Answer:
(1) Cooperative and microfinance institutions are often preferred over traditional banks in developing countries for several reasons. Here's why-
Step-by-step explanation:
a) Accessibility: Cooperative and microfinance institutions are typically more accessible to individuals in rural and remote areas where traditional banks may not have a presence. These institutions establish branches and outreach programs in underserved regions, making financial services more readily available to the population.
b) Financial Inclusion: Cooperative and microfinance institutions prioritize financial inclusion by serving low-income individuals, small businesses, and marginalized communities. They offer tailored financial products and services that cater to the specific needs of these groups, such as small loans, savings accounts, and micro-insurance.
c) Flexibility: Cooperative and microfinance institutions often have more flexible lending criteria and procedures compared to banks. They take into account the borrower's character, community ties, and repayment capacity, rather than relying solely on collateral or credit history. This approach allows them to extend credit to individuals who may not meet the stringent requirements of traditional banks.
d) Social and Developmental Focus: Cooperative and microfinance institutions emphasize social and developmental objectives alongside financial sustainability. They aim to uplift communities, promote entrepreneurship, and alleviate poverty. By providing access to financial services and empowering individuals economically, these institutions contribute to local economic development and social progress.
e) Member Ownership and Control: Cooperatives are typically owned and governed by their members, who have a say in decision-making processes. This participatory approach promotes community engagement, fosters a sense of ownership, and ensures that financial services align with the needs and priorities of the members themselves.
(2) The contributions made by cooperatives in various sectors are significant and can be observed in several ways:
a) Agriculture and Rural Development: Agricultural cooperatives play a crucial role in supporting farmers by providing access to credit, agricultural inputs, and marketing channels. They enable small-scale farmers to pool resources, access better prices for their produce, and improve their livelihoods. Cooperatives also facilitate knowledge sharing and capacity building among farmers, leading to enhanced agricultural practices and increased productivity.
b) Financial Inclusion: Cooperatives and microfinance institutions contribute to financial inclusion by extending financial services to marginalized and underserved populations. They provide small loans, savings facilities, and insurance products tailored to the needs of low-income individuals and small businesses. By promoting savings habits and offering affordable credit, cooperatives help individuals build assets, start businesses, and improve their economic well-being.
c) Housing and Consumer Needs: Housing cooperatives enable individuals to access affordable housing through cooperative ownership models. Members pool resources, share costs, and collectively manage housing projects, making homeownership more attainable for those with limited financial means. Similarly, consumer cooperatives provide affordable goods and services by eliminating intermediaries and ensuring fair pricing for members.
d) Employment and Job Creation: Cooperatives generate employment opportunities and promote self-employment. They enable individuals to form cooperative enterprises, contributing to local economic development and reducing unemployment. Worker cooperatives, in particular, empower employees by providing them with ownership and control over their workplace, fostering a sense of dignity and economic security.
e) Social and Community Development: Cooperatives contribute to social cohesion and community development by promoting democratic participation, fostering social solidarity, and addressing local needs. They often reinvest profits into community projects, infrastructure development, education, healthcare, and other social initiatives, thereby improving overall quality of life.
Overall, cooperatives play a vital role in promoting economic empowerment, social inclusion, and sustainable development, making them valuable contributors to both local and national economies.