Garcia: Modernizing coops pays Dividends

The recent global financial downturn and the two-year economic devastation brought by the Covid-19 pandemic crippled many nosiness operations, yet, one industry remains resilient across the globe — the cooperatives.

In addition, the massive public bail-out of investor, private-owned banks has underscored the rectitude of a customer-owned cooperative financial system that is more risk-averse and less profit-drive to line investors’ pockets and make bonuses for managers.

These savings and credit cooperatives continue to build societies amid the global financial turmoil and customers are banking with them because of trust.

“We like to say that cooperatives are friendly financial partners for you and Filipinos. As compared to banks, where interest rates can get up to 12 or 15 percent, and compared to the common loan sharks that offer the so-called ‘five-six’ scheme, where it can get up to 20 percent per month, cooperatives offer interest rates for as low as seven and nine percent per year,” Cebu CFI Community Cooperative president and CEO Pablo Garcia told the Daily Tribune in its show “Business Sense.”

“Cooperatives are friendly financial partners hoping to provide financial stability for Filipinos at the lowest interest rate in the Philippines,” he added.


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According to Garcia, cooperatives play a crucial role by acting on behalf of a unified group to offer traditional services.

However, they still must differentiate themselves from established institutions by offering above-average services, together with competitive interest rates in the areas of investment offerings and lending.

“It’s actually really interesting because even though cooperatives could have such a big impact [in financial services], we were never perceived as an established financial partner in the Philippines. If you look at cooperatives today, you will imagine rundown buildings and old computers from the 90’s. It is easy to assume that existing cooperatives do not have the technological capacity to deploy financial services seamlessly. They do not use e-wallets or most don’t even have online banking capability,” he explained.

The Cebu CFI transitioned into digitalization during the time of its former Chairman Winston Garcia back in early 2000 and transformed the institution into the country’s first fully digitalized cooperative.

Garcia continued, “If you will look at our [mobile] app, it is almost as good as, maybe, the UnionBank app. It is one of the privileges of becoming a member of the CFI Cooperative because we can now provide financial services as good as any bank you can think of today, But our interest rates are lower. Meaning you will have more money to spend for your family, yourself, and for your future if you borrow from us.”

But one of the most significant benefits of CFI’s digitalization was it could tap into funds from institutional lenders like the World Bank, Asian Development Bank, and others.

From mid-2020, CFI increased its loan portfolio from P5 billion to P9 billion, with assets totaling over P16 billion because of its access to institutional lenders which are not available to ordinary Juans.

Although, in terms of asset size, the cooperative is still a “toddler” compared to established banks, Garcia said, CFI can now access more funds for deployment to its members.

Indeed, the Small Business Corporation or SB Corp, the government financial institution focused on providing micro, small, and medium enterprises with much-needed access to finance to help them grow their businesses, is partnering with them for additional funding facilities.

SB Corp. and Cebu CFI met during the Daily Tribune’s Asian Innovation Forum held on 29 August at the Bellevue Hotel.


Nation-building partner

In a cooperative, members and its executives do things together. The funds that members invest in the cooperative and the funds it lends can create programs that allow everybody to increase their incomes.

So, from there, when we talk about nations. The families, our members, and their families can grow through education, business, and comfortable housing. So, the effect this has not just in the long term, but in the short term in 2-5 years, we can help the economy.

As a cooperative, Cebu CFI can further provide loans through its members’ contributions, which the company pools and reinvestments in other businesses, such as real estate and food. Gains from these investments are then distributed to the members digitally.

“Through the funds that you put in the cooperative or the funds that we lend to you as a cooperative, we can create programs that allow you to increase your income. We do this together,” Garcia said.

“Our members and their families can grow through our education, business assistance, and opportunities for comfortable housing. So, we help the economy not just in the long term, but even in two to five years.”


Loan, business to booth

For example, Cebu CFI offers members loans to put up their own Five Star Manok, a chicken franchise that originated in Thailand and uses a mobile app to facilitate all business transactions.

After all these digital efforts, Cebu CFI has increased its assets to P15 billion and gained the trust of government lenders for additional capital to support its growing demand for personal and business loans.

Garcia said credit cooperatives are essential to the country’s financial system. These institutions act as a safe haven for members to invest and could also be a significant funding source for households and MSMEs for capitalization or expansion.

Its not-for-profit orientation focusing on maximizing the benefits for its members has guaranteed the cooperatives’ popularity and sustainability.

This was evident during the past financial crises when banks closed, and some stopped lending, but cooperatives continued expanding their portfolios, with the CFI Community nearly doubling its deployable funds.

The overarching narrative of cooperatives is that they are our friendly financial partners and are better able to withstand financial crises and economic recession than invest-owned institutions.

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