UK and Romanian credit unions share knowledge

Across the world, credit unions face similar challenges to which they can respond by working together, an exchange meeting between the UK and Romanian sectors declared.

The four-day event, which saw representatives from both countries share knowledge and expertise, was arranged through one of the main credit union associations in Romania, UNCAR, following a 2013 European research project into affordable credit, which involved the British and Romanian sectors.

The 30 visitors went on a series of visits and seminars, including Manchester where they were greeted by the Lord Mayor, Cllr Paul Murphy.

In Manchester, they also saw presentations by Kathryn Fogg of Pennine Community Credit Union and Christine Moore of Manchester Credit Union. International credit union expert Ralph Swoboda, from the US, offered global perspectives on development, while Matt Bland, policy manager at ABCUL, discussed current issues in legislation and regulation.

Credit unions have had a long history in Romania, the first ones being set up in the late 19th century when the banking sector was at an incipient stage. By 1903 there were 700 credit unions across the country.

The movement was one of the most advanced in the world during the interwar period but, after the communist regime came to power in 1948, the credit union sector became politically subordinated to the state and the greater part of them were nationalised.

Following a law decree in 1949, the name of the savings, credit and assistance associations was permanently changed to “houses of mutual assistance”.

All services provided to members prior to the 1949 decree were cancelled except the one provisioning loans from the members’ savings funds.

After 1990, houses of mutual assistance (CAR) became independent from trade unions and politically free. They associated as part of territorial unions and joined into the National Union of CAR (UNCAR).

Until now, CARs have remained financial institutions mainly for employees. But UNCAR is working to ensure that CARs provide microcredits to an increased number of self-employed people, from rural and urban areas, to address financial and social exclusion.

As in the UK, a key challenge for Romanian credit unions is increasing membership. In 2003, they had over 1.5 million members, but by 2010 membership had fallen to 942,381 due to economic restructuring and privatisation. This trend is reversing now, said Stelian Minoiu, director of the supervision department of UNCAR. In 2014 CARs counted almost 1 million members.

The number of CARs fell from 3,895 in 2003 to 1753 in 2014 – a positive development, said Mr Minoiu, as credit unions are often too small and scattered. But mergers were legally complicated, he added.

Another challenge is that, because most CARs have employee members, there is a limited common bond. While affiliation to credit union associations is optional, non-affiliated credit unions are not supervised.

The lack of consent among the main national groups of credit unions – UNCAR, FEDCAR and OMENIA – is also a barrier. There are about another 20 credit unions outside of UNCAR membership.

Mr Minoui said: “Credit unions in Romania face challenges in ensuring appropriate legislation, regulation and supervision.

“We need a new legal and regulatory framework and learning of the British experience in this area is important for us.”

He added: “We do not have government-protected savings, which means we have to be highly efficient in controlling bad debt in our credit unions.”

Paul Jones, from Liverpool John Moores University, added: “Credit unions in Romania are small, with the largest credit union having about 8,000 members and many more with just a few hundred members.

“Average savings per member are €507 and the average loan is €1,232, charged on average at 16% APR. But what was impressive was that Romanian credit unions still pay a 5% dividend on savings, which is far in excess of that paid by any credit union in this region.”

More than 90% of the assets of Romanian credit unions are loans. The visit enabled British credit unions to see how even small credit unions could operate efficiently and profitably within a competitive market place.

Assisting them to do this was a robust approach to credit control in which all borrowers have to identify one or two other people to guarantee the loan.

As well as hearing from different credit union experts, visitors got the chance to experience the local culture. The Merseyside and Greater Manchester Forums organised two traditional pub nights, one in Manchester and the other in Liverpool, and a banquet in a restaurant in Manchester’s Chinatown.

Angela Fishwick, chief executive officer for Unify Credit Union, said: “It was wonderful to welcome representatives from Romanian credit unions to Wigan and to learn from each other. Credit unions have millions of members across the world, all co-operating and thriving from shared knowledge.

“We have made new friendships which will continue to grow and we hope to welcome other credit unions from other countries to our credit union in future.”