Supporter contributions fund the credit union development programs in the field that the World Council and the Worldwide Foundation carry out. We look at what challenges we have faced, what we have accomplished and what is still underway at year-end 2018.
Caribbean Hurricane Relief: Dominica Credit Union Rebuilding:
Hurricane Maria in 2017 damaged 18,000 of the island’s 23,000 buildings. The island has six credit unions on the island serving 97% of the population. All six credit unions and the league building sustained damages. Many lost roofs, water damage destroyed floors and wires, windows and doors were destroyed and computers were damaged. Worldwide Foundation issued a call for funds assistance to help repair credit unions in Dominica. While now credit unions are largely repaired, local infrastructure and economy damage impacted the credit union balance sheets and income. Dominica lost 96% of its GDP in 2018 as the local university decided to move to Barbados, banana plantations were destroyed and large amounts of farmland were washed away. Credit unions’ loan performance was significantly impacted. The credit unions asked for help in working through the impact of the disaster on their financials and in putting in place improved risk management systems. The credit unions have also asked for help in shifting their operations to support their members who have lost their means of livelihood and have had to shift to new types of economic activity such as agriculture.
A group of volunteers from Indiana credit unions traveled to Dominica at their own expense to assess the credit unions and engage in strategic planning. The volunteers advised the Dominica credit unions on how to monitor and manage their risks and in how to engage in increased agricultural lending. The group will continue to work with the Dominica credit unions to help them with loan collections capital rebuilding planning, risk management systems, regulatory compliance systems and agricultural lending.
Caribbean Hurricane Relief: Puerto Rico Credit Union Assistance:
Hurricane Maria caused serious damage to Puerto Rico in 2017. Yet credit unions responded fast to provide service to members within a week after the hurricane while other financial institutions took a month or more to re-open or simply withdrew from communities. Communities responded with significant membership and liquidity growth in the credit unions after the hurricane.
In 2018 Worldwide Foundation took a number of credit union volunteers from Massachusetts to Puerto Rico, at their own expense, to assess and assist Puerto Rico credit unions. Yet the local economy remains depressed. Many local businesses have not reopened. Many islanders have left the island to seek work. Tourism has not recovered yet. Prior to the hurricane, the Government of Puerto Rico (GPR) entered into Chapter III of bankruptcy proceedings. Government employees have been laid off. All of this impacts the credit union loan portfolio quality and local lending opportunities. Credit unions with investments in government bonds are also affected by the government default.
Cooperation with mainland Massachusetts credit unions in purchasing loan participations, offered an in-system opportunity for generating income, rebuilding reserves and diversifying risk for Puerto Rico credit unions. Worldwide Foundation and the Cooperative Credit Union Association hosted Puerto Rico and Massachusetts credit unions in Massachusetts to train the Puerto Rico credit unions on methodologies, requirements, opportunities and simulations for engaging in loan participations. The progress takes place in small steps but has strong local impact. Puerto Rico credit unions have begun to pool their liquidity and to purchase mainland credit union loan participations. This generates income for both parties and finds a business solution within the credit union system.
Busia Compassionate Center:
World Council provided training for credit unions in Northwest Kenya to serve small farmers. We found that in all villages where we worked there were large numbers of HIV AIDS orphans. Credit unions committed not only to the finance of the village farmers but also to mitigate the community strains in which they operated. Credit unions began to provide education accounts for the orphans to go to school. Farmers taught the orphanage volunteers how to raise crops and chickens. Kenyan and US credit unions raised funds to build an orphanage campus in Busia town to provide a safe and sanitary living environment for orphans.
Worldwide Foundation continues to support the orphanage that credit unions built with donations to pay for food and school fees. In 2018, after young girls at the orphanage were harassed by men who tried to break into their dormitory, Worldwide Foundation called for donations to build a protective wall around the orphanage. By year end, the orphanage has completed construction of the wall.
Nepal Credit Union System Development:
The National Federation of Savings and Credit Unions of Nepal (NEFSCUN) was formed in 1993. NEFSCUN represents 3,094 credit unions serving 2.5 million members with USD$1 billion in assets.
NEFSCUN has a large number of small credit unions scattered over remote rural locations. NEFSCUN has asked for assistance in system design for back office data processing, monitoring and reporting to authorities. NEFSCUN is now required to report to the regulatory authority for its members. The credit union system, Sicredi, from Brazil has one of the most successful models for supporting rural credit unions with integrated data processing and regulatory reporting systems. Sicredi has stepped forward with the World Council to provide technical advice to NEFSCUN.
Sicredi sent a volunteer to Nepal with a World Council consultant in November to advise the Nepalese in their system development. The mission provided recommendations to NEFSCUN for establishing a branding program linked to standards and monitoring self-supervision program for participation in the stabilization fund. NEFSCUN will look to the Sicredi stabilization program for modeling its own program. The Ministry of Cooperatives has developed a data base system, but most credit unions continue to process data manually or via manual transfer from excel spreadsheets. NEFSCUN will need to take the lead by establishing a standard chart of accounts, supporting a common data processing system and establishing a reporting data transfer to the regulator.
Supporting the Emergence of the Private Sector in Belarus:
The credit unions in Belarus are embryonic. Belarus is still a state controlled economy. Yet in the rural areas, people have to depend themselves and each other. Credit unions exist to help finance the small farmers and the self-employed. There is very little private sector operating. What exists operates outside the planned state economy so inputs are subject to variability of from those who exceed their state production quota. Private entrepreneurs do not have access to state planned purchase opportunities. Finance is not available for the state banks. Credit unions help those who depend on themselves and not on state structures by providing them with finance from their pooled savings.
In 2017 and 2018 World Council provided training in credit union operations to the few credit unions in Belarus. The Foundation carried out a regulatory assessment and led the Belarus credit unions in a strategic plan for the future of the credit union movement.
Accessing Donor Funded Projects:
Supporter funds allow the Worldwide Foundation to respond to international requests for assistance from credit union systems and to access donor funding to carry out projects in particular countries. During 2018, Worldwide Foundation was able to leverage supporter dollars 44 to 1 to access donor funds to support credit union development around the globe.
Looking West vs. East in Ukraine:
With civil conflict in Ukraine, other financial institutions withdrew from the rural areas. Communities turned to the credit unions to fund farmers and small business. Supporter funding allowed us to be on site in Ukraine during the early stages of the conflict and to help the Ukrainian credit unions respond to the crisis and assess what they needed to do to update legislation and regulation and increase agricultural and small business lending. World Council now implements a USAID funded project with staff in Ukraine to continue that work. World Council staff in Ukraine train credit unions in how to strengthen their management, transition to a European Union credit union regulatory framework and expand agricultural and small enterprise financing. The program is aimed at strengthening credit unions as a means to expand agricultural lending which increases business opportunities for the emerging middle class in rural areas of Ukraine. It provides greater private sector and community economic stability within a Western grassroots democratic model. The USAID funds also pay for a number of volunteers from the US credit unions to travel to Ukraine to provide on the ground training. Worldwide Foundation supporter funds also allow us to address needs of the credit unions such as financial management training and compliance with updated regulations, which the USAID funds do not pay for.
Introducing Mortgages in Haiti:
After the earthquake in Haiti, credit unions contributed to the Worldwide Foundation to help rebuild credit unions. Credit unions were able to respond to their members so quickly after the earthquake that it generated a high growth of membership and savings. The impact of the earthquake highlighted the need for safe and affordable housing on the island. Using supporter funds we were able to point to our record in earthquake response and convince USAID to fund a program which introduced the first mortgage program for affordable housing through credit unions and to introduce another program to take credit union services to more remote rural areas via mobile rural service officers. The mortgage program has been successful in stimulating a new and sustainable line of business for credit unions which has provided their members with a safe home in a country characteristic of frequent natural disasters. In 2018, USAID added additional funding for the mortgage program.
Providing Local Job Opportunities for Youths in Guatemala:
In Guatemala, many rural communities have lost the local cottage industries which produced handicrafts, clothing and basic construction materials as cheap imports and higher quality manufactured goods from the capital city have become more available in rural areas. Many of their young people migrate to the capital cities or show up on the US border. Communities have turned to their credit unions and asked the credit unions to provide financing for small businesses that will provide jobs for their children.
In 2017 credit union volunteers traveled to Guatemala on an engagement trip to lead a strategic planning and training exercise for the Guatemala credit unions on how to finance small business. This led to the creation of a 2018 national strategic plan by the Guatemalan credit unions to introduce small business underwriting standards and tools. Credit unions in Guatemala can only lend to natural persons. As a result of the volunteers’ experience, the Guatemalan also began to explore the feasibility to establish a credit union service organization (CUSO) for lending to businesses which are legal entities. Worldwide Foundation was able to leverage this strategic commitment of the Guatemalan credit unions to access a grant of from USAID in 2018. The grant funds technical assistance to credit unions for lending to small business in Guatemala, Kenya and Burkina Faso.
Guatemala credit unions have developed national wide underwriting standards for small business lending in 2018 and plan to launch a business lending CUSO in 2019.
Supporting Regional Stability in Colombia:
During the Colombia civil conflict, credit unions continued to serve the rural areas where other non–community based financial institutions feared to go. Credit union supporter contributions allowed World Council to introduce remote service delivery technologies so that people did not need to travel through the conflict areas to town to access credit unions.
With peace finally established World Council and the credit unions were asked to take on another challenge. The turmoil and conflict in neighboring Venezuela disrupted Colombian border town commercial and trade activities. Tens of thousands of Colombians fled from Venezuela and Venezuelan refugees settled in the border communities. World Council accessed financial support from Banca de las Oportunidades for a project to expand credit union services to areas on the border. Our aim is to stabilize local communities and help refugees settle by helping credit unions provide new livelihood financing and financial education services for the refugees. Credit union volunteers have traveled to Colombia at their own expense to develop and deliver a financial literacy training curriculum as part of this project.
Moving Small Farmers from Subsistence to Semi Commercial in Kenya:
In Kenya World Council trains credit unions how to finance small farmers. Small farmers have difficulty accessing other formal lenders’ services and often lack information about best practices in agriculture. World Council implements a USAID funded program to train farmers in agricultural practices, train credit unions in agricultural lending and apply updated service technology. We work with the Kenyan national association for credit unions to establish a sustainable rural lending unit in the association.
The agreement with USAID requires that World Council pay for part of the program activities. This is called “cost share”. Foundation funding allows us to pay for activities which we believe are important for the local credit unions but which cannot be paid for by the donor funds. This has included things such as the purchase of software for hand held tablets and software for credit union representatives to access data when they are visiting farmers in the field and the purchase of a car so that the program staff can travel to the rural farms more safely and rapidly than by public transportation bus.
Moving Credit Unions to the Digital Age in Philippines and Indonesia:
In 2017 and 2018 the Worldwide Foundation worked with the Gates Foundation and the Asian Confederation of Credit Unions to assess Asian credit union systems readiness to move into the digital age. Staff worked with Philippine and Indonesian credit union system representatives and began mapping out a strategy for the credit unions to provide their services online and mobile and to connect their credit union network to the local country payments and digital eco system. Based upon the strategic work completed with the financial support of the foundation, The Gates Foundation has granted funds to the Worldwide Foundation to plan, create test and launch interoperable payments platforms enabled by a digital financial services toolkit for credit unions in Philippines and Indonesia which we hope to replicate through Asia.
While most credit union decision makers are generous in providing financial support, we also find that credit union folks wish to participate themselves in field work and give back a service contribution to the movement as well as be a financial contributor. We build a longer term relationship of exchange and ownership from supporters who have participated with us in the field. Engagement programs can be one or a combination of three types: (1) study of another system (3) service and (3) consultation. Study involves looking at an issue and how another credit union system is addressing that issue. Service usually involves community hands-on work in another country. Consultation usually involves contributing expertise or advice to help another credit union system with technical or advocacy challenges.
We are a small organization with limited resources so we require that volunteers on engagement programs pay their own travel costs, shared food and transportation costs and some contribution to the program.
In 2018, we carried out engagement programs in Kenya, Puerto Rico, Thailand, Poland and Dominica. The Dominica program and Puerto Rico programs are described above.
Volunteers traveled to Kenya to study the Kenyan credit union system and its work to extend service to small farmers and rural communities. The engagement group met with the Kenya association of credit unions, visited credit unions in the rural areas and visited small farmer associations. The volunteers also spent time at the Busia orphanage mentioned above doing manual labor service work at the orphanage.
Volunteers traveled to Thailand to study the Asian credit union system. The group met for briefings from the Asian Confederation of Credit Unions and with the two credit union associations of Thailand. The Asian credit union confederation hosted the group to Thai cultural activities and temples to understand Thai history and culture. The group visited credit unions and their women’s business development centers to understand the work that the credit unions do in their communities. Credit leaders from 12 countries came to Bangkok to meet with the group to do a day long strategic visioning open forum exercise which then feeds into the strategic planning process of the regional association.
As the US is positioning soldiers forward in Poland the US army asked for help giving US soldiers safe access to local cash. We suggested Polish credit unions provide ATM and cash services in alliance with the US Defense Credit Union Network. We took a number of US Defense based credit union CEOs to Poland to study the credit union system and to begin negotiations to give US soldiers access to Polish Credit Union cash services. The Polish credit union officials, who remember the US support for Poland as it transitioned out of the Soviet Union, simply explained that they wanted to give something back to the US.
With the US credit union officials on the ground in Poland, the engagement participants assisted the Polish credit unions in delivering their advocacy message to the Polish regulator and Parliament. Our volunteers delivered the message of credit union commitment to prudential discipline while serving financial inclusion. Our Polish colleagues gain credibility by showing the strength, the scale and the role of credit unions in advanced financial markets.
World Council Vision 2020 – Challenge 2025:
One of the most common request from members has been for assistance in increasing membership growth and, in particular, growth of young adult members. In 2014, World Council launched Vision 2020. World Council took stock of membership levels as of then and projected what an increased membership growth could achieve. Projections were moderate and not radical. World Council launched several exchanges, publications and showcases of best practices in membership growth and in attracting young adults.
In 2018, we found that credit unions globally reached the target of 260 million members at the end of 2017, three years early. Several credit union systems, such as the US, Brazil, Kenya and Ethiopia, dramatically increased membership during the period.
The three primary challenges we hear from credit unions are regulatory burden, disruptive technology and membership growth. In 2019, we will launch the next step: the global challenge of disruptive technology. The 2025 follow-up challenge will be the global digitization of the credit union system. Digitization includes access to core services by online and mobile channels, automation of internal processes, field credit union representative and consumer member linkage to core services and connection to local payments and electronic ecosystems.
World Council uses its conferences, communications, projects and technical papers as well as engagement, projects, training and education programs to promote and support the digitization of the international credit union network. Worldwide Foundation makes this possible though its project development, field engagement and volunteer assignments.
Thank you for the financial support and for the volunteer service which you provide to our colleagues around the world. We always remain grateful.
Best wishes for 2019,
President and CEO
World Council of Credit unions