Time for Co-op Financing to Get Creative; Potential Federal Budget Cuts Inspire Co-op Community to Look to Domestic, International Financing Models

The following story is not news for people in the United States who are familiar with cooperatives. In the mid-1930s, nine out of ten farms lacked electricity.^[1] Investor-owned utilities were not interested in accessing the Federal Rural Electric Administration’s^[2] loan program. In contrast, farmers, who were familiar with the cooperative form of business through their membership in agricultural cooperatives, formed electric cooperatives and applied to the government for loans in large numbers. More than 90 percent of farms had electricity by 1953. Electric co-ops now serve 42 million people and 56 percent of the U.S. landmass and return $1 billion annually in patronage refunds to their consumer members.^[3]

The success of electric co-ops is no accident. Nor is the success of two other co-op sectors, agriculture and credit unions. Over the past 100-plus years these sectors grew with the help of hard work and Federal, State, and private sector support. Ag co-ops and electric co-ops benefited from miscellaneous loan, grant, guaranteed loan, and intermediary relending programs that were targeted for rural areas. All three types of co-ops received help from a dedicated Federal workforce. And rural ag co-ops benefit from the Farm Credit System, which is overseen by the Federal Farm Credit Administration and insured by the Farm Credit System Insurance Corporation. Credit unions are subject to oversight by the National Credit Union Administration, deposits are insured by the Credit Union Share Insurance Fund, and the Congressionally created Central Liquidity Facility serves as lender of last resort for the credit unions. All three sectors benefit from tax incentives and tax-favored status.

In recent years, worker cooperatives have become the fastest growing cooperative sector.^[4] This type of co-op has been the focus of some nonprofit technical assistance providers who hope to help workers form cooperatives to buy businesses from retiring employers. Help for rural worker cooperatives has been funded in part by the U.S. Agriculture Department’s two cooperative technical assistance grants, the Rural Cooperative Development Grant (RCDG) and the Socially Disadvantaged Group Grant (SDGG). These grants are also used by nonprofit cooperative development centers (CDCs) to help assist groups forming or expanding other types of cooperatives including purchasing, shared services, consumer, and producer cooperatives.

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