Definition Definition

What Is Co-operative Bank? Advantages and Disadvantages of Cooperative Banks

What is Co-operative Banks?

A co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank.

These banks are often created by persons belonging to the same local or professional community or sharing a common interest. Co-operative banks generally provide their members with a wide range of banking and financial services.

Definition 2

Cooperative banks are financial entities whose members own and govern them. These banks offer banking services to their members and are usually smaller in size than commercial banks.

More Thorough Understanding of the Term

The cooperative banking concept is founded on the values of mutual aid and cooperation, with the objective of meeting the community's financial needs in a democratic and participatory manner. Members pool their resources and use them to provide banking services to one another. A cooperative bank's members are also its owners, with each member having one vote regardless of how much money they have put in the bank.

Savings and checking accounts, loans, and mortgages are common banking services offered by cooperative banks. They also frequently offer specialized services, such as lending to small enterprises and farmers. Cooperative banks are often smaller than commercial banks, with a greater emphasis on serving the needs of their local community.

In general, cooperative banks are more stable than commercial banks. They are less likely to engage in risky activities that could lead to financial instability because they are owned by their members. Furthermore, because they are focused on meeting the needs of their local community, they are less vulnerable to global economic trends that can influence larger commercial banks.

Advantages of Cooperative Banks

Cooperative banks are often smaller than commercial banks, with a greater emphasis on serving the needs of their local community. The following are the advantages of cooperative banks:

  • Rural people, low-income communities, and small businesses can access banking services through cooperative banking. 
  • Regarding lending criteria, cooperative banks are frequently more flexible than commercial banks, and they are more prepared to work with customers who may not have excellent credit.
  • Cooperative banks are also more concerned with their members' needs.
  • They are less prone to economic trends worldwide that may influence larger commercial banks.

Disadvantages of Cooperative Banks

The following are some potential drawbacks to cooperative banks:

  • They may not be able to provide the same variety of services as larger banks because they are smaller.
  • They may be more subject to changes in the local economy or changes in the bank's membership because they are owned by its members.
  • Because members are also bank owners, there is the possibility of a conflict of interest between what is best for the bank and what is best for individual members.
  • Cooperative banks may need to charge higher interest rates on loans to pay their costs since they may have limited access to funding sources. As a result, they may be less competitive when compared to larger commercial banks.


Example 1

Desjardins firm is a Quebec-based cooperative financial firm. It was created in 1900 and currently has over 7 million members in Canada. Desjardins provides financial products and services such as banking, insurance, and wealth management.

Example 2

Nationwide Building Society is a mutual financial firm located in the United Kingdom. It was created in 1846 and now boasts over 15 million members in the United Kingdom. Nationwide Financial Services provides a variety of financial goods and services, including savings accounts, mortgages, and insurance.

In Sentences

  • The mutual aid idea underpins the cooperative banking paradigm. 
  • Cooperative banks have been around since the mid-nineteenth century.
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