The Power of Networks: Integration and Financial Cooperative Performance


  • by Martin Desrochers,

    1. Service des programmes de protection et d’indemnisation, l’Autorité des marchés financiers, Québec, Canada
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  • Klaus P. Fischer

    1. CIRPÉE, Centre interuniversitaire sur le risque, les politiques économiques et l’emploi, Faculté des sciences de l’administration, Université Laval, Québec, Canada
      Associate Member, British Columbia Institute of Cooperative Studies, University of Victoria, Canada
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      The first author was staff of Development International Desjardins (DID) during the execution of the research and the first writing of the paper. Financial support from the International Development Research Center (IDRC) and DID is gratefully acknowledged. DID has also been instrumental in providing encouragement, contacts, a portion of the data and time off from normal duties to the first author. The views expressed are those of the authors and not of the respective employers. This work is part of a larger research program that operates under the title of ‘Microfinance: a market approach’. Two blind reviewers provided excellent comments and critiques that lead to a significant improvement of the paper. All remaining errors are the sole responsibility of the authors. Email:

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    Résumé en fin d’article; Zusammenfassung am Ende des Artikels; resumen al fin del artículo.


Abstract**: The purpose of this paper is to perform a cross-country survey of the level of integration of systems of financial cooperatives (FC) and its effect on measures of performance. We develop a classification scheme based on a theoretical framework that builds on published work using transaction cost economics (TCE) to explain integration of large numbers of financial cooperatives into networks. We identify three critical levels of increasing integration we call respectively atomized systems, consensual networks and strategic networks. Further, we test some of the propositions that result from the theoretical framework on an international sample of financial cooperative systems. Based on this analysis we can conclude that: (i) Integration is less (more) important in developing (more developed) countries and for very small (large) financial cooperatives as a determinant of efficiency. However, integration tends to reduce volatility of efficiency and performance regardless of development. (ii) Integration appears to help control measure of managers’ expense preferences that tend to affect performance of FC. (iii) Despite high costs of running hub-like organizations in highly integrated system, these systems economize in bounded rationality and operate at lower costs than less integrated systems.