Credit cooperatives must go digital

The cooperative movement in India is over a century old and almost all co-operatives, old and new, function alike — conservative, having legacy systems and a mindset that is not ‘futuristic’. In fact, even the membership base is that of elderly people. Nothing wrong in it, but look at whom the co-operatives have left out — a whopping 65% of the population that is below 35.

It is not that the co-operatives are unaware of this, but they have their own limitations that they are unable to break away from. It is not easy, but it is not impossible. What is the first thing that the cooperatives need to do? They need to go digital now. Along with digitisation, they should have products targeting the younger generation and the rural women as cooperatives normally operate in tier 2 and 3 cities.

Some cooperatives are assisting Women’s Self-Help Groups (WSHGs) and I would like to see the day when the rural woman does her cooperative society transactions on a smartphone.

As such, some of them are using smartphones, but to watch YouTube videos. Yes, in this age when smartphones and internet penetration are increasingly becoming demographic-agnostic, the best expansion route for cooperatives is by going digital. If I may rephrase Sir M Visvesvaraiah’s phrase, it would be to ‘digitise or perish’.

This is not just in India, even in developed countries, cooperatives are seized of the matter. The other day, the President of the World Council of Credit Unions (WOCCU), Brian Lee Branch, addressing a motley group of cooperatives of Karnataka, said that digital is the future of credit unions if they wanted to expand their customer and fund base.

Branch was here at the invitation of the Karnataka State Souharda Federation and Sahakar Bharati. His visit was to get India on board of WOCCU as there is so much to learn and exchange in the realm of credit cooperative societies.

Be that as may, Branch made three points that credit cooperatives must keep in mind if they have visions of growing big. They are: digitisation; new channels to expand membership base; and that government regulations are a necessary evil. At the conference, Kerry Dwayne Naylor, chief operating officer of the Local Government Credit Union of North Carolina mentioned that the union is planning to set up a ‘virtual credit union’.

While a ‘virtual credit union’ in India may not happen in the near future, cooperative societies are at the cusp of transformation, if only they go digital, particularly when banking and other financial institutions have already migrated there. The mismatch is glaring.

There are eight lakh cooperatives in the country with a huge membership base (spread over many branches) and fund base that can certainly take the lead, as investments in technologies can be substantial. The other route is sharing of costs of technologies by a group of societies or, even better, if the respective State Cooperative Federations take up the onerous task of hosting a server.

The Karnataka State Cooperative Credit Societies Federation Ltd., can be the nodal agency, having one common server connected to the many credit cooperative societies it has under its fold. The cooperatives also can think of exploring payment gateways such as PayTM, Mobikwik etc., to facilitate quick, digital transactions. Presently, some of the societies are giving members the option of ‘email log-in’ on their websites, but no financial transactions are allowed.

RBI’s role

The Reserve Bank of India should allow cooperative societies to offer internet transaction services to their members. With its plate full (with banking institutions), the RBI has very little time to look at cooperatives, a system that has the potential to transform rural India, at least.

In fact, RBI allows urban cooperative banks (UCB), state cooperative banks (StCB) and district central cooperative banks (DCCB) that have implemented the core banking solution in full to provide non-transactional services to customers, including balance enquiry, balance viewing, account statement download, request for cheque books, etc.

As regards transaction services, the RBI has set stringent conditions for the cooperative banks. The societies are under state regulations, but for banking-related functions, the RBI has to take a call. The RBI has stated that cooperative societies can convert themselves into cooperative banks if they would like to expand their services.

I believe that if cooperative societies go digital, that in itself would provide a platform for growth. The potential of cooperatives to transform lives at the village level is enormous as banks have not reached out to the rural population as they should have. Going digital is necessary not only for the growth of the cooperatives but also to reach out to vast sections of the society who are away from the mainstream.

(The writer is President, Gnanashale Souharda Cooperative Ltd)