In the current context in which we live, all people (and companies too) need a financial institution to carry out their financial transaction, from the basic ones (payment of daily bill) to the most complex ones (loan, financing, investments,


A credit cooperative (or financial cooperative) is an association of people, non-profit, with its own legal nature, part of the National Financial System and designed to provide credit and financial products exclusively to its members. The people who seek, through mutual aid, non-profit, a better management of their financial resources. The purpose of the financial cooperative is to provide more favourable credit assistance and the provision of banking services to its members. The credit union have a complete range of products and service (loan, applications, deposits, insurance, consortia, cards, among others), they are also known as cooperative financial institution.


 The objective is to provide credit and provide service in a simpler and more advantageous way for its members. They are complex financial institution, as they are essentially intended to provide the provision of financial services to their members, being restricted to raising funds and granting credit.

Financial Cooperative is a credit institution organized in the form of a cooperative society, maintained by the members themselves, who simultaneously exercise the role of owners and users. Financial cooperatives are efficient for strengthening the economy, democratizing credit and deconcentrating income.

In a Cooperative, all operations made by members (loan, investments, deposit and others) are reversed to their benefit through fair prices. The resources invested in the cooperative are in the community itself, which contributes to the development of the localities where it operates.

Cooperatives are societies of people with their own legal form and nature, of a civil nature, non-profit, not subject to bankruptcy, constituted to provide service to their members.

Being made up of at least 20 people, a cooperative is a dual nature company that contemplates the economic and social side of its members. The cooperative member is both owner and user of the cooperative. As an owner, he will run the company, and as a user he uses its financial services. Cooperativism is a worldwide movement, based on an ideal, embodied in principles

The Cooperative Society is the union of people with common interests, who seek to satisfy economic, social and cultural aspirations and needs through an economically and democratically organized cooperative. Cooperatives are not aimed at profits, everyone’s rights and duties are equal and the result achieved is shared among the members, according to their respective participation in operations and activities. Currently there are cooperatives from the most diverse branch: consumption, credit, agriculture, health, work, education and others.


We can mainly highlight two types of credit cooperatives:

1. Rural Savings Bank or Agricultural Credit Cooperatives: They are characterized by their rural nature, they operate at the regional level. They appeared motivated by rural cooperatives as well as by agrarian societies. Its main objective is to finances agriculture, livestock, the forestry sector and all those activities that improve rural living conditions in the rural world.

2. Non-agricultural Credit Cooperatives: They are characterized by their industrial and urban nature. They originate from associations and cooperatives of union and professions. A clear example is the boxes of engineers.


These are the main characteristics of credit union:

  • They are made up of people who associate freely.
  • The membership and withdrawal of a credit union is voluntary.
  • They have a democratic structure and functioning.
  • They seek to carry out business activities to satisfy the interests and economic aspirations of their partners and the geographical area in which they operate.
  • They are required to return all funds from the public that they receive in the form of a deposit.
  • They have the corporate form of cooperatives and are subject to the supervision of the monetary authorities.
  • The bodies in charge of management and control are: the General Assembly, the Governing Council and the Social Council.
  • The benefits are distributed among the members of the cooperative, a compulsory reserve funds, a voluntary reserve funds and an education and promotion funds that is used to attract new members.


 There are other financial and personal advantages:

  • Reduced interest rates: these cooperatives offer lines of credit with lower interest rates and, many of them, do not charge fee for their financial services (provision of receipts, transfers, registration); when they charge, they are always lower than those practiced by commercial bank.
  • Income normally higher than the market: if the member has a financial reserve available, he may invest it in the cooperative in the form of a term deposit, with yields generally higher than those offered by the financial market. It should be borne in mind that the cooperative enjoys tax exemption and is not obliged to collect compulsory deposit like bank, which allows a higher rate of return for members.
  • Differentiated service: the member is served in the cooperative not as a simple customer service, but as one of its owners. And, most importantly, you will be doing business at an institution that will return to you, through the apportionment of leftovers, interest and fee paid more than due. Its share in the surplus may be in cash or in the acquisition of more quotas, depending on the decision of the Assembly. In case of losses, they can be offset against future results. In addition, if the cooperative wishes to withdraw from society, it may receive the value of its shares. Read also about Differences between accounting and financial management


The creation of an MPE credit union goes through several phases:


 The first step is to give lectures to raise the awareness of the local business community about the advantages and benefits of the cooperative for the development of their businesses. In this phase, a commission should be officially appointed to study the economic and financial viability of the cooperative.


 In this phase, the Constitution Assembly is held, a formal step in the legalization process and the moment when the statute is approved and the boards of directors and the fiscal council are elected.


 In this stage, the location, the acquisition of furniture and equipment, the hiring of personnel and other necessary measures to start its operation are defined.


 It is the effective start of the cooperative’s activities, when it is already inserted in the competitive rates market and fully serving the purposes for which it was created.

Read also:  List of Current Liabilities on Balance Sheet

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