Colorado's CUs Get Their Foot In The ECUADOR

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The best operational plans often are those that are most specific.

That's what the Colorado Credit Union System has discovered in its relationship with the credit unions of Ecuador. By matching the needs of Ecuadoran credit unions with the technical assistance Colorado credit unions could provide, the two groups working together have helped the South American institutions make great strides.

But the relationship hasn't been without a long period of inactivity and moments of doubt. It was only after some soul-searching by CCUS officials and executive staff that charting the right course for a mutually beneficial future became, said Jane Willard, vice president of governmental affairs and public relations for CCUS.

Like most such relationships, the one between CCUS and Ecuador started with a call from the World Council of Credit Unions in 1999.

"We wanted to assist WOCCU in its efforts, but we felt we needed a country that had substantial footing," said Willard. "We were looking for successes, to show our credit unions that they really could make a difference."

WOCCU officials suggested Ecuador, a country with a 35-year-old credit union movement and a Spanish-speaking people who mirrored Colorado's large Hispanic population. Bill Sterner, chief executive officer of University of Colorado Federal Credit Union, Boulder, had served in Ecuador in the Peace Corp and helped build the country's then fledgling movement. It seemed like a natural fit, Willard said.

No Middleman

CCUS started out by hosting a visit from five Ecuadoran credit union managers in June 1999. The group spent two weeks at the league and visiting large Colorado credit unions to better understand how they operated. Lending, technology, human resources, board governance and governmental affairs were all part of the lessons, said Willard.

"They took special interest in the entire concept of association services, because that was something Ecuadoran credit unions lacked," said Willard. "There was no middleman in the process."

That shortfall would become more critical in the future but, for at the time, it was just one more area of study for the visitors.

In November, 1999, Willard and CUNA's Judy Weidemann traveled to Ecuador to view first hand how credit unions functioned and the role they played in the lives of their members. For two weeks, the pair traveled much of the country's 283,000 square miles in a well-chronicled adventure of economic development.

"The credit unions were much more sophisticated than I ever thought they would be, with a surprising level of use of computers and satellite communications to make up for the difficulty traveling," said Willard.

Ecuadoran credit unions also took special efforts at youth education and teaching children how to manage money. Credit unions in small villages struck deals with local merchants, allowing credit union members to buy things on credit, which credit union officials cleared and paid that same business day.

"The service acted like a credit card, but was manually operated," said Willard.

The credit unions had no choice but to operate the service manually. The country had no middleman processor, no settlement procedures and no equivalent to a federal reserve bank, Willard said.

At the time, the country supported some 300 credit unions, about 280 of which were very small, family-run operations, Willard said. WOCCU attempted to make inroads with the 22 largest credit unions and start a rudimentary league. Such an organization would be critical for future growth.

A Financial Crisis

In 2000, Ecuador suffered crippling inflation that seriously devalued the country's currency. Banks closed their doors and froze depositors' assets. Ecuadorans lined up early each morning at the front doors of the nation's banks to draw their small daily subsistence amounts from their accounts. Larger withdrawals would have been threatened Ecuador with financial ruin.

Credit unions weren't subject to the same regulations and prospered in the face of the banking crisis, said Willard. "No one trusted the banks any longer and it became a good time for credit unions," she said.

That fact, along with Willard's own experiences, gave the CCUS staffer a lot of good stories to tell as she met with different Colorado credit union groups and shared her experiences. Those tales were critical to CCUS' plans, she said.

"We knew this needed to be a credit union-to-credit union relationship, not a league relationship and we wanted to get more of them involved," said Willard.

In Fall of 2000, Willard returned to Ecuador with five credit union chief executive officers in tow, including Sterner. The group traveled around the country by car and airplane, meeting with their counterparts at Ecuadoran credit unions of all types and sizes.

"It was the trip of a lifetime," said Willard. It also almost marked the end of Colorado's involvement in South America.

Staff reassignments at WOCCU moved Mario Galarraga, who helped foster the Colorado/Ecuador relationship, on to other assignments. The relationship stalled between the western state and her sister country to the south and even the fledgling Ecuadoran league began to suffer. The lack of momentum caused the CCUS to begin questioning its relationship with Ecuador.

Is It Worth It?

The early visits had been positive, engendering a great deal of good will, but the Ecuadoran movement, while only moderately sophisticated, was relatively mature. Was CCUS really capable of helping Ecuadoran credit union overcoming their service challenges? Could Colorado credit unions make a meaningful difference?

"The board really wanted to know if all this was worth the time and effort," said Willard. It took 18 months before they found an answer to that question.

Last fall, officials from WOCCU and four Ecuadoran credit unions came to Colorado to discuss continuation of the program. Specifically, the Ecuadorans wanted help in three areas: credit cards, debit cards and shared branches.

"These are hugely complex issues, especially for a developing nation," said Willard. "We knew we couldn't continue spreading ourselves so thin and would need to narrow our focus if we were going to provide value to the relationship."

"We were at a crossroads," Willard added. "We had to decide now if we would help them or not."

Some necessary additional help came from Credit Union Service Corp., the Atlanta-based data processor now run by Carroll Beach, former president of CCUS. When forced to choose, the Ecuadorans narrowed down their primary need to shared branches. WOCCU, with the aid of CUSC and CCUS, committed to piloting a shared branch network in the South American country.

"It's one thing to provide training for visiting officials, but to offer this kind of nuts-and-bolts technical assistance is a huge step," said Willard. It's also a step all participants say is well worth taking, she said.

CCUS's next step is to renew its commitment to the cause. That's something Willard said its board has committed to do during the first quarter. Shared branch training will be givien to visiting Ecuadorans in April and WOCCU staff in May and June.

In July, a contingent of Colorado credit union executives will visit Ecuador with the sole purpose of laying the groundwork for a shared branching network, including policies and procedures development and the writing of a marketing plan.

By October, the financial advances and contracts should be in place and ready for formalization, said Willard. There's even talk of preliminary steps on a card services project. Together, those efforts to assure there will be no more 18-month lag time toward building Ecuadoran credit union success, she said.

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