Why No Int'l Loan Participations, And Other Worldly Issues
Notes from all around the World (Council of Credit Unions International Credit Union Leadership Institute in Paradise Island, Bahamas).
* Mike Kitchen's departure from CUNA Mutual occurred just as the WOCCU event was starting, and news spread quickly. The sentiment expressed again and again by league presidents and other credit union executives who know him: "What was he thinking?"
* There are about six-billion people on this planet. So why do just 123 million of those people belong to credit unions? In developed countries, credit unions have been somewhat late to the retail financial services party, and have for nearly all their lives been limited by both their own resources and regulatory restrictions. The real opportunity for credit union membership growth lies in developing countries. The best example is Poland, where 10 years ago there was a nascent credit union movement personified by one individual, Grzegorz Bierecki. This year Bierecki brought with him 28 other Poles to the meeting.
If I were to ask you to make a list of all the roadblocks in the way of credit unions taking root in developing countries you'd no doubt cite a lack of capital, enabling legislation, expertise or the absence of a middle class. And you'd be right. But WOCCU President Arthur Arnold was frank in acknowledging another troublesome issue. "What is the biggest obstacle" in forming new credit unions, he asked rhetorically. "Corruption. And we better recognize that."
It isn't that all second and third world countries are first-rate scammers. Rather, Arnold said, it's that many people in those countries have never been exposed to ideals that credit unions in the U.S. take for granted. For that reason, later this year WOCCU plans to publish its first-ever paper featuring best practices in good governance.
The World Council has been surveying all of its member organizations on their good governance practices. "We fight corruption through the adoption of good governance."
WOCCU has identified three categories of good governance: individual (conflicts of interest, codes of ethics, etc); external (an obligation to comply with all regulations and laws,), and internal (ensuring rules are in place to guarantee the CU is operated democratically, that board term limits are observed, and that the board reflects the membership).
"In the outside world credit unions are often looked at when it comes to good governance as being wishy-washy," said Arnold. "In developing countries members have been abused in some cases, and that hurts the reputation of all credit unions. We may find (good governance) to be normal, but in developing countries it is not. As we gathered all this data, as you read between the lines you see that many people are looking for guidance. We think that credit unions collectively have an obligation to demonstrate to the world that we are champions of good governance."
* During the meeting it was noted that the host country, the Bahamas, has a relatively new credit union movement (it started in 1974). Given the outrageous gratuities automatically charged to everything but air at the host Atlantis Hotel, which has an employee credit union, I'd predict the total assets of Bahamas' credit unions should be among the world leaders in short order.
* During the WOCCU meeting I spoke with a representative of an African credit union lamenting how desperately short on liquidity the CU movement in his country is as it struggles to fund loan demand. Not much later I spoke to an Irish credit union rep whose situation was as different as the African weather-plenty of liquidity, tepid loan demand. So why isn't there an international loan participation market among credit unions?
The answer, according to several people, lies in the fact a loan in one place wouldn't qualify as a loan in another. Some credit unions in Africa, for instance, have write-offs and delinquency ratios that would have U.S. regulators arriving in fire trucks. There is no international loan participation market "because of the risks involved," confirmed WOCCU's Arnold.
"We're not in the lending business," he stressed. "But we can bring people together. We can tell them where the risks are."
As an example, Arnold noted he was just back from the Ukraine, where representatives of seven Eastern European credit union movements met with reps from U.S. Central and Mid States Corporate. The fledgling Ukrainian Central is working with a $20,000 technical assistance grant it received from WOCCU, which it has also asked to act as a pass through for a $200,000 loan from the two corporates. U.S Central and Mid States are in turn acting as advisors to the Ukrainian Central on the conditions and criteria to be used in making loans to natural-person credit unions.
* One of the best parts of any WOCCU meeting is seeing first-hand the diversity of movements represented and where they lie on the development curve. As one Caribbean credit unionist said to a Canadian speaker, "Your micro loans are our mega loans."
Frank J. Diekmann is editor of The Credit Union Journal.