Problems and Purpose

Banco Popular (Banco Popular y de Desarrollo Comunal, BPDC) is a cooperative bank that is owned and managed by the workers of Costa Rica. Its diverse clients include workers, farmers, enterprises, and a variety of development associations. Workers who hold a savings account for over one year have the right to shared ownership in the bank while employers and workers together contribute to the bank’s capital base. The governing body of BPDC is a democratically elected Worker’s Assembly comprised of 290 representatives from among the bank’s worker-owners. The assembly advises on strategic guidelines and procedures for the day-to-day actions of the BPDC and selects four of the bank’s seven board members. BPDC aims to combine commercial and developmental functions to achieve environmental and social good along with financial returns. 

Background History and Context

Costa Rica emerged from civil war in 1948, ending the presidency of Rafael Angel Calderón Guardia and placing José Figueres Ferres in power for 18 months during the government’s transition. During this time, Figueres nationalized all of Costa Rica’s banks, putting credit in government control and creating a monopoly on public deposits. For the next thirty years, only state-owned banks operated in the country. During this period, in 1969, the Costa Rican government created BPDC with the purpose of promoting economic development and serving the welfare of Costa Rican citizens. Throughout the 1950s through to the late 1970s, the Costa Rican government placed an emphasis on financing small and medium enterprises [1]. This model contributed to Costa Rica having the second highest growth rate of per capita GDP (after Brazil) of all Latin American countries during this period [2].

However, in the mid-1980s, due to economic crisis in the region and in the country, in which the economy contracted by 9.4 per cent [3], restrictions were loosened and private banks were allowed to accept deposits from the public for terms longer than six months. In 1995, all restrictions were lifted. However, the majority of Costa Ricans continue to deal with government-sponsored banks due to their proven stability and favorable terms [4]. As these banks are backed by the Costa Rican government, if a bank fails, as Banco Anglo Costarricense did in 1995, the government will cover its losses so that depositors do not lose money [5]. 

Organizing, Supporting, and Funding Entities

BPDC was established in 1969 by the government of Costa Rica to promote economic development and solidarity. All employers pay 0.5 per cent of paid monthly wages to the bank and employees contribute 1 per cent of their wages. After a year, the majority (1.25 per cent) of these contributions are transferred to the employee’s own pension funds, while the remainder (0.25 per cent) is used for permanent capitalization of the bank. This unique source of capital provides both stability and a sense of publicness to BPDC [6]. 

Participant Recruitment and Selection

The bank is owned by the country’s workers.

Methods and Tools Used

Cooperative Management

What Went On: Process, Interaction, and Participation

BPDC represents an alternative to mainstream banking. It is a hybrid, owned by the workers of Costa Rica and with explicit links to the public sector, rather than being a private financial firm. BPDC espouses very clear values which are enforced across all levels of management and operations:

• Accountability;
• Transparency;
• Ethical behavior;
• Respect to all parties involved;
• Lawfulness;
• Respect to the international norms of behavior; and
• Respect to human rights. In addition, the Code of Practice of Good Governance spells out detailed guidelines for the roles, responsibilities, duties, and expected behaviors for all governance structures. 

Additionally, BPDC offers special environmental services, like eco-savings and eco-credits, for micro- to medium-sized enterprises, with projects aimed at environmental protection and sustainability [7]. BPDC supports local communal associations to provide sustainable energy and environmental service systems [8]. For example, they have worked on two notable projects with a regional energy cooperative, COOPELESCA, in central Costa Rica. One project finances the switch to low-energy LED lighting and another purchases land in a vulnerable natural area to protect it from over exploitation.

BPDC’s primary governance structure is its Workers’ Assembly, which represents the more than 1.2 million worker-members, or about 20 per cent of the Costa Rican population. The Assembly is responsible for dictating the institution’s strategic direction, and as such it possesses consultative as well as decision-making power. Being a commercial bank, BPDC must tend to the needs of a wide range of customers. The Workers’ Assembly is formed of 290 elected members, representing all of the country’s social sectors: artisans; community development associations; cooperatives; independent workers; teachers; professionals; unions and solidarity sectors. The Workers’ Assembly also includes a Permanent Women’s Commission that makes gender equality a priority across the conglomerate. At least 50 per cent of the bank’s board must be women, earning the bank the distinction of being the first public organisation in Central America to establish a gender ratio of at least 1:1 in its decision-making bodies. The Assembly normally gathers once a year, but in extraordinary cases, whenever it is needed. Its duties include:

• Defining the strategic guidelines and procedures for the day-to-day actions of the BPDC;
• Tracking and holding BPDC accountable by revising its management reporting; and
• Designating four out of the seven members of BPDC’s National Directive Board.

Furthermore, the assembly is divided into five sub-groups:

1. National Directorate: Responsible for executing agreements;
2. Permanent Commission for Women (founded in 1997);
3. Oversight Committee: Ensures that there are no acts of discrimination within the Workers’ Assembly due to ethnicity, religion, gender, sexual preferences, socioeconomic status or disability;
4. General Council, which is formed of 45 people, some of whom are members of the National Directive Board, as well as other delegates representing the different sectors; and
5. Financial Analysis Commission.

Apart from the Worker’s Assembly, BPDC involves its members through other participatory processes. For the creation of its 2017-2020 strategic plan, the bank carried out a three-year nationwide consultation, which reached nearly 1,500 participants across 11 regions. The consultation aimed to better understand the current realities faced by the Costa Rican population and their expectations of a people-owned financial institution. Furthermore, BPDC has made efforts to communicate to the wider public that the adjustments to the business model and organisational alignment processes presented in its new strategic plan are not linked to redundancies or to detriment of the labor rights of any worker, nor in any contradiction to the bank’s current code of good corporate governance [9]. 

Influence, Outcomes, and Effects

Today, BPDC is highly profitable and has managed to grow into a large financial services provider offering banking, pension, stock market, investment, and insurance services; whilst maintaining its participatory governance structures. Furthermore, since 2012, the bank has developed special inclusive investment funds, such as their Fondo Especial de Desarrollo (FEDE) or the Special Fund for Development, which targets small enterprises and social economy organisations that would otherwise not have access to financing. 

Analysis and Lessons Learned

Despite ever-present calls by the International Monetary Fund for BPDC to privatize, the bank has remained open and in public hands since its founding 50 years ago, while other, privatized banks have failed. Today, BPDC has become the third largest financial institution in the country and accepts over 40 per cent of the country’s payroll contributions [10]. In general, BPDC has also increased trust in a nationalized banking system. 

See Also

References

[1] Goldstein, D. (2001) ‘Financial Sector Reform and Sustainable Development: the Case of Costa Rica’, Ecological Economics 37.2: 199–215. doi10.1016/S0921-8009(00)00278-0 (Accessed 28 October 2019)

[2] Cardoso, E. and Fishlow, A. (1992) ‘Latin American Economic Development: 1950–1980’, Journal of Latin American Studies 24.S1: 197–218, doi:10.1017/S0022216X00023841 (Accessed 28 October 2019)

[3] Hidalgo, J.C. (2014) ‘Growth without Poverty Reduction: the Case of Costa Rica’, Economic Development Bulletin 18. 8: 1-8, https://www.cato.org/sites/cato.org/files/pubs/pdf/edb18.pdf (accessed 28 October 2019) 

[4] Hart-Kozloski, L. et al. (2008) ‘Are Retail Banks Satisfying Their Customers in Costa Rica?’, Global Journal of Business Research 1.2: 73-86, https://papers.ssrn.com/abstract=1461876 (accessed 28 October 2019)

[5] Ibid.

[6] Marois, T. (2017) How Public Banks Can Help Finance a Green and Just Energy Transformation, Amsterdam: Transnational Institute, https://www.tni.org/files/publicationdownloads/how_public_banks_can_help_finance_a_green_and_just_energy_transformation.pdf https://www.cato.org/sites/cato.org/files/pubs/pdf/edb18.pdf (Accessed 28 October 2019)

[7] José Romero, M. (2017) Public Development Banks: Towards a Better Model, Brussels: European Network on Debt and Development, https://eurodad.org/files/pdf/1546743-public-development-banks-towards-abetter-model.pdf (Accessed 28 October 2019) 

[8] Marois, T. (2017) How Public Banks Can Help Finance a Green and Just Energy Transformation, Amsterdam: Transnational Institute, https://www.tni.org/files/publicationdownloads/how_public_banks_can_help_finance_a_green_and_just_energy_transformation.pdf https://www.cato.org/sites/cato.org/files/pubs/pdf/edb18.pdf (Accessed 28 October 2019)

[9] Banco Popular (2017) ‘Código de Buen Gobierno Corporativo del Conglomerado Financiero Banco Popular y de Desarrollo Comunal y sus subsidiarias’ 1 June, https://www.bancopopular.fi.cr/GobCorporativo/Documents/CODIGODEBUENGOBIERNOCORPORATIV O-DEL-CONGLOMERADO-GACETA-101-30-05-20.pdf (accessed 28 October 2019)

[10] Marois, T. (2017) How Public Banks Can Help Finance a Green and Just Energy Transformation, Amsterdam: Transnational Institute, https://www.tni.org/files/publicationdownloads/how_public_banks_can_help_finance_a_green_and_just_energy_transformation.pdf https://www.cato.org/sites/cato.org/files/pubs/pdf/edb18.pdf (Accessed 28 October 2019)

External Links

https://opendocs.ids.ac.uk/opendocs/handle/20.500.12413/15161

Notes

Original source: The first submission of this Participedia entry was adapted from a research project by the Institute of Development Studies, 'Linking Participation and Economic Advancement’ licensed and reproduced under Creative Commons (CC BY 3.0).

Original source:

https://opendocs.ids.ac.uk/opendocs/handle/20.500.12413/15161