U.N.C.A.R.S.R REPOPRT ON STUDY VISIT- October 13-20, 2018

The study visit was organized in 5 days, and the 6th one was dedicated to networking and sharing experience among participants.

The Trentino co-operative model has gained wide acclaim for its positive economic and social impact upon the territory. Developing a strong understanding of why the model has been so effective is important in identifying those factors which other localities could utilize as potential criticalities. This case study has therefore focused on developing an in-depth understanding of the Trentino model of the co-operative movement and its Federation. In particular, it has examined and assessed the various components which have contributed to making the Trentino model highly effective in delivering economic and social benefits for the province of Trento and its residents.

The main aspects of cooperative system in Trentino area are related to the cultural identity built up since early 1800. That means that each citizen is proud of being part of the successful system, working together to reach prosperity and social goals.

From the very beginning, we were presented the importance of microfinance and cooperative system in the autonomous region of Trento.

Relationship with customers / members

From this perspective, genuine microfinance has been a kind of ‘relational banking’ for the poor. This interpretation is consistent with the growing emphasis on ‘client centricity’ in financial inclusion and it focuses on the value of the relationship, as measured by its cost and quality. The quality of inclusion, on the one hand, brings together what is valued in the transaction, such as proximity, timeliness, transparency, adequacy with respect to actual client requirements, variety, sufficient amount, reliability, sustainability, respect and dignified treatment - and others. Cost, on the other hand, refers not only to financial charges (interest and fees), but also to all the opportunity costs incurred by the clients.

The overall ‘value’ of the client relationship reflects a weighted amalgam of all these attributes. These attributes differ across diverse types of MFIs (banks and non-banking institutions, commercial and not-for-profit entities, gender-focused, urban or rural operators, Cassa Rurali). Further, relationships are dynamic; they evolve over time and they are influenced by numerous contextual factors - such as the regulatory framework, in particular.

Traditional microfinance is a proven model, yet it faces persistent challenges from new competitors and disruptive technologies. Different strategies have been established to face such challenges, however in the process of facing them, some MFIs have drifted away from their core values and mission. Some blame the legal structure of an MFI, mainly of a regulated financial institution, for the distancing effect. Some MFIs, afraid of mission drift, refuse to convert into a commercial institution. Yet, while refusing to make this change, they risk giving up the possibility of scaling and providing other financial products to their clients

The importance of cooperative system is transmitted from person to person, from generation to generation, as the most valuable asset of the autonomous region of Trento.

Consumer co-operatives have the lowest fiscal benefit because only 45% of their net profits are exempted. The exemption for the indivisible reserves is abolished when the consumer co-operative doesn’t meet the prevalence of mutuality criteria only for the 45%.

Social co-operatives are a particular case, since they are, by nature and definition, considered with prevalence of mutuality and therefore totally exempted. However, when the labor costs of the members are lower than 50% of the total labor cost, they are taxed on 30% of net profits and exempted for the 70% when allocated as indivisible reserves, including the 3% of the mutualistic fund. The tax concessions are extended to consortia which are made up of at least 70% of social cooperatives

Furthermore, social co-operatives can benefit from total IRES exemption from income when they can present at the same time:

  1. the requisites necessary to be classified worker cooperatives;
  2. total wages paid to members of not less than 50% of the total costs incurred excluding costs of raw and subsidiary materials.

Similar rules apply for co-operative credit banks (Casse Rurali), with the particularity that the share of net profit subject to IRES amounts to 27%. The minimum share of profit that these institutions should devolve to reserves in fact amounts to 70%, to which 3% of net profit to be devolved to the compulsory mutualistic fund.

In the case of co-operatives without prevalence of mutuality (“other co-operatives”), but this is not the case of Trentino Federation of Co-operatives’ (FTC) members, they can enjoy some fiscal benefits only when their charter states the indivisibility of the legal reserves. In this case these reserves up to 30% of the net profits are exonerated from the corporate tax. They must allocate the 3% to Mutualistic fund and the remaining 67 per cent is taxed with the ordinary rates.

Most relevant activities undertook constantly by Trentino Region Credit Unions (Cassa Rurali Banca):

  • Coming from financial activities > financial products and services for members and all other clients (acting also as a commercial bank, in the traditional way), such as – deposits, current accounts, overdrafts, money transfer, internet banking, on line payments and overnight deposits, withdrawals, etc
  • Coming from non financial services > financial education with members, for their families and communities, education in schools, various programs with kids, etc

As far as the definition of co-operative and the requirements for registration and membership, we were presented that the following categories are most common:

  • Agricultural co-operatives.
  • Co-operatives of agricultural work.
  • Agricultural consortia.
  • Consumer co-operatives.
  • Co-operatives of retailers.
  • Transport co-operatives.
  • Production co-operatives and labour.
  • Housing co-operatives.
  • Consortia and financial guarantee co-operatives.
  • Co-operative consortia.
  • Other co-operatives.

The category of social co-operatives is divided in three subcategories:

  • Co-operative of social-sanitary services, cultural and educational services.
  • Co-operatives aimed at providing employment for disadvantaged people.
  • Consortia of social co-operatives.

All cooperatives are organized in networks, such a very complex scheme is presented below:

As regards Quorum requirements and adoption of judgments, the lessons learned referred to:

At the first call, the conference is legally constituted if at least 2/3 of the delegated members participate in the works.

If at the first convocation the 2/3 quorum is not met, at a second convocation, the conference is legally constituted irrespective of the number of delegates present.

The decisions of the conference shall be adopted by a simple majority of votes expressed by those present in the proceedings, except for the decisions regarding the change of status, affiliation or de-filing to the territorial union, merger or liquidation of the mutual aid house, which shall be adopted by a vote of at least 2 / 3 of present delegations.

Educational programs for young generation, communities, members and staff

Trentino’s vocational training system provides working opportunities to young people by strengthening the bond between education, training, and employment. Training takes place both at school and in the workplace. Besides, various support tools are provided thanks to the Youth Guarantee, the commitment of schools in employment guidance, and the technical centers that complement the opportunities offered by schools, enterprises, and research centers. Vocational training currently represents 25% of Trentino’s educational offer, with 30 centers and 6,100 students enrolled in which the Autonomous Province of Trento invest every year more than 54 million euros.

Cassa RuralI Banca are actively involved in encouraging participation of young people in diverse educational programs.

Students in the 16 to 27 age group who finish their studies and obtain a diploma or vocational qualification have a 85% chance of being in employment. Vocational education and training also offer a cultural enrichment opportunity for young people, combining it with courses aimed at enhancing their technical and professional skills. Training curricula are based on workshop activities developed in strong partnership with manufacturing enterprises, and on several internship and school-work education opportunities. Vocational qualifications are issued at the end of a three-year programme and they are useful to immediately enter the labor market. By attending an additional training year (fourth year), a vocational training diploma can be obtained and exploited to seize technical and operational employment opportunities that require a higher level of autonomy and responsibility. People who have obtained their diploma have the possibility to attend a targeted programme of the duration of one year that provides training to undertake a final vocational training National exam.

All these programs are aimed to contribute to the prosperity of the region and also to help new generation to understand and apply co-operatives principles and values.

Pictures from visit