This publication reviews the key elements needed for successful formation and development of new cooperative businesses. Six phases of cooperative formation are described: - identifying the opportunity
- building consensus on the potential for a cooperative
- developing trust among potential members
- securing member commitment
- involving other stakeholders
- starting up the cooperative enterprise
Potential obstacles are presented for each of these phases and common causes for new cooperative failures are reviewed. Key ingredients for successful cooperative start-up are discussed. These include: - a joint recognition of a common economic problem by the potential members and initial leaders;
- a cooperative solution which will be more effective at providing the desired service than the prospective members could achieve individually.
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A member owned financial institution is a private business organization that is owned and controlled by the people who use its products, supplies or services. This might include informal self-help groups as well as those formally registered in some way. We will concentrate here on member-owned institutions that are licensed and regulated in some way but are not subject to full banking legislation. The most common form of registered member-owned institution is a cooperative. Although cooperatives vary in type and membership size, all are formed to meet the specific objectives of members and are structured to adapt to members' changing needs. Thus cooperatives are formed by individuals who coordinate among themselves (horizontal coordination) to achieve vertical integration in their business activities. Specialised financial service cooperatives are most widely known as credit unions or savings and credit cooperatives. However, financial services may also be provided by multi-purpose cooperatives or marketing cooperatives. Newer forms of member-owned institutions such as Financial Service Associations and Village Banks will also be addressed in this topic. 
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