Savings & Credit Co-ops - Credit Unions (ICA/UN 1995)

   This document has been made available in electronic format
           by the International Co-operative Alliance.
                                  Background Information Note 9




In his report to the General Assembly at its forty-seventh
session on the status and role of co-operatives in the light of
new economic and social trends (document A/47/216-E/1992/43 of
28 May 1992), the Secretary-General concluded that savings and
credit co-operatives "have a strong potential for mobilizing
local savings and providing credit to members, particularly
important in apparently capital-scarce conditions, thereby
encouraging thrift and entrepreneurial activity and hence
stimulating local multipliers. They appear to be capable of
making a significant contribution to the solution of financial
problems facing the countries now engaged in transformation from
centrally planned to market-determined societal management.
Notwithstanding the very valuable contributions of certain of its
agencies to supporting their expansion, it appears that there
remains considerable scope for further United Nations support for
this category of co-operatives, in close collaboration with WOCCU
(World Council of Credit Unions)"

The Secretary-General recommended that "the General Assembly may
wish to draw the attention of member States undergoing
significant structural adjustment to the benefits, in terms of
mobilizing local savings and financing entrepreneurial efforts,
of promoting and supporting savings and credit co-operatives, and
to recommend that they avail themselves of the help of WOCCU and
other relevant international organizations in establishing them
and in ensuring their efficiency and stability".

In his latest report to the General Assembly (document A/49/213
of 1 July 1994), the Secretary-General concluded that
"co-operative enterprises provide the organizational means
whereby a significant proportion of humanity is able to take into
its own hands the tasks of creating productive employment,
over-coming poverty and achieving social integration y and social

In resolution 49/155 of 23 December 1994, the General Assembly
recognized the important contribution and potential of all forms
of co-operatives to the preparations and follow-up of the World
Summit for Social Development and invited the World Summit, in
formulating strategies and actions, to give due consideration to
the role and contribution of co-operatives.

The Summit Declaration also commits itself to increase
significantly and utilize more efficiently the resources
allocated to social development: one means by which this could
be done is to "utilize and develop fully the potential and
contribution of co-operatives". And the Programme of Action
proposes "strengthening co-operation among Governments, community
organizations, co-operatives, formal and informal banking
institutions, private enterprises and international agencies,
with the aim of mobilizing local savings, promoting the creation
of local financial networks, and increasing the availability of
credit and market information to small entrepreneurs, small
farmers and other low-income self-employed workers, with
particular efforts to ensure availability of such services to
women."  The Programme also proposed enhancing opportunities for
the creation and growth of private sector enterprises which would
generate additional employment by means of actions which included
"promoting and supporting and establishing legal frameworks to
foster the development of co-operative enterprises and
encouraging them to mobilize capital, develop innovative lending
programmes and promote entrepreneurship".

                    ("CREDIT UNIONS") 

Credit unions are legally constituted not-for-profit co-operative
financial institutions chartered and supervised, for the most
part, under national co-operative law and created to meet the
basic financial service needs of primarily low and middle income
citizens who generally cannot obtain these services through the
existing banking system. They provide a means to learn the value
of regular savings and wise use of credit. They are a form of
economic empowerment, based upon an individual's ability to
control and manage the financial institution which provides
savings, credit and financial management.

Membership eligibility is usually defined in terms of some common
affiliation, such as employment or residence. All members are
owners of the enterprise and have equal privileges, opportunities
and responsibilities. Typically a credit union only accepts
deposits from and grants loans to members.  All members are equal
owners of the enterprise and each has one vote in the election
for committee members and the board of directors.  Members of
these elected bodies serve in an unpaid voluntary capacity.

During the initial period of their establishment, credit unions
can be operated by using relatively unsophisticated
administrative practices, so that costs are very small and
practically all interest income from loans may either be
distributed to the members, reinvested in the credit union within
a capitalization programme, or both. When combined with member
confidence in their own institution this allows credit unions to
mobilize considerable amounts of capital from apparently capital
scarce communities.

Subsequently, as credit unions expand in membership and capital
more sophisticated operating and lending practices must be
introduced.  Usually individual credit unions join national
federations and thereafter international federations at regional
and global levels. While at first acting only as a
representational and service organization, some of the regional
federations - such as that in Latin America - have taken on
operational functions, permitting the transfer of capital between
national savings and loan systems.

Access to means of secure savings and credit at non-exploitive
terms is of the greatest importance for the poor and those at
risk of becoming poor. Credit unions provide credit on reasonable
terms, either to render more efficient the household sector (they
are often the only financial institution providing housing loans
to low-income families), to provide capital for entrepreneurial
activities, or to provide resources at times of emergency,
whether personal or arising from national disaster or civil
strife. They enable the poor to avoid dependency on money lenders
and permanent indebtedness. They are of particular importance to
women, allowing them to manage their own financial affairs and
to obtain credit for their own entrepreneurial ventures.


The proportions of the working age population who are members of
credit unions is already considerable in a number of countries.
At the end of 1993 members of WOCCU ranged from virtually 100 per
cent in Dominica, to between 30 and 49 in five other countries
(including 44 in Ireland and 36 in the United States); between
10 and 29 per cent in another 16 countries (including 30% in
Quebec and 22% in other parts of Canada; 21% in Australia and 13%
in France). Savings and credit co-operatives belonging to the
Raiffeisen movement are also of major importance in Austria,
Germany and Switzerland.

Savings and credit co-operatives have the most dynamic growth of
any type of co-operative.  Since 1972, when WOCCU first started
gathering credit union statistics, world-wide credit union
savings and loans have both grown at annual rates of 15 per cent,
while assets have grown by 16 per cent annually.  At the end of
1993 members of WOCCU comprised 55,186 credit unions and
93,216,000 members. In USD total savings amounted to 383 billion,
loans to 248 billion, reserves to 17 billion and assets to 425

As of the end of 1993 members of WOCCU existed in 28 African, 11
Asian, 3 Pacific, 13 Caribbean, 16 Central and South American,
and 5 North American and European countries which were members
of the United Nations, as well as in a number of dependant
territories. In addition, largely through a technical assistance
programme operated by WOCCU in collaboration with its regional
and national federation members, and with support from some
governments and intergovernmental organizations, new credit union
movements have been set up in Byelorussia, China, the Czech
Republic, Latvia, Lithuania, Poland, the Russian Federation and
Ukraine. The same technical assistance programme is helping to
set up new, and to strengthen existing, national movements in a
number of developing countries, including South Africa.


WOCCU's mission is to assist members to organize, expand, improve
and to integrate credit unions and related institutions as
effective instruments for the economic and social development of
people. It serves as a forum for the exchange of ideas and
information, provides services for its members, promotes
membership development and growth, represents members' interests
and extends co-operative financial services to areas where there
is an established need. WOCCU holds consultative status with the
UN Economic and Social Council and is a member of the
International Co-operative Alliance, and the Committee for the
Promotion and Advancement of Co-operatives (COPAC).

WOCCU operates a "Women in Development" programme, believing that
increasing the participation of and services to women is not only
consistent with co-operative philosophy, but provides additional
resources, future leaders and new professionals. Women make up
high proportions of membership in some national movements: at the
end of 1992 there were 87% in Lesotho, between 50 and 61% in
Montserrat, Costa Rica, Seychelles, Philippines, Japan and Sri
Lanka, and between 30 and 49% in nine other countries.

This Note has been prepared jointly by the International
Co-operative Alliance and the United Nations Department for
Policy Co-ordination and Sustainable Development. For further
information contact the ICA at 15, Route des Morillons, 1218
Grand Saconnex, Geneva, Switzerland. Tel: +41 22 929 8888, Fax:
798 4122, E-mail: 

                                                June, 1995