Know

THE CREDIT UNION

Difference

Despite the competitive nature of Despite the competitive nature of today’s financial market place credit today’s financial market place credit unions worldwide continue to thrive unions worldwide continue to thrive because they differentiate because they differentiate themselves through:themselves through:

- The quality of service they provide- The quality of service they provide

- Community focus- Community focus

What’s the What’s the Difference?Difference?

Each credit union must make that Each credit union must make that distinction of what makes it different distinction of what makes it different through assessing its own market space through assessing its own market space and the community in which it operates and the community in which it operates in order to determine how to in order to determine how to differentiate itself from other local differentiate itself from other local financial institutions and how to create financial institutions and how to create its own unique niche. its own unique niche.

Credit Unions?Credit Unions?

• Financial co-operativesFinancial co-operatives• Provide saving and lending products Provide saving and lending products

to membersto members• Each member must be a shareholderEach member must be a shareholder• Member owned, member operatedMember owned, member operated• Unpaid volunteers from the Unpaid volunteers from the

membershipmembership• Democratic – one member, one voteDemocratic – one member, one vote• Exists for the benefit of the membersExists for the benefit of the members• Members direct credit union policiesMembers direct credit union policies

Credit Union MythsCredit Union Myths

• Credit unions are small banksCredit unions are small banks

• Credit unions are charitiesCredit unions are charities

• Membership means guaranteed loansMembership means guaranteed loans

• Larger credit unions should be taxedLarger credit unions should be taxed

• Credit unions are for poor peopleCredit unions are for poor people

• Credit union should always remain Credit union should always remain smallsmall

The Global CU DifferenceThe Global CU Difference

Democratization of societies providing Democratization of societies providing people with:people with:

A means for democratic participation A means for democratic participation and self-help community organizationand self-help community organization

An alternative source for financing An alternative source for financing income generation, while large income generation, while large enterprises down size and close out.enterprises down size and close out.

A source for financing entrepreneurship A source for financing entrepreneurship and promoting self employmentand promoting self employment

Difference #1 - Difference #1 - MembershipMembership

The most distinctive features of a credit union include:The most distinctive features of a credit union include:• OpenOpen• VoluntaryVoluntary• NondiscriminatoryNondiscriminatory• Benefits include: Benefits include:

Lower rates, Lower rates, Higher interests, Higher interests,

Lower fees, Lower fees, Improved servicesImproved services

Difference #2 Difference #2 – Service to Members– Service to Members• A range of services including:A range of services including:

SavingsSavingsChequingChequingYouth a/c Youth a/c Seniors a/cSeniors a/cLoansLoansInsuranceInsuranceMoney transfersMoney transfersInvestmentsInvestments

Other financial servicesOther financial services

The Hallmark of Credit The Hallmark of Credit UnionsUnions• The strong The strong

commitment to commitment to member service member service because of the because of the member focused member focused structure of credit structure of credit unionsunions

• Unlike banks and Unlike banks and other financial other financial institutions credit institutions credit union members are union members are also its ownersalso its owners

Superior Memberservice

Member Satisfaction

+Higher retention

Members = owners

+

Governance structure

Providing Affordable Access to Providing Affordable Access to Financial ServicesFinancial Services• CUs are very receptive to members needs.CUs are very receptive to members needs.

Special consideration for rural communities, Special consideration for rural communities, the poor and ethnic minorities the poor and ethnic minorities

• The co-operative nature of CUs provides a The co-operative nature of CUs provides a self-help structure to the marginalized, who, self-help structure to the marginalized, who, had there been no CUs would be at the had there been no CUs would be at the mercies of Government and ‘for profit mercies of Government and ‘for profit companies’companies’

• In times of hardship CUs are often able to In times of hardship CUs are often able to adopt more sensitive approaches to adopt more sensitive approaches to accommodate individual member needsaccommodate individual member needs

Globally – Credit Unions Globally – Credit Unions provide Financial services to provide Financial services to the excluded:the excluded:• U.S.U.S. – CUs serve low income, immigrant markets – CUs serve low income, immigrant markets

with remittance services and start savings for with remittance services and start savings for thousands of “unbanked individuals”thousands of “unbanked individuals”

• Guatemala, Jamaica, Ecuador, Kenya and Sri Guatemala, Jamaica, Ecuador, Kenya and Sri LankaLanka – CUs are largest source of micro-finance – CUs are largest source of micro-finance

• Canada and Australia - Canada and Australia - CUs are taking over rural CUs are taking over rural branch network abandoned by banks and are in some branch network abandoned by banks and are in some communities the sole providers of financial services.communities the sole providers of financial services.

• Honduras, Sri Lanka, Brazil and Mexico -Honduras, Sri Lanka, Brazil and Mexico - CUs CUs provide over 50% of rural financial services.provide over 50% of rural financial services.

• Philippines and EcuadorPhilippines and Ecuador - CUs are an important - CUs are an important source of financial, health and general education to source of financial, health and general education to many poor rural women many poor rural women

Appropriate Legislation and Appropriate Legislation and RegulationRegulation• A sound credit union sector A sound credit union sector mustmust have have

enabling Legislation and Regulation enabling Legislation and Regulation • Credit unions are not banks and are not non Credit unions are not banks and are not non

governmental micro-credit institutions, governmental micro-credit institutions, hence CUs must be regulated and hence CUs must be regulated and supervised differently.supervised differently.

• CUs should be prudently regulated by CUs should be prudently regulated by competent regulators who understand the competent regulators who understand the structure and social difference of CUs from structure and social difference of CUs from other financial institutions.other financial institutions.

• CU supervision must reflect the risk that the CU supervision must reflect the risk that the cu carries cu carries

More of the Credit Union More of the Credit Union DDifferenceifference• CUs often lack access to CUs often lack access to

conventional capital marketsconventional capital markets• Grow capital over a long period of Grow capital over a long period of

time, internally mainly through time, internally mainly through retained earnings and share capital retained earnings and share capital

• Being retail oriented risk is more Being retail oriented risk is more spread over a large number of savers spread over a large number of savers and borrowers and borrowers

Remember credit unions are Remember credit unions are not banks!not banks!

• To efficiently service the financial To efficiently service the financial needs of members, CUs NEED to have:needs of members, CUs NEED to have:

• Access to interbank clearingAccess to interbank clearing• Settlements systemSettlements system• Central bank servicesCentral bank services• Deposit insurance privilegeDeposit insurance privilege• Other wholesale services offered to Other wholesale services offered to

other financial service institutionsother financial service institutions

Appropriate Legislation and Appropriate Legislation and RegulationRegulation

Is vital to build and maintain Is vital to build and maintain members’ confidence in the members’ confidence in the

financial viability of CUs and to financial viability of CUs and to ensure continued growth and ensure continued growth and

improved services to membersimproved services to members

Social Goals of Credit Social Goals of Credit UnionsUnions

Credit Unions are:Credit Unions are:

• social movementssocial movements

• Civil movementsCivil movements

• Self help movementsSelf help movements

Credit Unions exist to help people not to make a profit

Social Goals of Credit Social Goals of Credit UnionsUnions• Customer satisfaction - the ultimate Customer satisfaction - the ultimate

measure of success for CUs is increased measure of success for CUs is increased when members see their CUs taking when members see their CUs taking actions that benefits the greater actions that benefits the greater communitycommunity

• CUs promote financial education – CUs promote financial education – providing members with the tools and providing members with the tools and information to improve their decisions information to improve their decisions regarding financial issuesregarding financial issues

Social Goals of Credit Unions Social Goals of Credit Unions cont’dcont’d

To achieve these goals efficiently, CUs:To achieve these goals efficiently, CUs:

• Pool marketing resources etc.Pool marketing resources etc.

• Pool financial resources – intra-Pool financial resources – intra-system lending & investing system lending & investing

• Share human resources Share human resources

• Use common brandingUse common branding

SummarySummary• Democratic structureDemocratic structure

• Service to membersService to members

• Social goalsSocial goals

Over 150 years Over 150 years

Serving over 136 millionServing over 136 million

In over 90 nations In over 90 nations

worldwide worldwide

Thank you Thank you