To enable primary cooperatives to provide their members mobile banking capability, the Cooperative Development Authority allows the formation of Technology Service Cooperatives.
Information Technology needed in finance is too expensive for most primary cooperatives. That is why in most instances, co-ops have to pool resources – through a co-op federation – to raise the necessary investment, and make I.T. services available to co-ops are reasonable price.
The Cooperative Development Authority (CDA) issued on November Memorandum 2021-14 on the Guidelines for the Registration of a Technology Service Cooperative (TSC) as a Special Type of Cooperative Organized Among Registered Cooperatives.
This was prompted by the need for co-ops to be able to develop and provide mobile transactions apps that enable co-op members to perform mobile transactions. Developing mobile apps of the magnitude required by credit co-operatives requires large capital and is possible only through a federation.
Thus, the TSC is a “special type of cooperative” that may be composed of federations and primary cooperatives.
“Technology Service” is defined in the MC as “professional services designed to facilitate the use of Information Technology by enterprises and end-users or to provide specialized technology-oriented solutions by combining the processes and functions of the software, hardware, networks, telecommunications, and electronics.”
A TSC is defined as “a special type of cooperative organized among registered cooperatives to provide technology to its members.”
One technology that needs to be provided by co-ops is mobile transaction systems.
There are currently two entities that are expected to submit (or may have already submitted) applications for registration: Digicoop Federation led the 1CISP and a KAYA federation (a proposed name after the KAYA Payment Platform), led by the National Confederation of Cooperatives (NATCCO Network), Philippine Federation of Credit Cooperatives (PFCCO), CLIMBS, and MASS-SPECC both in Cagayan de Oro City.
The Bangko Sentral ng Pilipinas (BSP) as the government agency assigned to implement the National Retail Payment Systems Act (NRPSA) regulates and overseas entities engaged in ‘digital or mobile transactions’.
These entities are called Electronic Money Issuers (EMIs)
Initially, such engagement was limited to banks and other BSP-regulated entities. But after prodding of the CDA, NATCCO and PFCCO, the BSP has agreed to accommodate CDA-registered cooperatives through the establishment of TSCs.
The CDA memo sets the minimum membership to fifteen cooperatives, and may operate on a national-scale. A minimum initial share capital of Php 100 Million is required.
Some of the challenges seen are the Php 100 Million minimum capital requirement, which may be difficult to raise if cash investment is required. The KAYA Payment Platform – already offered by NATCCO and PFCCO – does have a value and may be included as “capital” since NATCCO and PFCCO have invested a great deal to develop it. But its value is still to be determined by an independent auditor.
Meeting the minimum membership of 15 may be a challenge as well, and forces organizers to invite primary cooperatives as member-investors just to meet the minimum requirement.
Then, another challenge is the stipulation that “no member shall hold more than 10% of the total subscribed capital of the cooperative.” In this case, NATCCO and PFCCO, who are the current owners and developers of KAYA Payment Platform may exceed this maximum limit.
The BSP has set a deadline of December 15 for registration of new Electronic Money Issuers (EMIs).