Credit Unions: A Self-Sustaining Development Solution
CUNA, World Council present to USAID staff
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WASHINGTON, D.C. — Financial inclusion through credit unions worldwide and in the United States was the subject of a joint presentation by the leaders of the Credit Union National Association (CUNA) and World Council of Credit Unions during a one-hour session hosted by the U.S. Agency for International Development (USAID) on June 4.
Tom Carter, USAID cooperative development program coordinator, introduced the presentation referring to the credit union movement as the development community's "best kept secret." Worldwide, savings-led credit unions in 101 countries provide access to financial services to more than 200 million members. In developing and emerging economies alone, credit unions reach more than 86 million members who have mobilized more than $179 billion in savings to lend to one another to promote local development. No other financial structure serving poor and middle class savers and borrowers has sustainably achieved this scale in the developing world.
"If you want to significantly accelerate agricultural growth, you need to get financing to the farmers. Many of the world's small farmers are credit union members."
– Tom Carter, U.S. Agency for International Development
"If you want to significantly accelerate agricultural growth, you need to get financing to the farmers," Carter said, addressing credit unions' role in meeting today's development priorities. "Many of the world's small farmers are credit union members."
Bill Cheney, former CUNA president/CEO, followed with an overview of the U.S. credit union system's origins and its role in supporting international credit union development.
Member-owned, locally-run credit unions started in the U.S. in the early 1900s as an alternative to money lenders and a way to offer the average person access to financial services. In the depths of the Great Depression, Congress took note of the credit union model's early success and passed the Federal Credit Union Act in 1934 to promote the expansion of credit unions to help lower-income families and communities rebuild. Today, U.S. credit unions are on the threshold of serving 100 million members-nearly one in three Americans.
Former CUNA President/CEO Bill Cheney highlights credit unions'
impact worldwide, asking U.S. Agency for International Development staff
to consider where $152 billion in financing in developing and emerging
economies would have come from if it were not for credit unions.
"The value of having a cooperative, not-for-profit alternative in the financial market place is quantifiable and specific," Cheney said.
In 2013, U.S. credit unions provided consumers more than $8 billion in financial benefits -in part through lower rates on loans, higher returns on savings and lower and fewer fees. Included are benefits provided to bank customers, who benefit as a result of competitive pressures credit unions impose on other financial institutions to lower their loan rates, reduce or limit fees and pay slightly higher returns on savings.
Cheney noted that the same solutions successfully implemented by U.S. credit unions have helped millions of people in developing and emerging economies. Since the 1950s, CUNA and U.S. credit unions have been instrumental in partnering with World Council (established in 1970), USAID and other donors to promote financial inclusion through locally sustainable credit unions.
Dr. Brian Branch, World Council president and CEO, focused on the impact of credit unions internationally. He reviewed the universal challenges faced by financial institutions in reaching more of the world's unbanked, which included regulatory burden, mobile and payment systems, membership growth, small credit union sustainability and outreach to small farmers. World Council leverages the global network of 56,000 credit unions to address these challenges and provide financial access through credit unions of all sizes.
"Through our network, a rural credit union in Ethiopia benefits from value chain tools developed in Peru; credit unions in Colombia gain access to mobile technology developed by credit unions in Mexico; and credit unions in Kenya learn from agricultural lending practices of Guatemalan credit unions," Branch said. "This tangible support and transfer of knowledge and technologies throughout the network is a key differentiator."
Branch highlighted the increase of mobile technology use to extend credit union services to remote areas worldwide, and how-for the past 15 years-World Council has linked credit union movements through electronic payments, including remittances, shared branching, card services and now mobile technology.
"Buying and selling airtime has become an increasingly popular way to transfer funds to friends and family, and to store money," Branch said. "Now with deeper internet penetration, the merger of payments and commerce with finance creates new business opportunities of ease and convenience of service for accelerating membership growth at the local level."
Based on experience in delivery and uptake of mobile solutions in Mexico, Colombia and Kenya, World Council's strategy focuses on developing technology to make financial institution and mobile network systems interoperable, building the capacity of local merchants and training underserved populations on how to use the technology for practical and financial purposes.
"Credit unions give people access to finance that allows them to solve their own health, education, food and economic problems, not others attempting to solve their problems for them."
– Brian Branch, World Council
Branch also explained other developments credit unions have made to benefit marginalized and traditionally unbanked populations, including an integrated agricultural financing model that has improved incomes and access to markets for small farmers; a remittance service that has transferred more than $4 billion to recipients through credit unions; a thriving cooperative-led, Islamic-based finance model that has brought financial services to the people of Afghanistan; and development of demand-driven products and services that promote economic growth for women and youth.
"Credit unions give people access to finance that allows them to solve their own health, education, food and economic problems, not others attempting to solve their problems for them," Branch said, addressing his reason for dedicating his life to promoting credit union growth worldwide.
Carter concluded with two challenges for his colleagues at USAID: "First, if you are not a credit union member, join a credit union. Second, think of ways that we can uncover this secret. There is no way that a movement that has achieved such scale and success should remain untapped."
World Council of Credit Unions is the leading international trade association and development agency for the promotion of financial inclusion. With funding from a wide range of multi-lateral, government and private partners, World Council promotes economic security, resilience and livelihoods strengthening through the sustainable development of local, well managed, savings-led financial institutions. World Council reaches marginalized and traditionally unbanked populations and has worked with credit unions in 71 countries to provide a range of affordable, pro-poor financial products and services.
Credit Union National Association (CUNA) is the largest national trade association in the United States serving America's credit unions. The not-for-profit trade group is governed by volunteer directors who are elected by their credit union peers from across the nation. With its network of affiliated state credit union associations, CUNA serves America's nearly 7,000 credit unions, which are owned by early 100 million consumer members.