Cooperative and Islamic Banks: What can they Learn from Each Other?

Abstract Islamic and cooperative banks – including credit unions – are broadly similar in that they both share risk with savers. However, risk sharing goes along with ownership control in cooperatives, whilst Islamic banks share risk with borrowers also, and full downside risk with depositors. Islamic banking is consistent with mutual ownership, which may ease some of the governance and efficiency concerns implied by Shari’ah constraints. Greater risk sharing among cooperative bank stakeholders, along the lines of products offered by Islamic banks, may strengthen cooperatives’ financial resilience.