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Victoria Mindova

During the crisis, the co-operative banks are the only ones that have increased the lending to the real business in Greece. They hold only 2% of the banking market in the country but have a considerable untapped potential to fund the real economy. The secret of co-operative banks is that the capital of real business creates them and they, in turn, directly fund the production on the basis of the "business-to-business" principle. They do not put depositors' funds into risky operations, instead they rely on the financing of a production activity that leads to the opening of new jobs or, at least, to the retaining of existing ones, thus ensuring permanent economic activity.

Yiannis Apostolidis, president of the Co-operative Bank "Western Macedonia," who is vice-president of the Union of Co-operative Banks, is speaking about the activities and challenges in the sector in times of crisis.

He explains that when the problem of liquidity in the country had almost frozen the activities of the commercial banks, the co-operative financial companies had undertaken a campaign for greater funding of healthy enterprises on which the economy of entire regions depends. They specialize in lending to small- and medium-sized enterprises that cannot obtain the necessary funds through the usual channels of funding.

Profit is important for the co-operative banks but it is not an end in itself. They fund production and innovation at a regional level and do not seek short-term commitments with a high risk.The situation of co-operative banks had deteriorated when the rumours of GREXIT intensified in 2011. The trend to withdraw deposits from the banks due to the economic instability of the country had affected the co-operative banks as well. Subsequently, the Bank of Greece closed three co-operative banks in Greece instead of giving them time to recapitalize, which has also adversely affected the co-operative sector.

"The closure of the three banks had embarrassed some members of the co-operatives and they preferred to withdraw their money," said Yiannis Apostolidis. He emphasizes that the neglect of the government regarding the role of co-operative banks in economic development is creating problems in the sector. Despite the difficulties, 13 of the 16 co-operative banks continue to operate and their capitalization is greater than the minimum requirements of the Bank of Greece in contrast to the large commercial banks.

The co-operative financial companies in Western Europe have a long tradition of activity. The majority of the banks in Germany, Belgium and Austria were established in the middle of the 19^th century and they have over 150 years of history.

Volker Hegeman, head of the Legal Department of the European Association of Co-operative Banks (EACB) is talking in Athens on the nature of the co-operative banks. He stresses that the objective of these financial companies is not to profit as profit is only a tool for the businesses in certain regions to fund their activities. The members of the co-operative banks are residents of a particular region where they are operating.

They are also customers of the banks in which the decisions are taken on the basis of a democratic principle, namely, one member is equal to one vote. Hegeman stresses that there are no majority owners or top-down decisions and adds, "We have long-term commitments to our customers and do not seek short-term commitments with a high risk."

The co-operatives have to generate profit because there is no other way to survive but it is not an end in itself. Unlike the commercial banks, they do not aim to focus money in big urban centres. They even invest in remote regions that have no commercial interest in order to enable local businesses to remain in areas which are not commercial regions.

According to the expert, the co-operative banks are the most stable taxpayers. In Germany and Belgium, the co-operative banks pay more taxes than the ordinary commercial banks, which avoid some of the tax burden by relocating the capital.

Specifically for Greece, Hegeman expresses his bewilderment as to why the central government refuses to support the effective co-operative banks in a period when it pours billions of euro into the insolvent commercial banks. "It's amazing that the co-operative banks have not been included in the recapitalization programme," Hegeman expresses his dissatisfaction.

The first co-operation was founded in Torino, Italy, in 1854, and the first co-operative bank in 1893. Innovations were introduced in the co-operative model in the 1970s. Social enterprises were established then, which were the result of the unification of various small businesses in one region and which aimed to help the local population.

There are two types of social enterprises in Italy. The first type is aimed at supporting people with disabilities, the second strives to include these people in real business, such as production and trade. At first, the co-operatives themselves funded these initiatives and later, the social enterprises were supported by the state.

"Now, because of the crisis, many social enterprises are closing or turning to the co-operative banks to obtain additional funding because only they have available funds to support their activities," states Mariateresa Ruggiero.