World Update on Credit Unions

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International Regulators Confer

ALEXANDRIA, Va.-Regulatory trends affecting the global credit union movement, especially issues involving capital liquidity and supervisory guidelines, topped the agenda for the fifth annual meeting of the International Credit Union Regulators' Network (ICURN), an independent organization that World Council of Credit Unions (WOCCU) helps coordinate.

The three-day event, co-hosted this year by NCUA, attracted more than 50 credit union and financial cooperative regulators from 21 countries.

Several common themes emerged during the meeting, stimulating significant discussion, according to WOCCU. Participating regulators said many of their countries will be implementing, modifying or restructuring depositor protection systems.

"As credit unions consolidate, the resulting concentration of assets and members in the newly formed larger entities creates potential concerns about their size and significance to the rest of their countries' respective movements," WOCCU said. "Many developing and transitional economies are migrating from a sector developmental stage to a prudential supervisory approach, requiring different regulatory environments, some participants said. Interest rate risk and asset/liability risk could be significant emerging issues globally for credit unions, subject to greater scrutiny."

"In response to global developments, ICURN will be drafting guidance regarding credit union capital and liquidity in the coming months," said ICURN Chair Andy Poprawa, president and CEO of Deposit Insurance Corporation of Ontario, Canada. "We believe these principles and practices for effectively supervising credit unions will aid with the development of appropriate and sound oversight of credit unions."

The meeting at NCUA's headquarters also included a focused discussion on wholesale credit unions and their proposed role in the future of the movement. Earlier in the week, credit union supervisors from Kenya and Tanzania participated along with the Maryland Department of Credit Unions in an on-site examination of a Baltimore credit union, while regulators from Brazil and Singapore joined the Virginia Bureau of Financial Institutions in a credit union examination in Richmond.


Mexican CUs Visit Canada's Servus

EDMONTON, Alberta, Canada-Three representatives of Caja Yanga of Yanga, Veracruz, Mexico, travelled to Edmonton, Alberta, to study risk management and anti-money laundering practices used by Servus Credit Union's Enterprise Risk Management Program, as well as the Canadian credit union's corporate security policies and procedures.

The technical internship marked the second such visit between Caja Yanga and Servus Credit Union, which have worked together since 2009 as part of WOCCU's International Partnerships Program.

Caja Yanga Chairman Manuel Hernandez, along with Abel Martinez, risk manager, and Gabriel Martinez, accounting and finance vice president, studied the operations of Servus' corporate security team, which is responsible for all of the credit union's anti-money laundering and anti-fraud efforts.

Servus' Mark Foote, corporate security compliance manager, and Ana Roccia, corporate security senior analyst, shared the credit union's strategies for detecting suspicious activities and identifying accounts representing a high risk for money laundering activity.

"Money laundering has long been recognized as an international issue, and sharing with the group from Caja Yanga gave us unique insight we would not normally have had," Foote said. "It's through these important relationships that we can combat money laundering and terrorist financing at an elevated level."

Caja Yanga found many of the Canadian credit union's strategies feasible for implementation in Mexico due to the fact that anti-money laundering regulations are similar in both countries thanks to their adherence to the guidelines of the Financial Action Task Force, an inter-governmental organization focused on developing and promoting national and international policies to combat money laundering and terrorist financing.


Tech Extends Service To Rural Poor

QUITO, Ecuador-Credit unions throughout Latin America are providing financial services to the rural poor via new technologies and time-tested strategies, but there are still many more people to serve.

As a result, strategies for increasing market penetration and reaching more underserved communities was the focal point of a WOCCU conference here.

More than 300 directors, managers and employees of credit unions and organizations in Bolivia, Colombia, Ecuador, Mexico, Nicaragua, Peru and the United States attended to the Congreso Internacional de Finanzas Rurales e Inclusión Financiera [International Rural Finance and Financial Inclusion Congress] to discuss ways to increase service to rural members. Participants at the two-day event, co-sponsored by COONECTA-Entura, the Quito-based office of WOCCU Services Group, learned how savings mobilization, institutional strengthening, technology and other strategies help credit unions to reach and serve more communities, WOCCU reported.

"Good financial discipline, product innovation and technology application are key strategies that enable credit unions to better serve their members," said Mark Cifuentes, WOCCU senior vice president of technical services who coordinated the event. "We have a commitment to work not only with traditional donors, but also local governments to help credit unions expand their reach to serve even more people than they already do."

Among the strategies shared:

* Mexico's CUs are reaching the poor through WOCCU's Semilla Cooperativa [cooperative seed] program, a rural finance model in which credit unions send representatives astride motorcycles to remote towns and villages to conduct transactions, essentially taking the institution to the members. More recently, the program was enhanced as representatives were equipped with PDAs and tiny printers strapped to their belts that allowed members in remote locations to conduct transactions in real time and provide members with paper records of those transactions.

* Credit unions in several countries, including Ecuador, which has a credit union penetration rate of 20.3%, discussed ways to network more effectively in hope of finding new collaborative methods to increase penetration.


Ohio, Romanian CUs Sign Pact

BUCHAREST, Romania-The Romanian Federation of Credit Unions (FEDCAR) and the Ohio Credit Union League (OCUL) have signed an agreement of mutual support as the newest participants in WOCCU's International Partnerships Program.

The partnered organizations will look for ways to continue strengthening Romania's evolving credit union system, in the process addressing perceptions that credit unions' "cooperative nature" echoes conditions from the country's former position under Soviet rule, according to WOCCU.

An OCUL delegation accompanied by WOCCU staff visiting Romania learned that such perceptions exist largely due to obsolete legislation used to govern the country's credit union movement. FEDCAR officials seek to develop new credit union laws that bring regulatory oversight more in line with requirements from other European Union member countries. Strengthening Romania's credit union system and providing assistance with lobbying are two areas in which the delegation pledged assistance, according to Paul Mercer, OCUL president.

Paul Mercer, president of the Ohio league, OCUL Vice President John Florian, and Bill Herring, president and CEO of Cincinnati Central Credit Union, joined FEDCAR officials to visit Romanian parliamentarians Alexandru Peres and Corneliu Olar to discuss different approaches to developing the appropriate legislation. WOCCU EVP/COO Brian Branch, and Victor Miguel Corro, senior manager in charge of the International Partnerships Program, were also part of the group.

One of the first steps toward effective credit union development is making sure appropriate and enabling legislation is in place to help a movement grow. FEDCAR, which represents just 17 of Romania's 2,900 credit unions, has already strengthened it member institutions through stringent management training requirements, strong representation and requiring its members to use PEARLS, a financial performance monitoring program first established by WOCCU in 1990.

The delegation also visited several FEDCAR member credit unions to get a better understanding of the issues facing individual institutions.


Women's Network Plans Two Engagment Events

MADISON, Wis.-WOCCU and the Global Women's Leadership Network are offering two new engagement programs this year, one to Belarus and another to Kenya. Both programs will provide credit union leaders a one-of-a-kind, hands-on way to become directly involved in the global credit union movement, WOCCU said.

Participants will learn first-hand about the challenges other credit unions face within their regulatory environments, as well as work alongside WOCCU development staff on key credit union issues.

"Participants have the opportunity to travel to another country, learn about the local credit union system and provide knowledge that will help other movements flourish," said WOCCU EVP/COO Brian Branch "Each program needs different expertise, so attendees should select one that best matches their interests."

Belarus, located in Central Europe, will host an engagement program from Sept. 4-10, with work focused on developing credit union legislation and regulation, as well as providing staff training to the credit union trade association there.

The Kenya program will take place Oct. 30-Nov. 6 and participants will develop savings and credit products tailored to meet the needs of the rural poor while also seeing first-hand how small credit unions are reaching the unbanked through an application service provider program that WOCCU developed. During the trip, participants will also volunteer at a WOCCU-supported orphanage, Busia Compassionate Centre.

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Landmark Legislation In Peru

LIMA, Peru-The government of Peru has passed landmark legislation that recognizes the not-for-profit status of credit unions and other cooperatives and grants them tax exemption.

La Federación Nacional de Cooperativas de Ahorro y Crédito del Perú (FENACREP) had been working with a coalition of cooperative advocacy groups from the time of the bill's introduction into the legislature in December 2009 to get the new law passed.

Manuel Rabines Ripalda, 1st vice chair of WOCCU's board of directors and president and CEO of FENACREP, sees the enactment of the law, which limits or eliminates the application of sales tax to cooperative transactions, as an act of justice for the cooperative movement in Peru, according to WOCCU, which noted the country's cooperatives have long struggled to help lawmakers understand that cooperatives' transactions with members are not designed to produce profit, thus should not be taxed.

The law specifies the scope of two articles in Peru's existing General Law of Cooperatives by recognizing that cooperatives are different from commercial enterprises in that their transactions with members are cooperative acts. Since these cooperative acts are considered internal-carried out in accordance with the cooperatives' social objectives-they carry no motive for profit. Cooperative acts are not considered a "sale of goods" or "provision of services," so the sales tax associated with these activities is not applicable.

Nearly 20% of Peru's population, or nine million people, are members of around 1,600 cooperatives of different kinds. Nearly 900,000 people are members of 160 credit unions throughout the country.


Mobile Money Launches In Haiti

PORT-AU-PRINCE, Haiti-WOCCU has launched an initiative here to allow most Haitians to conduct financial transactions on their cell phones.

The Haiti Mobile Money Initiative (HMMI), a partnership between the Bill & Melinda Gates Foundation (Gates Foundation) and the U.S. Agency for International Development (USAID), is managed by WOCCU's Haiti Integrated Financing for Value Chains and Enterprises (HIFIVE) program.

According to WOCCU, HMMI is working with local mobile network operators and their partner financial institutions to provide Haitians with improved access to financial services nationwide. HMMI believes that access to safe and affordable financial services is an effective means to providing disaster and poverty relief and to stimulating economic development. Mobile money allows the poor in rural or underserved areas to safely and cheaply receive, send and save money, which directly contributes to improved economic well-being, WOCCU said.

HIFIVE has been involved in the HMMI since its launch in June 2010. WOCCU oversees the program and has administrative authority over a grant from the Gates Foundation to award one or more prizes to organizations that provide mobile money services via cell phones to as many of Haiti's estimated 9.5 million people as possible.

The Gates Foundation funding provides up to $10 million in prize money for HMMI program participants. Up to $5 million of technical assistance grants from USAID are available to help address obstacles to the implementation of these payment systems and to assure that HMMI's objectives of increasing mobile banking availability are met.

"Haiti's devastating earthquake on Jan. 12, 2010, left 316,000 dead and more than a million homeless, half of whom still live in tent camps," WOCCU said. "Lack of a secure place to keep their money puts many Haitians at risk for robbery and assault, problems that are reduced or eliminated through a widespread cell phone banking program. Such payment platforms can help address the limited points of financial service available in Haiti, where the population in many zones may face more than a seven-hour walk to conduct the simplest financial transaction."


Wis. CU Offers Lesson To Moldova

MADISON, Wis.-Ron Kase, CEO of Landmark Credit Union, shared his CU's story of growing from $2 million in assets to $1.6 billion in assets with a visiting group of four financial regulators from the former Soviet satellite country of Moldova.

Kase's strategy to success: adhering to philosophy and maintaining consistency. Kase told the visitors that credit unions grow best when they can mobilize savings for both institutional strengthening and member service.

The Moldovans' visit to Landmark was the capstone to a week of credit union education sponsored by WOCCU. The visiting regulators sought to better understand how successful credit unions operate so their country's own fledgling industry would be better poised to meet operational standards when the country applies to join the European Union later this year.

"We know that savings-led development coupled with appropriate and enabling regulations are key ingredients for credit union growth," said Dave Grace, WOCCU senior vice president of association services who co-hosted the visitors with Liliana Tangwall, WOCCU credit union analyst and a Moldova native.

Landmark was only one stop for the representatives from the National Commission of Financial Market (NCFM), Moldova's financial regulatory body. The group also visited with Madison Credit Union and Dane County Credit Union, both in Madison, as well as the Wisconsin Credit Union League, CUNA, and even the Wisconsin Department of Financial Institutions' Office of Credit Unions. A webinar conducted from WOCCU's Madison headquarters with members of the European Network of Credit Unions, WOCCU's sub-organization of European Union members, provided a European context for what the regulators had learned.

In addition to savings mobilization, the delegation learned about risk-based supervision, deposit insurance and the importance of sharing best practices among credit unions, their trade association and their regulator, according to Elena Pui, a board member of NCFM.


A CU That Owns Two Ambulances, Water

AIMÓN, Dominican Republic-In the mountainous central valley town of Maimón, Dominican Republic, Cooperativa de Ahorros y Créditos Maimón, Inc., celebrated its 20th year of service with workshops, social gatherings and sporting events-including a marathon to kick off the events.

But even more remarkable than the two decades of financial service, according to WOCCU, is how the credit union has changed the social fabric of everyday life. "The credit union has become a pillar of the community by adding value through more than just financial services, offering vocational training programs to hundreds of young adults, fortifying municipal water systems, providing two ambulances and offering the only comprehensive funeral services in town," WOCCU said.

The credit union provides vocational training to young people who might not otherwise have the means for such preparation to enter the workforce or start their own businesses, has built a water tower to bring running water to residents who had previously been without, owns and operates a funeral home adjacent to its offices and a hearse. A funeral insurance plan for members and their families helps ease the financial and logistical burden of a death so the family can focus on mourning the loss of their loved one, according to WOCCU.

The credit union's 43,000 members represent more than 60% of local residents, and assets total about $52 million.


'All Types Belong'

"What makes Maimón credit union truly great is its social engagement to benefit the community," said Ramón Antonio Diaz Guzmán, Maimón credit union board president. "All types of people in the region, especially those most in need, come to our institution to address small but systemic problems. Maimón credit union will continue to leave footprints in the hearts of our members and the community."

IRAC maintains diverse connections within the global credit union movement through a partnership with the Wisconsin Credit Union League (WCUL), facilitated by WOCCU's International Partnerships Program. The organizations first signed a partnership agreement in October 2007.


Columbia CU Execs Spend Week Touring Missouri

FENTON, Mo.-Two Colombian credit unions executives spent a week with their counterparts at Alliance Credit Union, learning how American financial institutions operate and discussing their role in the economy.

Dennis Sommer, President and CEO of $187-million Alliance Credit Union arranged the program through WOCCU. Sommer has a long association with credit unions dating back to the 1970s when he was a Peace Corps volunteer working with credit cooperatives in Cali, Colombia.

David Orjuela and Silvia Liliana Gonzalez visited the St. Louis area to learn about the roles of credit unions within the United States financial system, as well as specific practices used at Alliance Credit Union.


Lessons In Growth

Orjuela is the director of Risk Management at the Cooperativa de Ahorro Y Credito Coprocenva in Cali, Colombia. Gonzalez is director of Collections at Financiera Comultrasan Ltda. in Bucaramanga, Colombia.

"Being able to share how we manage our credit union and plan its future growth with our South American neighbors was an outstanding learning experience for everyone involved," Sommer said. "Our credit unions have many of the same opportunities, and it was great to be able to exchange ideas on how to approach those opportunities."


Louisiana CU Execs Spend Week at Canadian CU

HARAHAN, La.-A group of Louisiana credit union executives spent a week visiting Servus Credit Union in Edmonton, Alberta to learn more about SCU's very successful business services department.

The Louisiana league (LCUL) organized the trip in conjunction with WOCCU in response to CU interest. The group includesd representatives from Barksdale FCU, Jefferson Financial CU, La Capitol FCU, Louisiana FCU, and the Louisiana League.

During the trip, participants spent time at the credit union learning from various senior staff members about the many facets of Servus CU's business services operations, including credit applications, administration, underwriting, and collections, as well as business deposit accounts, cash management, payroll processing, employee solutions, and other member business services.

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