As consumers seek trustworthy financial institutions, credit unions worldwide have seen an uptick in growth and membership – especially during the recent years of economic crisis and recession.
Over the last few years, credit unions flourished as consumers took their savings and business needs to the safety of these depository institutions. From 2007 to 2010, membership around the globe increased to 188 million, up 11 million from just a few years before.
This is due in large part to the fact that credit unions have helped – rather than hindered – its members. When banks refused to lend, credit unions provided communities with low-interest loans and supplied businesses with the capital needed to succeed. In addition, members were able to save at interest rates that were higher than some of the biggest banks in the US. In 2010 alone, credit unions loaned USD 960 billion to members worldwide, and housed over USD 1.2 trillion in savings.
As a result of this lending, communities were able to reinvest savings, thus providing jobs and increasing economic activity. This is especially true in developing countries – such as Australia, Brazil, Cameroon, Costa Rica, Kenya, Korea, New Zealand, Panama, Peru and Singapore – where many members are self-employed entrepreneurs and family business owners. Due to credit unions increasing their lending to these micro- and small enterprise owner members, many were able to survive the economic downturn and savings grew 20 to 30 percent.
One reason why credit unions were able to effectively help these members was due to innovation, which enabled their expansion into new areas of business beyond their peri-urban communities to more remote rural areas. Widespread access to wireless communications in remote areas and declining technology costs enabled credit unions to explore new ways to deliver services remotely without having to invest in brick-and-mortar infrastructure.
For example, in Latin America, credit unions linked together to form networks through shared branching. These primarily small community financial institutions could now provide members with one of their country’s largest point-of-service (POS) networks. The new approach was especially important for members who produced their goods in one community and traveled to another part of the country to sell or trade. To meet the needs of these members, credit unions sent rural outreach officers on motorcycles and in pickup trucks to remote communities on a regular schedule so that town residents knew that they could access services on a certain day each week -- rather than pay the costs of travelling into town.
In addition, the officers were remotely connected to the credit union’s central server and were able to perform transactions live and issue a receipt to the member. To expand service from one day a week to all working days, some credit unions put a POS device in the local store. This allowed members to merely swipe a debit card and deposit or withdraw cash from their accounts as part of their regular shopping activities.
Another way that credit unions used technology to empower members was through the use of mobile devices. For example, in Kenya, Mexico, Ecuador and Haiti, credit unions partnered with telephone companies to allow members to move money from their accounts with their cell phones. This way they could receive loan funds, make loan payments, make deposits, transfer money to other individuals, or purchase goods in stores by moving funds electronically from their credit union accounts to cell phone accounts.
As a result of these innovations, credit unions are now benefiting from their commitment to their members by seeing a steady uptick in funds and money transferred to these local institutions. The continued lending during these hard times and the proactive advancements on behalf of the credit unions generated member loyalty and helped maintain member commitment to meet their repayment obligations as the recession deepened.
Today, there are 53,000 credit unions around the world that service 188 million people in 100 countries. Increasing levels of member service in many rural communities has helped generate significant membership growth. Technology has played a significant role in this growth and so has commitment to member service. But credit unions are trusted because they are community-based institutions that keep their members well-being at heart and put their needs first – and this has made all the difference.
Brian Branch is the President and CEO of the World Council of Credit Unions(WOCCU), the global trade association and development agency for credit unions. WOCCU promotes the development of financial cooperatives worldwide to empower people through financial services and advocates on behalf of financial cooperatives on a global and national level for improved laws and regulation. The organization’s technical assistance programs introduce new tools and technologies to strengthen credit unions’ financial performance and increase their outreach.