In Indication of Growth, Bankers In Poland, Russia Oppose CU Expansion

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In a sign that two relatively new credit union movements in two former communist countries are growing, their respective banking industries are on the attack.

In Poland, banks have launched legislative efforts seeking to limit growth and services offered, while in Russia, banks are opposing plans to expand the tight caps on membership numbers. In both cases, the World Council of Credit Unions (WOCCU) has dispatched a team of executives who are working to help credit unions fashion a response.

In Poland, the Polish National Association of Savings and Credit Unions Executive Director Grzegorz Bierecki; World Council of Credit Union Chairman L.R. Bobby McVeigh; and interim WOCCU CEO Brian Branch met with Leszek Balcerowicz, president of the National Bank, and Andrzej Jacaszek, Undersecretary of the Ministry of Finance. The team sought to explain the importance of credit unions' ability to provide consumers with choice and lower-cost services. Bierecki described the community development programs that Polish credit unions have instituted to serve their social mission, WOCCU said.

"This is the value added of credit unions: the provision of lower-cost choice for consumers and the social mission of service and community development," McVeigh told the government officials.

The growth of credit unions in Poland has been quite fast, with the first credit union in the country opening in 1992 following the fall of the communist government. Credit unions got off to a rough start. After that first CU opened in a Gdansk heating plant, three weeks later Polish tax authorities seized the credit union's assets, only to release them upon finding everything in order. The tax authorities started their own credit union a few months later. In Poland today more than 109 credit unions serve approximately 1.2 million members.

The World Council of Credit Unions estimated that a $3-million grant from U.S. AID to get credit unions started in the country has "yielded a return of $900 million in assets. Today the Polish credit union system continues the development mission.

As the Polish state expands its own foreign assistance programs, it has turned to the Polish credit union system to help generate employment and lend support to small and micro enterprises in Moldova, Ukraine and Georgia."

Meanwhile, in Russia, current legislation limits the size of credit unions to just 2,000 members, but many either already exceed these limits or find that their restricted size severely limits the range of services they can provide, WOCCU said. The Russia Credit Union League has begun policy dialogue with the Parliament, the Central Bank and the Ministry of Finance to "put into place empowering legislation for credit unions and regulation supervision systems, which will strengthen the credit unions' ability to protect member savings."

WOCCU's McVeigh and Branch met with the Russia league, Parliament and Ministry of Finance Officials to assure them that WOCCU will work with them to implement the group's PEARLS monitoring system and to assist with the development of legislation and regulation systems appropriate for credit unions. "Credit unions can provide financial services to many in Russia who today are unserved, and to do so will require legislation which allows them to grow," McVeigh told the group.

Credit unions have a long history in Russia, and also a long interruption. The first credit unions appeared in Russia in 1865, growing to 14,000 in number and serving eight-million members by 1916. By the mid-1930s, credit unions had ceased operation under the Soviet system. It was not until the early 1990s that credit unions restarted in Russia; today there are more than 500 CUs serving 250,000 members.

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