Social Capital in Co-operative Financial Institutions: Situational Analysis of South Africa

Despite an enabling legislative environment and government incentives, the cooperative financial industry's performance has been disappointing due to alarming failure rates. The purpose of this paper is to deepen understanding of social capital in cooperative financial institutions within the context of South Africa, challenges facing the institu-tion, and a roadmap for sustainable development. The finding reveals that social capital use in CFI is still in its nascent stage and below its full potential due factors such as outreach failure, marred social net-works, unfulfilled goals, and strict regulatory policy. Additionally, the performance of the South African CFI sector has been very gradual in terms of growth; however, factors such as a weak governance structure, insufficient credit risk management, a weak legislative environment, a lack of innovative technology, poor operational policy, excessive governmental interference, insufficient capital levels, poor outreach, and managerial capabilities are some of the challenges facing CFIs that pose a threat to their sustainability. It is therefore recommended that bold steps and practices such as improved managerial capabilities, technol-ogy, risk management, effective marketing, outreach to middle-class society to attract valuable financial capital, capacity building, and staff training are also needed to improve social capital use and the overall effectiveness and sustainability of CFIs.