Credit Unions: Philosophy, Policy and Regulation

Proceedings from the "First NIS Policy Forum on Microfinance Regulation and Supervision"
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This presentation discusses the philosophy, policy and regulation of credit unions (CUs), focusing on the Central Eastern Europe (CEE) and the New Independent States (NIS).

The presentation:

  • Defines CUs;
  • Lists countries in Europe that have CUs as well as those that have cooperative financial institutions;
  • Describes the following philosophy and operating principles of CUs:
    • Open entry/exit of member owners;
    • Equal rights, responsibilities and treatment;
    • One member, one vote;
    • Business with members only;
    • Joint holding of institutional capital and reserves;
    • Limited return on member shares without equity appreciation;
    • Liquidation of assets without profit to members.

The presentation analyzes:

  • Differences between CUs and banks/ non-government organizations (NGOs);
  • CU governance structure;
  • Common bond amongst CUs - the diverse financial needs of open membership and commitment to help one another;
  • Sources of credit union funds;
  • Sustainable growth formula for CUs: promotion of thrift through incentives;
  • CU services;
  • Means of ensuring long-term viability of CUs through formal regulation;
  • Need for regulations to reflect model CU needs;
  • Sustainable development concepts for CUs;
  • The ‘CU crisis’ in the Czech Republic and lessons that other CUs can learn from it;
  • CU challenges in the region.

The presentation concludes by identifying the following legislative and regulatory priorities in the CEE/NIS:

  • Law for CUs;
  • Becoming part of the financial sector;
  • An adequate regulatory and supervisory framework.