The financing of Maltese co-operatives : an evaluation

Abstract

Purpose: The purpose of this study is to gain insight into the financing sources used by Maltese co-operatives whilst assessing the role of commercial banks and the CCF in their financing. Moreover, recommended ways of improving such financing were also suggested. Design: The objectives were achieved through data collected from financial statements for the period 2009-2010 and through twenty-four semi-structured interviews with experts and co-operative representatives. Findings: This study found that Maltese co-operatives are greatly dependent on internally generated financing with member and non-member direct injections and other financing sources, such as EU funding, being scarce. Moreover, the lack of use of CCF/KM funding schemes reveals a limited CCF financing role whilst the request for significant guarantees coupled with a lack of sense of ownership and low co-operative understanding hinders banks' potential financing role. Co-operatives failed to favour all proposed alternative means of financing, yet they supported the creation of subsidiaries for financing purposes. Conclusion: The study concludes that co-operatives differ by type and size with respect to their financing needs and therefore cannot continue to be treated almost identically by the providers of finance particularly the CCF. Most financing problems derive from a lack of member commitment and their resistance to change. Thus, more readiness on the part of the co-operative when approaching commercial banks would mitigate the banks' unwillingness to extend the needed financial facilities. Value: It is hoped that this study together with the proposed recommendations will increase general financing awareness whilst assisting co-operatives and institutions in identifying other sources of finance currently not utilised and in implementing appropriate resolutions. Proposed recommendations include strengthening member participation, CCF restructuring, increased networking, KM smoothening access to funds, increased training, fine-tuning committee of management appointment, and appropriate legislative revisions.