Burger Csaba — Gál Zoltán

Local finance?

Lending activity by the Hungarian cooperative banking sector

According to the principles of cooperative banking, the primary aim of its financing is to fund local economic activity and local communities, while making a normal level of profit. This means converting local deposits into local loans. The relatively small size of the banking cooperatives precludes economies of scale, so that they are at a competitive disadvantage, but this is offset by having a central institution that links cooperatives with each other and with the capital markets. The study looks into whether the actual lending practice of Hungarian cooperatives follows this traditional cooperative principle of local financing. To do so it relies on the literature of spatial concentration of capital and of cooperative governance. The authors discovered from financial reports and financial analyses of all Hungarian banking cooperatives in 2010 that their main activity was to channel locally collected deposits towards financial centres, rather than pursue their traditional calling. The lack of local lending was not due to any shortage of local deposits.

LX. évf., 2013. April (373 - 401. O.), Study

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