Landscape Cooperative Financial Institutions Gerard van Empel Washington DC, April 2007

Key Figures Rabobank Group 27 27 27 27 27 27 28 28 29 28 27 28 28 29 29 28 28 29 29 28 30 29 29 29

Key figures Rabobank Group (1) (in EUR billions) 31-12-2006 31-12-2005 31-12-2004 Total Assets 556 506 475 Reserves 29,3 26,3 18,1 Private Sector Lending 324 278 253 Funds Entrusted 215,9 186,5 192,1 Net Profit 2,3 2,1 1,5

Key figures Rabobank Group (2) (in EUR billions) 31-12-2006 31-12-2005 31-12-2004 Member banks 188 248 288 Offices: - branches 1,214 1,249 1,299 - contact points 3,091 3,031 2,965 Cash dispensing machines 3,139 3,116 3,062 Foreign offices 330 267 244 Employees - Total Employees 56,209 50,998 56,324

Consultation and decision structure local bank local bank local bank local bank local bank local bank local bank local bank local bank Regional meeting Regional meeting Regional meeting local bank local bank local bank local bank local bank local bank local bank local bank local bank Right to vote Central Delegate Meeting Rabobank Nederland General Meeting 20 20 20 20 20 20 21 21 22 21 20 20 20 21 21 20 20 21 21 20 22 21 21 21

Observations Cooperative Banking Traditional coop banks in many countries become marginalized Global players are entering emerging markets an developing countries Many coop banks lack scale and adequate capitalization structure Need to think more “out of the box” including donors, governments etc Cooperative legislation too restrictive in many cases

Strategic Issues World-wide pure agricultural retail banks are not sustainable Rural banks also need good urban presence Financial sector is consolidating rapidly. Real retail bank also coop. bank needs retail market share of 10% plus Capitalization model needs to be flexible and governance model needs to reflect that

Our preferred approach for Coop. Banks Strategy: Client driven, partly client owned, full retail bank with a rural orientation with cooperative characteristics Based on shares Internal trading mechanism Voting system proportional not necessary linear One tier operational structure, possibly multi tier governance structure

Hubs and Spoke Distribution Network Branch Sub Branche Branches Head Office Sub branches offering basic financial products Sub Branche

Example Capital Structure Clients and employees are invited to be shareholders Minimum number of shares, for instance 10, maximum number of shares 1000 Semi-linear voting system, for example 10 shares one vote, 1000 shares 10-20 votes Development of internal share trading mechanism

Example Corporate Governance Structure Local Level Share Holders Branch assembly Sub Branch Central Level General assembly Non Executive Board Branch …… …… …… ….. 3 5 Election Information Exchange

Main challenges for the next 5 years Transform coop financial institutions into full fledges retail banks based on cooperative characteristics Adequate capitalization and flexibility using other capital instruments like member certificates etc. Separate operations from governance structure Operations based on efficiency Governance based on bottom-up democracy control

What are we doing in developing countries Provide technology and expertise Investment into retail banks with rural orientation, currently: NMB, Tanzania ZNCB, Zambia Banco Terra, Mozambique URCB, China