Finance in an Age of Austerity

Finance in an Age of Austerity

The Power of Customer-owned Banks

Johnston Birchall

This is a book in search of an alternative to the discredited investor-owned banks that have brought the rich countries into crisis and the world economy into a long period of austerity. It finds customer-owned banks – credit unions, co-operative banks, building societies – have hardly been affected by the crisis and continue to operate according to their organisational DNA: low-risk, close to the customer, underpinned by real savings, and still lending to SMEs to protect jobs and local economies. They are big business – in some countries with over 40% of the market – but networked in smaller, democratic societies whose origins go back to 1850s Germany.

Chapter 11: Customer-owned businesses – the wider picture

Johnston Birchall

Subjects: business and management, corporate governance, social entrepreneurship, development studies, social entrepreneurship, economics and finance, corporate governance, money and banking, politics and public policy, social entrepreneurship


Apart from banking, are there other types of business owned by their customers? Of course there are. They can be found wherever people have needed to organise the supply of some good or service for themselves. Table 11.1 lists the types that have become well established, and in the final row adds in banking to show the similarities with these other sectors. The closest sector to banking is insurance, since many banks offer a range of insurance products and insurance mutuals often also provide savings products; the term ‘bancassurance’ indicates that in some countries the two sectors are beginning to merge. Another closely related sector is agricultural supply, which in the Raiffeisen system in Europe grew up in parallel with the banks. Similarly, consortium cooperatives (sometimes called shared service co-ops) for small business people and retailers grew up in parallel with the supply of credit by the urban Volksbanks. Utility co-ops have sometimes been founded alongside banks supplying credit to farmers. Consumer cooperatives have set up banking departments that sometimes have grown into separate cooperative banks.

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