Understanding Financial Cooperatives in South Africa, Malawi and Swaziland – Full Report

, ,

FinMark Trust commissioned Genesis to better understand the role and use of co-operative financial institutions (CFIs) as viable alternatives to the commercial banking sector for accessing financial services for lower income individuals in South Africa, Malawi and Swaziland, as well as best practices in the sector.


An initial desktop review was completed at the study’s inception. Following the development of research tools, research teams of one senior researcher and one junior researcher were deployed to South Africa, Malawi and Swaziland to conduct field research. This included key informant interviews with regulators, policy makers, apex bodies and CFI leadership, as well as focus group discussions with CFI members.

Country Case Studies

Detailed descriptions of the CFI sectors in each of South Africa, Malawi and Swaziland are provided according to:\n

  • The history of the co-operative and CFI movements;
  • An overview of the CFI sector today, in terms of number and types of CFIs, products, challenges and roles in the financial system; and,
  • An assessment of the legislative and regulatory environment

The CFI sector in South Africa today is small and plays a very minor role in the country’s overall financial system relative to other African countries. This has been attributed to a number of reasons, many of which relate to the sector’s history in the country, the development of which has been short and troubled. Challenges include grant-based programmes that did not operate for long enough to ensure that managers and communities were equipped to run CFIs, resulting in misaligned incentives and rent-seeking in some cases;

Poor management; insufficient capacity and top down approaches to development. The failure of many of the smaller CFIs, and a lack of publication of the few clear success stories, has also affected the level of people’s trust in CFIs as safe and reputable financial institutions. The majority of CFI members in South Africa also have bank accounts.

Malawi is an example of a poor and predominantly rural country where CFIs provide an opportunity for people to use financial products and services they would not otherwise have had access to. Malawi has a strong apex body, the Malawi Union of Savings and Credit Co-operatives (MUSCCO), and donor support for the sector consisted mainly of capacity building, through the remuneration of staff, and education, training and development, rather than financial support. Given the limited resources of the state, the Ministry works closely with industry stakeholders, particularly MUSCCO, to achieve adequate regulation and supervision. The Malawian case demonstrates that developing a new regulatory framework with the Savings and Credit Co-operatives (SACCOs) and the apex body, after analysing and understanding the sector, is a more prudent way to formulate appropriate and accepted regulatory regimes.

The CFI sector in Swaziland grew off the back of large, employer-based organisations and continues to play an important role in the country’s economy. CFIs make use of non-withdrawable savings that members can borrow against and they remain competitive with commercial banks. Most CFI members also have bank accounts but are loyal to their CFIs and apex body, and use their CFIs for asset-building and large expenses, such as school fees and lobola. Recent changes in the regulatory environment have raised concerns amongst some CFIs who have expressed the need for these to be resolved and adopted shortly.