2007 by the honourable Minister of Finance, Trevor A Manuel, MP
11 September 2007
Madam Speaker, the Co-operative Banks Bill, 2007 seeks to create an
appropriate regulatory framework for member-based deposit-taking, financial
services co-operatives. By creating a sector-specific regulatory framework, the
Co-operative Banks Bill also seeks to promote and advance the social and
economic welfare of South Africans by enhancing access to banking services
under sound and sustainable co-operative banks.
Co-operative banks will be divided into three tiers, namely:
1. Primary co-operative banks; which will comprise of the savings as well as
savings and loans co-operative banks.
2. Secondary co-operative banks; which will be established by two or more
primary co-operative banks.
3. Tertiary co-operative banks which can be established by two or more
secondary co-operative banks.
The Co-operative Banks Bill is one of Government's initiatives to promote
access to financial services, particularly to the most vulnerable people
characterised by low incomes and lack of access to mainstream financial
products. It is part of a broader strategy for promoting access to financial
services in addition to the financial sector charter and the Mzansi
initiative.
In 2004, the financial sector launched the financial sector charter which
culminated in some innovative initiatives that promote access to financial
services. The most prominent of these initiatives is a "no-frills" basic bank
account popularly known as the Mzansi bank account. According to the Banking
Association of South Africa over three million Mzansi accounts have been opened
in the three years following the launch of the financial sector charter.
According to the Finscope (2006) survey at least 49 percent of the total
adult population in South Africa does not have access to banking services. This
implies that in 2006, 15,27 million of the adult population was unbanked.
While noting the major achievements made by the commercial banks in
providing banking services to the previously excluded sections of our
community, it must be pointed out that the problem of access to financial
services is too large to be tackled by commercial banks alone. Community
participation and some government intervention is required if we are to see
success.
Madam Speaker, it is important to note that the Co-operative Banks Bill is
not proposing a new concept, but seeks to formalise an old international
tradition of institutionalised self-help practices. Co-operative banks have
been in existence for centuries and are very successful in countries like
Germany, Australia, United Kingdom, United States, India, Brazil, Tanzania,
Uganda and in many others. In many of these countries, these co-operative banks
have been successful because of deliberate government policies that support and
advance their cause but also because of an existing dedicated regulatory
framework.
Since 1998, financial services co-operatives, credit unions, and village
banks have been operating under an Exemption from the mainstream Banks Act. The
implications of the exemption notice and an absence of a sector-specific
legislation for these community-owned banking institutions are firstly a lack
of protection for the deposits invested in such institutions and secondly an
exclusion from the lender of last resort facilities. Under an "Exemption
Regime", and in the absence of formal regulation and protection afforded in the
lender of last resort facilities, the public confidence in these institutions
is hugely compromised.
The Co-operative Banks Bill seeks to correct this sub-optimal and temporary
regulatory arrangement by providing for formal regulation and supervision of
co-operative banks, creating a development framework to be implemented through
a Development Agency for Co-operative Banks, and for an establishment of a
deposit insurance fund aimed specifically at protecting the registered
co-operative banks.
The Co-operative Banks Bill was intensely debated in National Economic
Development and Labour Council (Nedlac) and extensive consultations with other
relevant stakeholders were carried out. Comments were received from a wide
array of groups and associations including Congress of South African Trade
Unions (Cosatu), the Banking Association of South Africa, Savings and Credit
Co-operative League of South Africa (SACCOL), the Business Parliamentary Office
representing Business Unity South Africa (Busa) and Chambers of Commerce and
Industry South Africa (Chamsa), the University of Pretoria, the Competition
Commission, and the South African Reserve Bank. Judging from the substance of
the comments received, the Bill was generally well received.
Madam Speaker, I would like to thank all the members of the community who
took time to engage with the National Treasury during the consultation periods
and for all those who sent through their useful written comments. I would also
like to thank the Portfolio Committee on Finance under the guidance of the
Honourable Chair Mr Nene for interrogating the Bill and helping to sharpen it
as an instrument that seeks to promote access to financial services.
Madam Speaker, I hereby request the House to pass the Co-operative Banks
Bill, 2007.
I thank you.
Issued by: Ministry of Finance
11 September 2007
