Why Cooperatives Matter in Financial Inclusion: e-MFP during the International Year of Cooperatives

Author: Sam Mendelson.

Kicking off a new blog series to celebrate the International Year of Cooperatives, e-MFP’s Sam Mendelson introduces the history and rationale of the cooperative movement, cooperatives’ role in inclusive finance today, and what e-MFP has planned for 2025.

In a world facing overlapping crises — economic inequality, climate disruption, democratic erosion — how we organise ourselves to meet shared challenges has never mattered more. In 2025, the United Nations invites us to recognise and strengthen one of the most quietly powerful tools we have: the cooperative model.

This year marks the International Year of Cooperatives (IYC), under the theme “Cooperatives Build a Better World.” It is at the same time a celebration and a challenge — to spotlight cooperatives as vital actors in sustainable development, and to mobilise support to expand their reach and impact. At e-MFP, we are proud to be part of this global effort, and want to spotlight our members, help people better understand the cooperative model, champion its role in financial inclusion, and learn from the extraordinary diversity of cooperative actors working across our field.

So let’s begin there: what are cooperatives, and why do they matter?

 

What Are Cooperatives?

Cooperatives are businesses owned and democratically governed by their members — who may be workers, consumers, producers, or residents. Unlike investor-owned firms, cooperatives operate on the principle of one member, one vote, and exist to meet the shared needs of their members, not to maximise profit.

They take many forms. Agricultural cooperatives help smallholder farmers pool resources, access markets, and manage price risks. Credit unions provide savings and loans to people otherwise excluded from formal financial systems. Worker co-ops are owned and operated by their employees. Consumer co-ops deliver essential services, from electricity to healthcare to retail. Housing cooperatives offer affordable, secure shelter. And hybrid models blend these approaches in response to local realities.

What unites them is their commitment to equity, participation, and long-term value. Cooperatives embody a different kind of business logic — one grounded in mutual support, democratic control, and reinvestment in the community. This makes them particularly well-suited to contexts where trust in institutions is low, access to capital is limited, and social ties are strong.

A Brief History of the Cooperative Movement

The cooperative movement has its roots in 19th-century Europe, emerging as a grassroots response to the upheavals of industrialisation. One of the earliest examples is the Rochdale Society of Equitable Pioneers, founded in 1844 in northern England by a group of weavers and artisans. Facing exploitation and economic exclusion, they banded together to open a cooperative store based on democratic governance, transparent accounting, and fair prices. Their “Rochdale Principles” — including voluntary membership, democratic control, and member economic participation — went on to form the philosophical backbone of the global cooperative movement.

From those humble beginnings, cooperatives spread rapidly. By the late 19th and early 20th centuries, they were taking hold across Europe, North America, and eventually in colonial and post-colonial contexts throughout Africa, Asia, and Latin America — often supported by social reformers, religious organisations, and later, governments. Cooperatives became essential in rural credit, agricultural production, mutual insurance, housing, and utilities — offering a counterweight to both unregulated capitalism and centralised state control. Today, the International Cooperative Alliance (ICA) represents a global sector of more than three million cooperatives with over one billion members worldwide — testament to a model that has endured, adapted, and proven its value across radically different economic systems and cultures.

In the Global South, cooperatives have played a pivotal role in economic development, often emerging in contexts where formal institutions were weak, markets fragmented, or colonial legacies left deep structural gaps. During the mid-20th century, newly independent nations in Africa, Asia, and Latin America embraced the cooperative model as a tool for rural development, food security, and financial access — frequently with state backing. While some top-down efforts struggled with politicisation or bureaucratic inefficiencies, many grassroots cooperatives flourished, rooted in local solidarity and mutual aid traditions. In more recent decades, liberalisation and decentralisation have led to a resurgence of interest in member-driven cooperative models — especially in agriculture, savings and credit, housing, and renewable energy. Today, cooperatives across the Global South are increasingly recognised not only as service providers, but also as vehicles of empowerment, enabling communities to pool risk, build assets, and exercise economic agency on their own terms.

Cooperatives and Inclusive Finance: A Natural Fit

In the financial inclusion sector, cooperatives are not peripheral players. They are core to how millions of people save, borrow, invest, and manage risk — often through structures that have evolved over decades to suit the needs of underserved communities.

Consider rural savings and credit cooperatives, sometimes called SACCOs. These offer low-cost, locally governed alternatives to commercial banks in areas where banking infrastructure is sparse. Producer cooperatives often serve as the entry point for bundled financial services, such as group lending or warehouse receipt finance. In conflict-affected or marginalised communities, cooperative models build resilience and help rebuild trust — a prerequisite for any lasting financial system.

Cooperatives also play a crucial role in addressing systemic market failures. By aggregating demand or supply, they overcome scale barriers. By reinvesting surplus revenues, they improve member outcomes. And by anchoring value in local communities, they promote shared prosperity rather than extractive growth.

Yet, despite their proven value, cooperatives are often overlooked by funders, regulators, and mainstream institutions. They may be perceived as too small, too informal, or too complicated to support. This is not just short-sighted — it’s a missed opportunity.

International Year of Cooperatives — and e-MFP’s plan

The United Nations declared 2025 the International Year of Cooperatives to draw attention to the role of cooperatives in achieving the Sustainable Development Goals. It follows the success of the first IYC in 2012 and builds on over a decade of global momentum.

The 2025 theme — “Cooperatives Build a Better World” — is more than a slogan. It signals a call to governments, investors, NGOs, development institutions and civil society to:

• Recognise the unique contributions of cooperatives to poverty reduction, employment, and social cohesion;

• Support enabling policies and frameworks for cooperative growth;

• Invest in cooperative capacity-building, especially in governance, finance, and digital tools;

• Share evidence and innovations across geographies and sectors.

  
  

2025 is moment of global alignment — a chance to raise the visibility of cooperative models, challenge outdated assumptions, and mobilise new energy and resources behind what works.

At e-MFP, we see this year as a strategic opportunity to:

• Amplify member voices — particularly those working with, for, or as cooperatives;

• Encourage candid reflection on the real-world challenges cooperatives face — from governance bottlenecks to capital constraints;

• Bridge sectors — connecting inclusive finance to broader cooperative movements in agriculture, housing, energy, and more; and

• Host honest, forward-looking conversations about what needs to change — in policy, funding, and practice — to help cooperatives thrive.

  
  

Over the course of 2025, e-MFP will be running a campaign to spotlight cooperatives and their role in inclusive finance. This will include:

• A guest blog/essay series featuring stories, insights, and reflections from across our membership — from agricultural supply chains to conflict zones, from women-led co-ops to digital-first savings groups; and

• A dedicated stream at European Microfinance Week 2025, in November, where cooperatives will take centre stage — with a plenary sessions, workshops, and peer exchange formats.

  
  

Get Involved

We are open to other ideas too, such as webinars or other events. If your organisation is a cooperative, supports them, researches them, or wants to learn more — we want to hear from you. We want to make sure members’ work is seen, supported, and learned from. The world’s politics and civic tone feels particularly uncooperative right now. But cooperatives do indeed ‘build a better world’. Let’s shine a light on them.

About the Author:

Sam Mendelson is Financial Inclusion Specialist at e-MFP and is the e-MFP lead for the Gender Lens Investing and WASH Action Groups. He is also the lead author of the Financial Inclusion Compass.