Financial Cooperatives Harness Democratic Spirit to Effect Social and Environmental Impact in Rural Africa

With their open membership, member control, ethic for internal training, and concern for their communities, cooperatives have proven to be an effective model for people looking to work together to meet their goals. This is evidenced by their spread across rich and poor corners of the world. In sub-Saharan Africa, SACCOs (savings and credit cooperatives) have been a key route for smallholder farmers to save and borrow. In turn, cooperative investors in Europe have been a top provider of funding and expertise to financial coops in Africa.

The Rabo Foundation has supported early-stage coops with concessional financing and technical support. Governance training is often a key need, as the leaders of the coops are the members themselves, and they often join their coops without a complete range of business skills. Ebo is an example of a SACCO that once needed subsidies to grow, but since has become a strong institution. With 250,000 members in Uganda, Ebo recently became the first SACCO recognized by Uganda’s central bank. It delivers groups and individuals payment services and 12 types of loans as well as savings accounts that bear interest and are insured by the government. Ebo is active in rural areas, and many of its members are smallholder farmers. Being controlled by these members, the SACCO remains focused on poverty reduction and other forms of social impact. Looking forward, its goal is to transform into a cooperative bank.

Many of Ebo’s funders are cooperatives themselves. One of these has been Oikocredit, which has a portfolio of USD 1 billion invested in finance, farming and renewable energy. Among the financial services providers it has invested in, Oikocredit has found differences between coops and the others. While the social performance scores of both types of investees are similar, those of the coops are increasing more quickly. The coops also are more likely to reach poorer people in more rural regions, while offering smaller loans at lower interest rates. Relative to their peers, more of the cooperatives offer savings as well as supportive (non-financial) services. They also hold certifications in client protection at a higher rate while earning higher levels of repeat customers and lower default rates.

SIDI is another investor in cooperatives, particularly in Africa. Among its successes has been helping cooperatives to become certified in fair trade and organic practices as well as to adhere more closely to labor laws. This results in both social and financial returns.

Among the strengths of the coop model is that by accepting deposits, financial services providers can lower their cost of funds while insulating themselves from the vagaries of markets and government subsidies. Other benefits of cooperatives are less tangible, however. Developing members’ leadership skills is a key example. As member-run organizations, coops have incentives to remain focused on their missions and invest in their members, including through training and leadership development. These skills result in pride and confidence that members bring to their communities and families beyond the bounds of the coop.

This content was presented on November 14, 2025, at IF25, which is hosted by the e-MFP which has about 120 members, each of which supports the provision of financial services in lower income countries. The photo above shows participants in the IF25 session on cooperatives using string to represent the connections that coops make among their members.