Presentation to the Standing Committee on Finance and Portfolio Committee on Trade & Industry

1. Presentation to the Standing Committee on Finance and Portfolio Committee on Trade & Industry Public Hearings on Financial Sector Transformation 3 May 2017 Desmond Golding - Chairman CBDA David de Jong - Supervisor: CFIs Kobus van Niekerk - Head Central Support Services Nomadelo Sauli - Head Capacity Building

2. TABLE OF CONTENTS • 1. CBDA Position in the Financial Sector Transformation Agenda • 2. CBDA Mandate • 3. What is a CFI? • CBDA Programs: • 4.1 Supervisory Function • 4.2 Capacity Building • 4.3 Central Support Services • 5. Sector Challenges • 6. Vision for the sector • 7. Co-operative Banking Sector – South African & International Perspectives • 8. Recommendations

3. 1. CBDA POSITION ON THE FINANCIAL SECTOR TRANSFORMATION AGENDA

4. 2. CBDA MANDATE • Co-operative Banks Act of 2007 (as amended) • Banks Act Exemption Notice 620 of 2014 • Co-operatives Act of 2005 (as amended) • National Credit Act of 2005

5. CBDA MANDATE - Achieved through 3 key strategic imperatives

6. WHAT IS A CFI? Co-operative Financial Institution is the umbrella term used for member based deposit-taking financial co-operatives owned and controlled by their members who have a common bond and whose members choose to call themselves: • Credit union • Savings and credit Co-operative (SACCO) • Financial Services Co-operative (FSC) • Financial co-operative • Co-operative Bank

7. WHAT IS A CFI – Common Bond The common bond is classified into three types: • Work based, working for the same employer or employed under the same business district; • Associational, have common membership in an association or organization, including religious, social, co-operative, labor or educational groups; • Geographic, reside within the same defined community within rural or urban district.

8. WHAT IS A CFI – Types of CFIs Tertiary/Apex Co-op Bank Members: 2 secondary co-ops To provide services to its members relating to the financial sector Secondary CFI/Co-op Bank Members: Primary co-ops At least 2 primary co-op banks or 2 CFIs or a combination of 1 co-op bank and 1 CFI To provide services to its members relating to the financial sector Primary CFI/Co-op Bank Members: Individuals (At least 200 individuals) To provide services to its members and to promote community development

9. WHAT IS A CFI – Why start/Join CFI? WHY JOIN OR START A CFI?

10. WHAT IS A CFI – Cooperative Principles CFIs are governed by the same co-operative principles as sat out by the International Co-operative Alliance (ICA). • Voluntary and open membership; • Democratic member control; • Members Economic Participation; • Autonomy and Independence; • Education , Training and Information; • Cooperation amongst co-operatives; • Concern for Community.

11. CBDA PROGRAMMES 4.1 Supervision Unit 4.2 Capacity Building Unit 4.3 Central Support Services

12. 4.1 Supervisory Function

13. Supervisory Function - Registration Requirements

14. Supervisory Function - Key Activities

15. 4.2 Capacity Building

16. Capacity Building - Key Activities

17. Capacity Building - Moving towards – Holistic CFI Support Business Process & Systems Engineering Institutional Strengthening Branding & Marketing PPP – CFI Holistic Support – towards vision 2020

18. Capacity Building - Enhanced service offering

19. 4.3 Central Support Services

20. CENTRAL SUPPORT SERVICES • Strategic Objective: To enhance the Operational capability of the participating CFIs and integrate the organisations into the National Payment System; • The Central Support Services has created an enabling environment where the sector can compete on an equal footing with commercial Banks; • Banking Platform Project • The CBDA identified the need for a common system for the Co-operative Financial Institutions and Co-operative Banks that will enable the sector to improve service to their communities, enter the National Payment System and achieve economy of scale.

21. Central Support Services – Banking Platform Components CO-OPERATIVE FINANCIAL INSTITUTIONS CENTRAL SUPPORT SERVICES PARTNER BANK (SPONSOR) NATIONAL PAYMENT SYSTEM

22. 5. Sector Challenges

23. CHALLENGES – Sector Specific • Low skills base (Finance, Banking etc); • Inaccurate financial reports submitted to SU; • Inadequate capital, low growth trends; • Poor governance structures; (oversight role) • Weak risk management levels; • Lack of understanding and non-compliance to the regulatory framework;

24. CHALLENGES – Sector Specific • Infrastructure; • Seed funding; • Branding & Marketing; • Manual operations; • Limited product & service offerings; • Constraining regulatory requirements

25. 6. VISION FOR THE SECTOR

26. CO-OPERATIVE BANKING SECTOR STATUS South African International Perspective SA – Cooperative Banking Sector as at Feb. 2016 – CBDA Annual Report WOCCU Statistics – Dec. 2015

28. Vision for the sector – Vision 2020

29. Vision for the sector – Vision 2020

30. Vision for the sector – CFI Network

31. Vision for the sector – CFIs within business ecosystem Raw Material Processing Manufacturing Storage Distribution Marketing and Supply Coops Consumer Co-operatives Agriculture Co-operatives Financial Co-operatives Worker Co-operatives- Labour intensive e.g. mining; construction; textiles; and arts and craft Slide source DTI

32. CO-OPERATIVE BANKING SECTOR STATUS South African International Perspective SA – Cooperative Banking Sector as at Feb. 2016 – CBDA Annual Report WOCCU Statistics – Dec. 2015

33. CBDA

34. 8. RECOMMENDATIONS

35. RECOMMENDATIONS

36. RECOMMENDATIONS

37. RECOMMENDATIONS

38. RECOMMENDATIONS

39. RECOMMENDATIONS

40. RECOMMENDATIONS

41. THANK YOU