Survey reveals similar challenges for credit unions around the world

The financial crisis has left credit unions (CUs) around the world facing similar challenges, says Brian Branch, president and chief executive of the World Council of Credit Unions...

The financial crisis has left credit unions (CUs) around the world facing similar challenges, says Brian Branch, president and chief executive of the World Council of Credit Unions (WOCCU).

Speaking at the annual conference of the Association of British Credit Unions (ABCUL), Mr Branch said the crisis meant people started to regard CUs as an alternative option for their savings, particularly due to their commitment to the welfare of their members.

To assess the current state of CUs, the WOCCU asked members across the world what challenges they faced. The survey revealed a consistent pattern in terms of challenges. Despite different national circumstances, CUs are usually constrained by regulation, especially after the problems of the financial market led to tougher rules. As a result, CUs need professional staff to monitor regulations and fill out reports, increasing their costs.

One of ABCUL’s responsibilities is to work with the regulator and advise on how regulation will affect CUs. ABCUL is also working with the WOCCU, having created the European network of CUs, which will look at the impact of regulation coming from Brussels.

According to Mr Branch, the role of trade associations like ABCUL has changed in recent years, having to advocate rather than just represent CUs.

“We are very proud that ABCUL is part of WOCCU,” he said.

With technological developments, CUs have also had to adjust to rapid changes in the system. Customers now want online access to payments and to carry out financial transactions on a mobile. Furthermore, the number of transactions on mobiles outnumbered those online, which, in turn, outnumbered branch transactions.

“CUs everywhere try to continue to provide services that respond to what the customers want,” said Mr Branch. He advised delegates to use social media to engage with members and attract younger members.

Attracting more savers and borrowers is another challenge for CUs around the world, with most credit union members aged over 48. He asked delegated what had contributed to the recent growth of  CUs in the UK. Most agreed that the Growth Fund has led to an increase in membership – but the fund had also led to more disadvantaged people joining credit unions, making it difficult for CUs to get back into the middle channel.

Manchester Credit Union welcomes over 500 new members every month. However, around 80% of these are financially excluded. Delegates expressed concerns that CUs continue to be perceived as “a poor man’s bank”. In Scotland, a commercial sponsored by the Scottish Government has helped raise the profile of credit unions.

Mr Branch said CUs in the USA, Brazil or Canada offer a full range of products, which explains why they have grown so much in recent years. Tougher regulation has also led to more mergers and shared pools of investment. A number of credit unions share resources to create a shared platform and offer the same services as larger institutions.

With competition from new financial institutions, tougher regulations and the need to diversify membership, the main objective for credit unions will be remain sustainable.

Increased co-operation is the answer

Grzegorz Bierecki, chair of WOCCU and Polish MP,  agreed that credit unions face similar challenges, some of which have resulted from the financial crisis. Mr Bierecki, who could not attend the conference, sent a message expressing his concerns over the fact that credit unions were paying the cost of the crisis they had not contributed to by being forced to observe “increasingly restrictive regulations, very often disproportional to the size and type of their operations”.

“Low-risk credit unions are being forcibly pushed into a straitjacket of rules appropriate for banks, very often gaining nothing in return in the form of privileges or possibilities which banks enjoy,” he added.

In this context, effective global advocacy was essential, he argued. Another answer to the various challenges faced by credit unions is implementing organisational changes by improving co-operation and seeking to attain goals that go beyond individual credit unions.

“If CUs aim to provide financial services at the highest level, at tens and in scope required by the members so that they are not forced to use commercial financial institutions, they will only be able to do so through co-operation”.

He praised British CUs for being active at international level and for “drawing their strength from mutual co-operation”.

“I congratulate ABCUL on their ambitious credit union development plans, drawing their strength from mutual cooperation. I am confident that we will soon see British CUs embark upon impressive growth, and the British movement will become prominent in the global credit union community.”

He also highlighted the collaboration between the British and Polish credit union movements, which resulted in the first registered Polish Credit union in the UK.

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