet the financial needs of their business- es. As far back as 2011, then deputy finance minister Nhlanhla Nene said: "CFIs should change their mind-sets if they want to see any significant growth. They must move away from the small mind-set that contributed to the establishment of many weak, small financial cooperatives.

"We should rather have fewer, but larger and stable financial cooperatives. These need to attract and retain large numbers of active clients to be self-sustainable." The benchmark of success for these cooperative banks lies in their ability to obtain a CFI licence from the relevant authorities, namely the Cooperative Bank Development Agency and the SA Reserve Bank. Obtaining such a licence will allow these banks to secure short- to medium-term deposits and grant loans. The CFI regulatory framework is to be used as a launchpad for establishing a fully fledged cooperative bank.

"We are working towards securing the CFI licence, which will expose us to firstmover advantages," said Nchoba. "The rules of the game are simple: A cooperative bank is a deposit-taking and loan-granting entity owned by its members. It only takes deposits and gives loans to members on good terms. Surplus, such as profit, in the business of a cooperative bank is shared by the bank's members." To become a KCB member, a membership fee of R2 500 is required. It can be paid in one go or in instalments.

While KCB is well on its way towards meeting the minimum regulatory requirements that will enable it to obtain a cooperative banking licence, Eyesizwe has some way to go before it does so. Eyesizwe is initially being rolled out in Mpumalanga. Other provinces have also been targeted, as have countries such as Swaziland, Zimbabwe and Mozambique.

Currently, about 300 members have signed on with Eyesizwe. A member's contribution payment amounts to R37 000 for one share, paid over three years. The single share qualifies them to be a shareholder and each person can have only one share. This makes shareholders equal.

Once you are a full member of Eyesizwe, you can get loan services at a lower rate and within a shorter time frame than you would at other banks. According to Eyesizwe, businesses that are generated from home or within the community have failed largely because of a lack of capital, access to finance and stable relationships with banks that understand their needs.