Credit Unions Offer Service Formula Across the World

AT a time when the United States commercial banking industry is retrenching through mergers and acquisitions, and many savings and loan associations are struggling, credit unions - the smallest segment of the financial services sector - are expanding their operations domestically and internationally.

Although the number of credit unions in the US has declined through mergers and some liquidations (dropping 19 percent since 1985), the amount of assets in credit unions has increased over 90 percent during that period. Credit unions have more than $261 billion in assets, compared with $137 billion in 1985. Membership has expanded from 52 million members (or depositors) in 1985 to 64 million today.

Credit unions are also expanding overseas, "both in third world nations, as well as in Eastern Europe," according to Ralph Swoboda. He is president of the Credit Union National Association Inc. (CUNA), the main industry trade group in the US, based in Madison, Wis. Working in cooperation with the World Council of Credit Unions Inc., CUNA is helping to organize credit unions in Bulgaria, Czechoslovakia, Poland, Hungary, Ukraine, and the Commonwealth of Independent States. Ten credit unions have been forme d in Poland in recent months, serving 23,000 members. Scores of applications have been accepted from Polish groups eager to form credit unions, Mr. Swoboda says.

Poland, though well ahead of its Eastern European neighbors in liberalizing laws allowing credit unions, is not unique, Swoboda says. Within Russia in recent months, for example, credit unions were started up at Moscow State University, at the Auto/Zil Corporation, an industrial concern, and at the Moscow Metro Subway System. Trade unions throughout the former Soviet Union have expressed interest, he says.

Credit unions are member-owned, not-for-profit financial cooperatives. In the US, accounts are insured up to $100,000. Almost 60 percent of US credit unions are federally regulated; the remainder are regulated by state agencies. Credit unions serve the employees of a single company, or associations of people having common interests. Thus depositors are considered members. Credit unions have traditionally offered passbook savings accounts and low-cost loans. Many institutions offer additional services, su ch as checking accounts, credit cards, individual retirement accounts, and money-market accounts. Because loans are given only to members, credit unions in the US have been able to keep loan losses at increasingly low levels (See chart below).

The motivation for US credit unions to help set up credit unions in Eastern Europe, Swoboda says, "is not financial." Rather, the effort is linked to the almost missionary zeal of credit union people, who have traditionally envisioned their financial sector as a cooperative people's movement. US credit unions differ from the credit unions and cooperatives of Western Europe, including Britain, which often sell stock, and are more profit-driven. The triennial forum of the World Council of Credit Unions, to

be held in July 1994, in Cork, Ireland, is expected to attract delegates from 84 nations.