Co-operative banks

2008-02-06 00:00

As an alternative to banking with commercial banks, many South Africans arrange themselves into groups and structure savings clubs and financial services co-operatives. The fiscus have indicated that the formation of such co-operatives is primarily as a result of inaccessibility to banking facilities, particularly for rural communities. An obvious drawback of these entities is that they have an identical taxing structure to commercial banks.

An important point to note is that interest income earned by the co-operative bank is classified as active income. The earning of interest is core to the operation of the co-operative bank. The requirement where the small business is prohibited from receiving more than 20% from investment income will clearly not apply in this instance.

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