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South Africa passes landmark financial co-ops law
MADISON, Wis. (3/14/08)--The South African government recently passed the Cooperatives Banks Act, marking the first financial cooperative-specific legislation to be passed in English-speaking Africa. The World Council of Credit Unions (WOCCU) assisted the Savings and Credit Cooperative League (SACCOL) of South Africa with drafting and reviewing the new legislation. Musa Mbingo, general manager of SACCOL, sees the formal recognition of financial cooperatives as a way to deepen and strengthen outreach to South Africa's poor. “In terms of poverty, South Africa's numbers are very high,” Mbingo explained. “There are many unbanked people who can't enter the mainstream banking system. Cooperatives are the solution to provide financial services. In the fight for poverty alleviation, [the legislation] is a big step.” Savings and credit cooperatives or SACCOs--credit unions--previously were regulated under an “exemption" to the Banking Act, which required deposit-taking cooperative financial institutions to join a self-regulatory organization. Most SACCOs and financial cooperatives affiliated with SACCOL, a WOCCU member. After unsuccessful attempts to address regulatory problems within the system, WOCCU was invited to make a legislative assessment in 2000. By October 2001, South Africans had launched a campaign to encourage banks to serve the poor. Due to the campaign's mass appeal, the Financial Sector Campaign Coalition (FSCC) was established. More than 50 community-based organizations rallied around FSCC to address mainstream financial exclusion of the poor. “SACCOL became pivotal within the FSCC and in addressing the exclusion of financial cooperatives operating under an ‘exemption’ rather than being brought into mainstream banking,” said David De Jong, former general manager of SACCOL and now regulator of cooperative banks for South African Microfinance Apex Fund, the new regulating authority for financial cooperatives. “One of the priority issues was a need to address the legislative and support environment for financial cooperatives,” he continued. Less than a year after FSCC's creation, government, business, labor and community constituencies organized and agreed to draft and enact legislation specifically for financial cooperatives. SACCOL and its affiliated SACCOs, South Africa's labor movement and WOCCU provided input for the Cooperatives Banks Act. SACCOs are now allowed to provide their members a full range of financial services, all covered by a deposit insurance plan. For the first time, this places financial cooperatives ahead of South Africa's mainstream banks, providing a unique window of opportunity for the movement, De Jong said. Dave Grace, WOCCU vice president of association services, who worked closely with SACCOL to draft the legislation, noted the importance of the law for African credit unions. “We hope this is the first in a sea of changes, enabling legislation for financial cooperatives in Africa.”
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