1. Credit Unions 101
PRESENTED BY VICTOR CARLO M. RESANO, MBA MAJOR IN
ORGANIZATIONAL DEVELOPMENT, ST. PAUL UNIVERSITY MANILA, MA IN
THEOLOGY, ADAMSON UNIVERSITY - ST. VINCENT SCHOOL OF THEOLOGY
2. What is a credit union?
A credit union is a not-for-profit financial institution that exists to
serve its members.
A credit union is a not-for-profit financial institution that exists to serve its
members. Credit unions provide products and services to people who
share something in common, such as where they work or live, or even their
nationality.
The democratic nature of credit unions allows all members to have an
equal voice in the operation of the organization regardless of the amount of
money each person has on deposit.
When a person joins a credit union, they are considered a member
because they are one of the owners and shareholders of the institution.
3. History of Credit Union
Credit unions are not-for-profit financial cooperatives. In the early stages of
development of a nation's financial system, unserved and underserved
populations must rely on risky and expensive informal financial services
from sources like money lenders.
Credit unions proved they could meet demand for financial services that
banks could not: from professional, middle class and poorer people. Those
that served poorer urban and rural communities became an important
source of microfinance.
The first working credit union models sprang up in Germany in the 1850s
and 1860s, and by the end of the 19th Century had taken root in much of
Europe. They drew inspiration from cooperative successes in other
sectors, such as retail and agricultural marketing.
4. cont.
Credit unions are not-for-profit financial institutions that exist to
provide exemplary service to consumers – which they call members
– because a credit union’s customers actually OWN the institution
where they bank.
Credit unions exist to serve members, not profit from them. All of a
credit union’s profits are returned to members in the form of fewer
fees, lower rates on loans and higher rates on savings. Credit union
membership offers numerous benefits, including access to a variety
of services like simple savings, home equity loans, IRAs and more.
5. Credit Union, Thrift Savings and
Loan Association in the Philippines
Credit Unions (CUs) are internationally understood as Thrift,
Savings, and Loans Associations.
CUs have somewhat developed a second name as
Credit Co-operatives.
Uniquely and unusually in the Philippines, there are
no more CUs but only Credit Co-ops. Also, in the Philippiness,
credit is synonymously if not misunderstood as loan, debt or
"utang" rather than trust.
In the Philippines in the early 1970s especially after the
declaration of Martial Law that was understood to be running
after the many communists movements and their considered
various fronts including various Labor Unions, credit unions then
"sounded" or "misunderstood" like the labor unions; and so
CUs were somewhat considered communist fronts if not
communists organizations as many CU or co-operative leaders
were arrested and placed in jails if not concentration camps; and
many could still be missing until today.er than "trust".
6. Credit Union, Thrift Savings and
Loan Association cont.
To somewhat further degenerate credit co-operatives or
CUs into ordinary Lending services or institutions, co-operatives
are now employing "collectors" with titles like "account officers",
etc. that only promote practices of usual and ordinary "lending
institutions" (rather than the values of "thrif and
savings" of CUs) and may not be increasing co-op
membership and much less of "quality" co-op membership.
While the Philippine Laws recognizes and encourage
multi-purpose co-operatives and many other types of
co-ops (consumers, producers, marketing, etc. and now
subsidiaries) as proposed by pioneering co-op leaders in
the early 1980s, co-op leaders appear to be contented and
promoting only the CU type.
7. Cont.
Rather than expanding (membership involvements and
benefits) on the internationally accepted practices of CUs with
credit committees, almost all co-ops in the Philippines have
abolished credit committees (by supporting a contrary law
provision under R.A. No. 9520 rather than on 6938 and 6939);
and worse, employing corporate style of internal auditors); etc.
8. What is the difference between
credit unions and banks?
Credit Unions are Not-for-profit cooperatives
Credit unions return earnings to members in the form of lower loan
rates, higher savings rates, and free or low-cost services.
Each person who deposits money into the credit union is a member
with a share of ownership.
Credit unions are controlled by Board of Directors elected by
members.
Most credit union board members are volunteers.
Credit unions are only allowed to serve a select group of individuals
that have a common bond such as where they work, live or even
their religion.
9. Banks
Banks are For-profit Organization.
Banks returns profits to shareholders.
Customers have no ownership in the corporation
Banks are controlled by stockholders who elect the Board of
Directors.
Bank board members are generally paid for their service.
Banks can serve anyone in the general public.
10. How does everyone benefit from
credit unions?
Credit unions benefit consumers Credit unions create competition in
the financial services industry. When financial institutions are forced
to compete with one another, they must work hard to provide
quality services at competitive rates.
It is the top priority for credit unions to improve services for
members, not to increase profits for stockholders. When credit
unions provide exceptional service to members, they raise the bar
for other financial institutions. Ultimately all consumers benefit.
11. Benefits of Credit Union Cont.
Credit unions benefit communities Credit unions have a history of
giving back to the communities they serve. Credit unions have
repeatedly proved that their philosophy of “people helping people”
is an everyday way of doing business.
All around the state credit unions are working to provide
communities the services and resources they need.
Credit unions are also actively involved in reaching out to
underserved areas and providing services to those who are not
traditionally served by financial institutions.
By teaching citizens how to properly build, maintain and use credit
wisely, credit unions are giving them the tools they need to achieve
financial success and further contribute to the local economy.
12. Cont.
Credit unions are best identified by their adherence to cooperative
principles, especially related to membership and control.
Many organizations of credit unions were started by and/or
controlled by governments in the developing world, and were
described as ‘credit unions’ or ‘cooperatives’ by their promoters.
However, government control, whether in a capitalist or communist
political context, represents a fundamental repudiation of
cooperative principles.
13. Advantages of Credit Unions
Customers are owners.
With credit unions, the set of owners and the set of customers are
one and the same. All decisions should benefit everyone.
Credit unions are non-profit.
Non-profit status means that more of the profits are shared with the
owners/customers. That doesn't mean that the institutions can't earn
a profit; any business needs to earn money to survive. The difference
is that there isn't a pressure to find ways to make money off the
customers. Additionally, credit unions benefit from exemption from
federal tax, and that saved expense help more of the unions'
revenue to be put to work.
There are fewer fees and higher savings rates.
14. Disadvantages of Credit Union
Access to new technology is limited.
There certainly are drawbacks to being a non-profit. Credit unions often do not have the funds to invest
in technology. As a result, some credit unions' websites appear as if they belong in a bygone era. I've
come across a few credit unions that still do not have a website that allows online account access. The
level of technology varies greatly from one credit union to another, and some credit unions do have full-
featured web-based technology, but it's worth auditioning a website before committing to a new credit
union if accessibility is important to you.
They have fewer ATMs.
With a national bank, I know that I could travel anywhere in the country, and perhaps internationally,
and find ATMs from my bank to avoid unnecessary fees. Credit unions are often community-based
groups with no capital to install ATMs in convenient locations. Credit unions often get around this
limitation by allowing you to use an existing network of ATMs, and if that ATM's owner charges you a fee
for its use, the union will refund that fee on your statement. Be sure to read the fine print of your
agreement to determine whether you will be able to find free ATMs near you.
Membership is restricted.
Credit unions are often focused on a certain community — most often either a geographic location or a
profession. This has created the impression that it can be difficult to find a union for which you qualify.
You might find that you're not eligible for the credit union that looks most appealing to you, but just about
everyone can find a credit union to join. For example, Pentagon Federal Credit Union is generally only
available to those who are U.S. government employees and a few other select groups, but anyone else
can also qualify with a $15 donation to an organization.
15. Additional Info on Credit Unions
Deposits at credit unions are insured, just like your deposits at banks.
The PDIC is the government organization that ensures that your bank
balances are safe, even if the institution fails, up to a certain
amount. Credit union balances are protected by the National
Credit Union Association (NCUA).
Like banks, credit unions often offer a full suite of financial products,
such as credit cards, mortgages, debit cards, business loans, and
checking accounts. Their non-profit status means that most do not
have the funds available for major marketing and advertising
campaigns, so it's difficult for the public to get the information
needed to make an informed choice between banks and credit
unions. It may require some research, but it is worth the potential
savings and service.
16. Strengths of Credit Unions
People helping people
Partnership, not just a credit union
The right products, pricing, programs, people, policies, procedures,
and processes
Differentiation
Promote what you “don’t do” that other financial institutions are
doing that is not consumer friendly (rather than promote what you
“do”
Use the 3 C’s of branding to communicate your message: Clear,
Concise, and Compelling
17. Weaknesses of Credit Union
The mindset of credit unions doing business as they always have
Lack of established goals aligned with credit union goals and action plans for
staff as well as business development department
No “real” added value in today’s market (everyone offers FREE checking, FREE
bill pay, FREE statements, etc. – so they think)
Lack of creative marketing/branding/programs in the Philippines to appeal to
existing and potential community business partners
Lack of full-time business development personnel to focus 100 percent
community business partners in order to build relationships and increase
penetration of the community.
Lack of credit union philosophy that all employees are responsible for growing
the credit union
Mindset that credit union is too small to have a full-time business development
person or staff
Products, pricing, programs, people, policies, procedures, and processes
18. Recommendation
Any imposition of minimum competency requirements should be
cognisant of the need to maintain the level of volunteerism in the
movement.
Legislation should be passed in the Philippines to prioritize unsecured
credit union debt over other types of unsecured debt in recognition
of the work that credit unions continue to do to end financial
exclusion among vulnerable sections of society
