Cooperatives are a critical social and economic lifeline for the country's rural communities. They are also an increasingly important contributor to the nation's financial sector.

Formal cooperatives (coops) have been around in Costa Rica for nearly 75 years and with a modern and supportive legal framework for almost 50 years. It is this well-established network of over 600 coops that makes Costa Rica an interesting success story in regard to financial inclusion, wherein one-in-five Costa Ricans are affiliated with a cooperative.

While coops exist in sectors ranging from agriculture to industry groups, savings and credit services represents 60% of the networks activities. Their contribution to the overall finance system, according to Fitch Ratings, was 14% as of June 2017.

The long-standing requisite regulatory structure is complemented by a comprehensive infrastructure, which has helped such a robust business model. The National Institute for Cooperative Development (INFOCOOP), the facilitating body for promotion and development of the sector, has the ability to grant credit at low interest rates to participating coops. Importantly, this has allowed many cooperatives to develop by removing otherwise restricting financial considerations.

Piggybacking off this infrastructure, coops have also proved to be an ideal conduit for international organizations looking to disperse funding into Costa Rica. In August 2017, the Inter-American Investment Corporation (IIC), established a strategic partnership with Cooperativa Nacional de Educadores, R.L. (COOPENAE) to provide an affordable lending option. The ultimate goal is to provide housing to those most in need, thereby, reducing the current housing finance gap. Though integrated into the social and business fabric of the country, coops have some challenges ahead. Many coops need to rejuvenate their affiliate base—where the average age in the network is currently 50 years old—and pivot toward the lucrative 18-35 year old demographic. Not only will there need to be a shift in the products being offered but it will require a more technological platform in which to market to them. Especially, within the saving and credit cooperatives, where about 50% of portfolios consist of consumer loans. For example, COOPENAE, one of the top three largest coops in the country, has 76% dedicated to loans but with only 30% dispersed to the 18-35 year olds. The company's financial status is stellar with an AA- from Fitch Ratings but this does not negate affiliates aging out of their portfolio all together.

Moreover, there is sentiment within the sector in relation to what coops can do to diversify their offerings. TBY sat with Jorge Solano, General Manager of COOPEMEP, a savings and loan coop for educators, who stated, “Among the main challenges in our sector are legal conditions that limit our activity compared to other finance players. This is a matter that must be checked in the short and medium term. At times, we feel shackled by what a cooperative can do.”

Augmenting Solano's point, General Manager of INFOCOOP Gustavo Fernández added that INFOCOOP “need(s) to implement forms of leverage that reduce our dependence on public sector funds.” He elaborated further, noting that INFOCOOP needs to engage more with national and international financial institutions.
In July 2017, there was an affirmed bill presented to the Special Commission of Social Solidarity Economy aimed at allowing cooperatives to raise funds and lend to non-members. It also incorporates new activities that are currently prohibited, such as the public offering of securities issues, administration of trusts, factoring, and financial leases.

This represents opportunity for the cooperatives but also increased competition with the private sector banking sector. As extracted from a September 2017 La Nacion interview with María Isabel Cortés, Executive Director of the Costa Rican Banking Association, "If there is interest in giving cooperatives the opportunity to venture into new businesses, the correct thing is to subject them to the same regulatory requirements as other competitors and apply the same contributory regime.” Despite going up against the private sector, coops are ready to push this new way forward, starting with increasing their financial activities.