Cooperatives and the crisis: “Our customers are also our owners” [Feature articles]

Cooperatives and the crisis: “Our customers are also our owners” [Feature articles]

Another call is coming in from a customer to a modern call centre in Malmö in southern Sweden. The caller wants to discuss insurance, and the call centre agent, sitting at their terminal and speaking through a head-set, begins to explain the terms of the policies available. The conversation progresses, the sale is made.

The transaction takes place not in the Swedish language, however, but in Kurdish. The Swedish cooperative insurer Folksam first piloted the idea of a multilingual call centre more than ten years ago, and its Malmö base can now handle calls in seventeen languages, including Somali, Farsi, Arabic and Polish. In a country where almost one in five of the population is from a migrant community, it’s a sensible business service to offer and according to Folksam attracts 100,000 calls a year. As a direct consequence, Folksam now claims the lion’s share of the insurance market of Sweden’s immigrant communities.

It’s the sort of idea that, you’d think, a bright new start-up company might come up with. But Folksam is no such thing: it is something of a venerable presence in the Swedish world of finance, having been offering Swedish people insurance for 102 years.
Reconciling economic and social values

Its chief executive Anders Sundström argues that Folksam’s business success can be attributed to its social values. Originally set up to meet the needs of Sweden’s early social and trade union movements, it has maintained its difference from other insurers, not least in its company structure. It operates without shareholders, as one of the global family of cooperative and mutual financial institutions. As the company’s website puts it, “Our customers are also our owners. The profit doesn’t go to shareholders, it stays within the company and benefits us all.”

Cooperative banks and insurers have, historically, tended to avoid the headlines. They can operate without concern about their share prices and therefore without the day-to-day attention from business media and analysts which businesses with share capital tend to attract. Between them, however, their market share is a significant one.
Significant market share of cooperative businesses

According to the International Cooperative and Mutual Insurance Federation, for example, about 24% of the global insurance market is in the hands of cooperative insurers. ICMIF’s largest member is the giant Japanese insurance cooperative Zenkyoren which dominates the country’s agricultural sector and attracts annual premium income of around 4,700 billion yen (or approaching USD 50 billion). Another ICMIF member, the Columbian cooperative La Equidad and the linked health care Saludcoop, occupies a similarly dominant position in its own country.

In banking, there is a similar story in many countries. In the Netherlands, half the population is with Rabobank whilst in Germany cooperative banks collectively have thirty million customers. One recent study gave cooperative banks 20% of the European retail market.

The worldwide network of member-owned savings and credit cooperatives (known variously as credit unions and SACCOs) is also significant. It provides according to the World Council of Credit Unions 177 million members in 96 countries (many of them developing countries) with an easy and safe way to save and borrow.

The financial crisis which has transformed the financial world for the past two years is bringing some unaccustomed attention to this diverse family of businesses, which share the common feature that they operate to bring benefits to their members-customers rather than to investor shareholders. The business magazine The Economist, for example, earlier this year reported that cooperative banks had been steadily increasing their market share in Europe in recent years. Customers, it seemed, were seeking security and reassurance. A recent study by the German central bank (Bundesbank) found coop banks more financially stable and less likely to fail than shareholder-owned institutions. ...