In Europe, co-operative banks were originally founded to improve the access to financial resources-by means of receiving deposits from and making loans to member-customers-for economically disadvantaged groups. In the 19th century, these groups consisted mainly of farmers and craftsmen. Whereas co-operative banks in the traditions of the founding father Friedrich-Wilhelm Raiffeisen mainly focused on the agricultural sector, co-operative banks in the tradition of Hermann Schulze-Delitzsch rather concentrated their activities on craftsmen. However, changing economic and regulatory conditions are affecting the benefits associated with being a member of co-operative banks. Neo-institutional economists (Royer 1992; Cook 1995) have identified a number of challenges regarding the traditional co-operative structure. Resulting from vaguely defined property rights, structural issues lead to various problems that are inherent in the traditional business model of co-operatives. For example, dealing with free riders and equity sourcing have been identified as factors hampering the growth of the traditional co-operative model (Sykuta and Cook 2001). At the same time, increasing competition and regulatory changes with respect to consumer protection laws and other legislative developments make it difficult for cooperative banks to differentiate between member customers and non-member customers regarding the provision of clear-cut economic benefits like, for example, better access to loans, cost advantages, etc.
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