Mutual Financial Institutions

Table of Content

What is a mutual financial institution?

Mutual financial institutions have gained popularity among the masses and have become an integral part of our economy today. What are these mutual financial institutions and how do they operate are some of the answers that we are looking for. A study of credit unions and building societies will provide an insight into the operational aspects of these institutions.

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Credit Union

A cooperative non-profit financial institution that is controlled and operated by its members is a credit union. A distinctive feature of the credit union is that the members of the credit union are the owners of the cooperative institution. These unions are generally small and cater to a local area. The members of a credit union share a common bond like location, community, interest, employment, or religion. The credit unions offer its members more than just financial services. It is driven to a cause and the funds are mobilized towards the establishment and fulfillment of this cause. A group of people with common needs come together to form a financial institution that will fulfill their financial objectives. The philosophy behind the credit union is of service to its members and is not a profitable or charitable institution. Providing loan to a member to cover his unexpected medical bills, start a new business or enterprise, building homes and education for children – these institutions cater to the community needs that is generally not provided by other financial institutions. The membership in this institution is voluntary and open to anyone who would like to share the cause and principles of the association. All members irrespective of their account size enjoy the services of the financial institution. Furthermore, the members willingly share the operational responsibilities of the institution. These institutions are generally democratic in nature and all members are eligible to vote and run for board elections. In short a credit union encourages and assists its members in saving their hard-earned money, allows its members to borrow money at lower rates of interest, and counsels its members on how to use their funds wisely and achieve their financial goals. Moreover, these are the cheapest source of funds available to the borrowers.

Building Societies

A building society too is a mutual financial institution that is owned and operated by its members that offers banking and other financial services like mortgage lending to its members. The building societies are now competing with banks in certain areas for mortgage lending. This kind of institution allows the members to earn interest on deposit money and lend money to members to buy or build their own homes. It is a society that looks into customer interest and mutual benefit of members rather than profits. These associations are focused on their members’ needs and serving the local community. The board of directors of these societies is responsible for outlining and implementing the operational objectives.

These financial institutions have proved over time to be efficient mobilizers of funds promoting the habit of savings that can be used for mutual benefit in the community. The World Council of Credit Unions (WOCCU) states “credit unions distinguish themselves from the other (financial) players by perfecting financial intermediation between net savers and net borrowers at the local level instead of relying on external funds.”

The factor that drives them apart from other financial institutions is that while others are profit-seeking enterprises the goals of credit union and building societies are serving the community and its members across all economic levels of society. This has seen a remarkable increase in number of credit unions across the globe. Today these institutions serve more than 120 million members across 87 countries over the world. They help members realize their dreams of a better home, education, and a secured life.

Where did they first originate? (History – Europe, US, Australia, Canada, UK)

The history of mutual financial institutions date back to the 19th century. The first financial cooperative was organized by a group of workers in Rochdale, England in the year 1844. More instances of such cooperatives were marked in Germany around the same time. Herman Schulze-Delitzsch and Friedrich Wilhelm Raiffeisen were the first people to create credit unions in Germany in the year 1852 and 1864. Raiffeisen founded the first credit union in the Flammersfeld in the year 1849. This association depended on the support and charity of wealthy men. In 1864 the first credit union was formed with the policies framework that are still the base of today’s institution. Examples of such credit union societies were visible all over Europe and the concept attracted many people to start such ventures. Emergence of such institutions was reported in Italy, France, Netherlands, Austria, and other European nations. Most of these credit unions across Europe later merged with large cooperative banks and other financial institutions.

In US the credit union concept originated nearly 100 years ago. Alphonse Desjardins who realized the exorbitant rates of interest charged by the banks and other lending institutions was associated with the formation of the first credit union in US in Manchester, New Hampshire in 1909. He set up the St Mary’s Cooperative Credit Association, a credit union that served the interests of the working class. Edward Filene, a merchant and Pierre Jay, the Massachusetts Banking Commissioner framed the Massachusetts Credit Union Law that became an Act on 15th April 1909. This law became the guiding principle for the subsequent credit union laws and Federal Credit Union Act. The 1920s saw a growth in the popularity of credit unions with more and more people availing the services of these institutions to serve their personal and consumer needs. It was the low rate of interest and easy availability of credit that popularized the concept among the masses. People preferred to approach these credit unions than commercial banks that were charging high rates of interest. In 1920 a lawyer was hired to manage the Massachusetts Credit Union Association that served to promote credit unions in the state. In 1934 the Federal Credit Union Act was framed that formed a guiding source for credit union societies across the country. The subsequent years saw a rapid rise in the number of credit union societies and by 1960 more than 6 million people were members of 10,000 federal credit unions. The National Credit Union Administration (NCUA) was formed in 1970 – a federal agency that chartered and supervised federal credit unions. Another development in the credit union sector was the setting up of the National Credit Union Share Insurance Fund in the same year to insure the members’ deposits. The credit unions have prospered over the years and growing popularity has witnessed a tremendous growth in this sector. Today the credit unions in US alone serve 85 million members with $600 billion on deposit.

Kevin Yates formed the first official credit union, the Universal Credit Union in Australia in the year 1946. This led to increasing number of credit unions in the nation and in 1966 the Australian Federation of Credit Union Leagues was formed to cater to this growing sector. The first Australian Credit Union Act was framed in the year 1969. The World Council of Credit Unions was formed in the year 1970 – the objective of this association was to support the credit union movement across the globe. In 1977 the first 24-hour ATM was installed by the Queensland Teachers’ Credit Union. The Australian Credit Unions were given the same regulatory status as banks, reporting to the Australian Prudential Regulation Authority regulated under the Federal Banking Act in the year 1999. In 2006, the Credit Unions Industry Association and Australian Association of Permanent Building Societies merged to form the Association of Building Societies and Credit Unions.

Canada saw an emergence of credit union movement in the year 1900 when the first credit union was created in Levis, Quebec with 80 people coming together to form the Caisse Populaire. Alphonse Desjardins, a reporter in the Canadian Parliament, founded this association. A number of credit unions were formed in the subsequent years with people from all walks of life joining hands to form a mutually beneficial society. The country now has more than 4.9million members managing assets of more than $91 billion.

In UK the first credit union was setup under the Companies Act in Wimbledon, Highgate in London, and Hove in Sussex in the early 1970s. The influx of immigrants from Caribbean lands to UK was one of the contributing factors to the rise in credit union societies. The numbers grew from 27 in 1974 to 40 in the year 1977. The Credit Union Act received official stamp in the year 1979.

What are their guiding principles?

The founding principles behind the International Credit Unions are based on cooperation, community interest, and equality.  These unions originated with the idea of serving the community and making life better for all its members through cooperation and mutual help. It filled the gap created by commercial banks and other financial institutions that were only interested in profit making ventures. The common man had nowhere to turn to for fulfilling his dreams of a better life, education, and meeting unexpected medical costs. It was this need of the common man that led to the formation of credit unions across the globe. The mission of these associations was to serve the local community and provide services that were not readily available at the commercial banks or other financial institutions. Thus by providing loans to cover critical emergencies, counseling members on their financial matters, giving better deals in car loans and home mortgages, the credit unions made a big difference to the members and the community that it served. It was a platform that promoted brotherhood and expressed overall human development.

The growing number of credit union organisation across the globe has opened financial services options for many people who could not afford the high interest rates of loans provided by commercial banks and other financial institutions. This movement has greatly helped the third world countries where the credit unions are the biggest source of small savings account and loan services for the working population.

The credit unions have well-defined operating principles that guide the functioning of the credit unions. There are seven guiding principles of credit unions that are discussed below:

·         Voluntary membership

Credit unions are voluntary organizations where people come together to form cooperatives that offer financial services and benefits to its members irrespective of their caste, creed, religion, gender, or social status. The members of these associations willingly accept roles and responsibilities to govern and operate the daily activities. These associations are open to all members of the community who share the same objectives and vision that is constituted in the credit union association.

·         Democratic Member Control

All members in a credit union have equal rights to vote irrespective of their savings accounts size, deposits or volume of business. All members also enjoy the right to run for elections to the governing body and operating committee. The credit union is an autonomous body that works within the laws and regulatory framework. All members in this cooperative enterprise are involved in the decision-making and policy regulation aspects of the cooperative. This democratic nature of the credit unions is responsible for the members’ control over its entire operation and governance.

·         Members’ Economic Participation

The distinctive feature of the credit union is the ownership of the members of the union. The association is owned and controlled by the members. The members contribute to the capital reserves of the union and democratically control the funds of the union. The members as such get proportional benefits on their transactions with the union rather than the deposits or funds contributed by them. The extent of financial transactions and the general usage by the members determine the benefit proportion of the members.

·         Autonomy and Independence

Credit unions are autonomous associations working towards mutual self-help of the members and the community that it serves. These are independent bodies, self-regulated and self controlled for the interests of the associated members. If the credit union body raises capital from external sources the terms of such agreements ensure that the underlying democratic control of the association is not compromised.

·         Education Training and Information

The cooperatives actively promote education and training of its members, officers and the community in general. They empower the members with more than just financial services. Education is also provided by many credit unions to the underprivileged and uneducated section of the community that they serve along with the financial services. The credit unions in developing and under developed countries have assumed the role of social benefactor aiming at better lives with the aid of financial services at low cost, education, and health awareness information. These associations are dedicated to providing the necessary information related to health and nutrition among the locals who have been living a stagnant existence in the under-developed economies. The service provided by these associations is truly a boon to the community and represent the underlying principle behind such organizations.

·         Cooperation among cooperatives

The credit unions stand for cooperative venture among the members and the community that it serves. The cooperation that this kind of association extends provides for the mutual self help and mutual interest that is required to improve the lives of the people associated. These associations actively cooperate with other local bodies serving the community and other credit unions across the area and the globe to serve the members and the communities better. In many instances these cooperatives with similar interests and objectives have come together to provide a better life and alternatives to the community that they serve.

·         Concern for Community

A distinctive feature of the credit unions is the social and economic development that these institutions promote. In line with its operating principles and policies the credit unions across the world commits itself to empowering the community members with better lifestyle, education, financial help and health information. These institutions believe in social and economic transformation by providing the adequate resources to the members of the society. The vision these organizations extend to their members and the community at large has popularized the concept of credit unions globally. The decisions taken by these unions should be in line with the community interest and needs of the members.

Credit Unions are very effective in providing easy access to financial services at low cost, promoting self-help and empowerment of the members through education, information, and better lifestyle. These institutions have been instrumental in rebuilding societies and economies, making a difference to the lives of the people in the under-developed economies by promoting economic, social and democratic growth.

In addition to the operating principles discussed above the credit unions have to abide by the external, internal and individual governance principles laid down by the World Council of Credit Unions. These principles are ideals to be achieved and apply to all credit unions. The board and managers are responsible for the union’s adherence and compliance to these principles and objectives.

External Governance: All financial institutions have to comply with the basic standards of transparency, auditing and financial reporting. Credit Unions have to comply with the standards set by the International Credit Union Safety and Soundness Principles. In addition strict adherence to the local and national regulatory framework is also a necessity.

Internal Governance: Credit Unions are non-profit associations bound together for the mutual benefit of members and community. This makes them liable to adhere to the democratic principles set by the association. The onus of complying with the International Credit Union Operating Principles lies with the managing committee of the union. Moreover these unions should adhere to the one member one vote policy to retain its democratic nature.

Individual Governance:  Individual board members and managers have to maintain ethical code of behavior and professionalism at all times. They should reflect the vision and goals of the association and abide by the decisions taken in the board meetings. The moral responsibility and social obligation shouldered by these members should always be held in high esteem.

How do they differ from banks?

Credit Unions are financial institutions that are committed to social welfare and community development with their activities than profit seeking organizations. The social and moral obligations that these associations fulfill distinguish them from the commercial banks and other financial institutions. The banks and other financial institutions are profit-oriented organizations with no social or moral obligations. Businessmen to earn profits and expand their services globally run these institutions. Higher profits and higher dividends for the stakeholders is the ultimate goal of these institutions. Credit Unions on the other hand are dedicated to the social cause and lend a helping hand in bettering the lives of the community members that it serves. They exist not for profit or charity but for service of the local community.

The credit unions can serve only those individuals who are members of the association. The members are the individuals who have invested or opened an account with the cooperative and are in return willing to share the duties and responsibilities of running the institution. Banks on the other hand, can serve anyone in general. Any individual can approach the bank and avail its financial services as per his needs and requirements.

The members of the credit union are also owners of the cooperative venture. The operations and management are in the hands of the members who are fully aware of their responsibilities in controlling and managing the organization. An individual who deposits money in a credit union becomes a member of the association and his contribution in the form of deposit makes him a shareholder or owner of the institution. The customers of the banks have no ownership in the organization. A customer can come and open his account or avail the services of the bank, but he will not have any hand in the banking operations or managing of the institution.

The members of a credit union have voting rights and elect their Board of Directors that takes care of the cooperative management activities. The customers of the bank do not have any voting rights and have no association whatsoever with the management of the banking institutions.

The credit unions are autonomous bodies, democratic in nature. The control and ownership of the association lies with its members. A group of individuals bound by the same principles and objectivity come together to form a union that lends its services to the community that it represents. This is the base of a credit union. The banks on the other hand are controlled by the stockholders and run by paid employees.

The credit unions are established for serving its member community and looking after the interests of its members unlike its banking counterparts that are solely driven towards profit.

The profits or surplus earned by the credit unions are distributed to the members in the form of lower interest rates, higher savings or low cost services. The commercial banks and financial institutions on the other hand distribute the profit to a group of stakeholders. The stakeholders are group of individuals that have invested their money in the banks and are the owners of the institution.

The National Credit Union Administration federally insures the credit unions. The Federal Deposit Insurance Corporation on the other hand insures the banks.

Credit unions are associated with the state and national credit union leagues that support these organizations. The cooperatives share information and ideas on the working of the enterprise. The banks do not share any such information and work as separate entities towards the goal of profit making.

The Board members of the credit unions are volunteers working towards the goal of the enterprise. They are not paid for their services. The Board members of the Banks are compensated for their services.

How safe is your money in a Credit Union?

The World Council of Credit Unions framed the International Credit Union Safety and Soundness Principles to safeguard the savings of the members from losses. All credit unions are required to comply with these principles and standards. A group of members form the supervisory committee that checks the functioning of the credit union and its compliance to safety principles. An Auditor is also appointed to audit the cooperative’s business transactions. In addition a credit union has to maintain an insurance policy to protect its members from fraud and losses. Financial reports and related information have to be sent by the credit unions to the Financial Services Authority, an organisation that supervises the credit unions, banks, and building societies. If the Financial Services Authority feels that the credit union is not adhering to or complying with the safety policies it may direct the credit union to cease operations to protect the members’ interests. In case the credit union fails to function successfully and the savings of the members’ are at risk, the Financial Services Compensation Scheme comes into picture. It provides compensation to the members of the credit union in such cases.

The safety and soundness principles laid down by the World Council of Credit Unions state those loans that are not paid as per agreement are considered delinquent the day after the first missed payment. In such cases the credit union should not grant new loans to cover the outstanding amount and interest.

Secondly, each year a portion of the credit union’s earning should be kept aside to cover losses from unexpected sources. High institutional capital from the members will not only ensure higher returns on savings, lower interest rates on loans and additional reserves but can also be used to negate any losses that may arise from delinquent loans or other unforeseen events.

The pricing of services provided by the credit unions should be adequate to cover the cost of operations. The credit union should also strive to cut its operational costs to achieve efficiency of operations.

What is the standard structure?

The credit unions across the world operate on standards of transparency and accountability of the members towards the enterprise. A cooperative of individuals sharing the same goals and objectives need the guiding light to achieve the vision of the enterprise. The management and the board of directors in the cooperative are important pillars that guide the daily management and operations of the unions. The members of the association are equally responsible for the running and managing of the association. Hence it is imperative that the credit unions inform the members of the governance practices since it is their money and their cooperative. Communication of all directives and practices to all the members is vital to maintain transparency and trust. The various levels of the organization that runs the entire operations need to have clearly defined roles and perspectives to measure their performance and evaluate the outcomes.

Board of Directors

It is vital that the board of directors of the credit unions act as a whole instead of group of individuals since they reflect the ideals and principles of the organization and not individual personalities. The credit unions need to clearly define the roles and responsibilities of the Board of Directors – what is expected from them, what assessment criteria will be used to define the eligibility of the members to the Board, and what will be the evaluation parameters to the successful functioning of the Board. These are some of the perspectives that need to be defined for effective and efficient functioning of the Board of Directors.

The Board of Directors are custodians of the members’ money and responsible for implementing the law and principles essential for the effective running of the organization. An ideal board of directors constitutes five to seven members who have to meet the assessment criteria for selection to this level. Upon selection the Board members need to undergo specific training workshops to understand the responsibilities that the position carries with it and its implications on the organization.


The management includes various positions and responsibilities to oversee the entire operations of the organization. The key positions include:

The President – who will report to the Board of Directors regarding all vital aspects of the operational functioning of various departments.

The Vice President – who serves in the absence of the President and is responsible for loans recovery and risk management.

Treasury Manager – who supervises all aspects of financial planning and management, reports financial updates and strategic management issues to the President and the Board.

Company Secretary – who is responsible for all legal and regulatory matters related to the organizational management.

Audit and Compliance Head – who is responsible for conducting necessary audit procedures to check compliance with the standards and principles set by the affiliating association.

General Manager – who will be responsible for the general administrative and controlling activities of the organization.


The staff of the credit union association constitutes individuals who are responsible for the implementation of the organization practices and policies. It enrolls – Loan officers who are responsible for loan processing and disbursement.

– Supervisors who are responsible for overseeing the various work procedures.

– Accounts officers who will be in charge of the members’ account processing and transaction handling.

These are some of the key responsibilities that are handled at the staff level.


Volunteers in credit unions are the members who willingly take up some roles and responsibilities for the cooperative enterprise. These volunteers are dedicated individuals to the underlying cause and obligations of the enterprise.


The members of the credit union are the most important aspect of the association. It is the needs and realizations of these individuals that shape the organization goals and vision.

To summarize the governing roles of each level should be well defined and well understood by all the individuals in the organization. Good governance requires the Board to provide strategic direction to the management, speak unanimously, and delegate operational authority to the CEO or President. All staff and management people across all levels should be accountable, provide timely monitoring and reporting of daily activities, adopt transparency, and abide by the Code of Ethics and operating principles of the organization. These are the essential elements of good governance and efficient management of cooperative enterprise.

Volunteers and volunteerism

Credit cooperative unions emerged as a need for low cost loans that could enable farmers and working class population with affordable consumer finance. These cooperatives were the result of efforts of a few enterprising and socially progressive thinkers who believed in making a difference to the society. The aims of these individuals to make lives comfortable and improve living conditions were slowly realized through these combined cooperative ventures. They were the volunteers for bringing about a radical change in financial markets and their bearings on the common man. The associations and cooperatives provided financial assistance and services to many who could not afford the high rates of interest charged by the commercial banks and other financial institutions. The common man was freed from the clutches of the moneylenders with the emergence of such cooperative institutions. Moreover, it popularized the concept of savings and planning expenses with limited resources. The counseling provided by the volunteers of these organizations gave the community members a direction to better standards of life and finance. Anyone could become a member of these credit unions that required a small amount of money deposit for being a member. These members enjoyed equal rights and responsibilities towards the credit unions irrespective of the size of their deposit money or saving accounts. The growth and popularity of this type of mutual cooperative financial institutions across the globe has revolutionized the credit union movement.

Today the credit unions have undergone structural changes and have metamorphosed into well-planned financial units that make a difference to the community they represent. The volunteers of social change have come forward to give a chance to the underprivileged and under-developed economies of the world. Besides, financial assistance and services the credit unions have also joined hands to improve education and health factors in the communities across the world. They provide information related to health and nutrition to those who have no access to such services. The humanitarian ground on which these association operate have gained rapid popularity strengthened its purpose over the years. The credit unions have evolved as mechanisms of social change and upliftment and are popular not just as any other financial institution. In many instances the volunteers of such cooperatives have come forward to assist the victims of natural disasters and have contributed to the rebuilding of economies and communities. In times of need these associations have come forward transcending the international boundaries to make a difference in the lives of the people struck by natural calamities. They have set an example and highlighted the importance of what impact an individual can have on the community and how he can create opportunities for others, provide economic stability and social development for a better existence.

What about mutual Building Societies? (Australia and UK)

The building societies originated in the United Kingdom in the 19th century when a group of workers came together to form a cooperative – pooled their savings to enable the members of the cooperative to build or buy their own homes. The concept emerged as a cooperative financial institution that was originated and owned by its members and offered financial assistance or mortgage services to the members. The popularity of such institutions that offered low cost loans for homes spread across the globe. Today these societies compete with the banks in the mortgage lending market. In 1980s the British laws were changed to allow the building societies to offer services equivalent to the banks. The building societies offered a real alternative to the banks – a banking alternative that was based on the community interest and low cost financial services.

Most of these building societies are mutual organizations where the members own the enterprise and have an equal say in the managing and controlling of operations. The building societies provide for safe and convenient place for saving money and avail low cost loans and financial services. They have enabled many members to build or buy their own homes. Such establishments have empowered the people and freed them from the clutches of the high rates of interest and heavy documentation requirements of commercial banks and other financial institutions. These societies work within the regulatory framework of the cooperative financial institutions.

In UK many building societies merged with larger banks or financial institutions since they were unable to compete with the larger banks. There are about 60 building societies in UK till date with total assets nearing 305 billion pounds.

In Australia the building societies have strong presence and play a vital role in the local communities. The societies have expanded their services and empowered the common men to buy and build a better life for themselves.

Work undertaken in developing countries (Asia and the Pacific)

The credit unions and other mutual finance institutions have contributed a great deal in the developing countries. The emergence of such financial institutions in these countries has opened doors to low cost financial services. In countries like Guatemala, Jamaica, Kenya, Eucador, Brazil, Sri Lanka, Bangladesh and Mexico credit unions are the largest source of small savings and credits for individuals. The World Council of Credit Unions has realized that many people in these economies do not have the minimum amount of money to become members of such associations. The Council has come up with a solution for such people by creating Savings and Credit Associations where the members can join as a group and gradually upgrade themselves to individual member status with their own savings accounts and loans. In most of these developing countries the conventional commercial banks and other financial institutions do not find it viable to operate in rural and semi-urban areas where the capacity of people for savings are low. The people in these areas are left with no other option but to go to the local moneylenders who exploit their predicament. The credit unions and self-help groups in the form of micro-finance institutions have come in to fill the gap in such areas and these have become the most sustainable systems. This has freed the people from the clutches of the moneylenders.

In the recent studies conducted by World Bank Group and by many other multilateral institutions have revealed that micro finance and self help groups have increased the average saving capacity of the members by 30%. The micro-credit and self-help-group concept of credits in rural areas have contributed in enhancing their confidence in managing their family finance, improved their ability to communicate, and is the most vital ingredient in increasing their capacity-building. The economic growth patterns have been changing in these areas after the introduction / formation of credit unions in these areas thus impacting in decreasing the family violence and many other social evils.

These studies have suggested and advised that micro-finance / credit unions / self-help groups should be encouraged for the credit plans of the rural and micro-economic zones.

There are many success stories in developing countries, which have created the benchmark for micro-credit institutions. The Grameen Bank of Bangladesh is the case of group-based micro-finance. These kind of micro-credit institutions have been formed and recognized by the commercial banks also and are being used as the intermediaries for their credit and loan disbursement activities. The Grameen system adopted in Bangladesh and Indonesia met with resounding success with over 2.2 million members in four years of its origin in the year 1976. The popularity and the success of the system have been widely replicated in many other parts of the developing and third world countries.

The Asian Confederation of Credit Unions felt the need to reach out to women who had less access to savings and credit facilities in their villages. The confederation felt that the empowerment of these women was vital for the overall social development in these areas. Policies and guidelines were formulated by the Asian Confederation of Credit Unions to give operating framework to the credit unions to increase the income and saving capacity of these women. The guiding principles of these policies were to encourage the women to use finance for productive activities. Using the credit facility for improving their business and enabling them to improve their household finance. These unions provided budget for women education and training program for their business development capacity. The policy framework was adopted in four countries – Thailand, Nepal, Sri Lanka and Indonesia. The credit unions were given the targets to increase the number of women participation, train 75 trainers on Micro Enterprise Development and Planning in the four countries, consolidate the business development capacities for women, generate a minimum savings of US$ 20 per member, provide micro-enterprise loans, empower women for access to finance, and increase awareness on development issues such as human rights equality.

The impact of these guidelines were observed in Sri Lanka where daily savings scheme was introduced and opportunities for women leadership was created and there was an overall increase in women participation in the society activities and improvement in health awareness.

Though these schemes and associations have brought an unprecedented change in the women empowerment in these countries the results are not very satisfactory. Challenges are still mounting – the saving and credit mechanism are not designed as per the economic needs of the women. The women need small capital for starting business enterprise but they still approach other sources of credit than the credit unions. These are some of the challenges that face the credit unions in these countries and the addressing of these issues is of vital importance to the success of their objectives and the social empowerment that these institutions can bring to the economies.

Instances of credit unions coming to the relief and rehabilitation of communities struck by natural disasters are plenty. Credit unions across the globe joined hands to rehabilitate and provide relief to the victims of Hurricane Mitch that hit Nicaragua. The credit unions provided loans on easy terms to people who lost their homes, livelihood, and crops.

Similarly when the tsunami hit Sri Lanka the credit union associations came forward to provide relief, food, and shelter to the affected communities.

The socio-economic situation has underwent a great change with the spread of these credit union and the mutual finance cooperative institutions that have been working for the social upliftment and economic stability.

Why make a career in the mutual sector?

The credit union and mutual finance institutions provide an interesting career option for people who want to make a difference in the lives of others. A career option that is committed to working for a social cause and moral obligation to the community that it serves. This sector provides the individual a chance to join the diverse staff with diverse accountabilities and participate in a dynamic work environment.

Working for a credit union, big or small in whatever part of the globe is promising since it provides a new purpose and definition to the work done. It cannot be compared to any ordinary job that pays off in the form of a paycheck at the end of the month. The meaning and purpose attached to the work done at credit unions bring a sense of satisfaction and achievement that is comparable to none. This is one sector where relationship comes before profits and social and economic development comes first and foremost.

A career in this sector will train the employees in aspects of culture; provide an insight into the varied lifestyle of communities across the globe. It provides exciting avenues for growth and experiences the cultural flavors of different parts of the globe since it has scope for extensive traveling.

All these advantages make the career in credit unions a fruitful and adventurous one though it should be kept in mind that the monetary compensation may not be as attractive as those offered by commercial banks and other financial institutions. It is ideally suited for individuals who want to make a difference in the lives of others and achieve a sense of purpose and direction in fulfilling their moral and social obligations.

What is the future for Credit Unions and other mutuals?

There is growing consensus that credit unions and other mutual finance institutions have made and can further improve the lives of the under-privileged and under-developed economies of the world. These institutions have played an important role in providing affordable credit in the rural and semi-urban areas where the commercial banks and other financial institutions do not think viable areas of operations.

The credit union sector has experienced tremendous growth over the years – UK alone has over 779 credit unions with a member base more than 814,538 and 900 million pounds asset.

Large credit unions enjoy scale of operations advantage and have encouraged many credit unions to increase their membership and asset size.

Credit unions having a skilled management team have greater chances of succeeding in their objectives.

These are some of the patterns that credit unions across the globe follow.

The World Council of Credit Unions has been promoting the growth of strong, self-reliant, and sustainable self-help credit unions that can contribute to the financial well being of the members.

Any individual requires credit at some point of time and more so for poorer section of the society. It has been observed that the formal banking institutions and other large-scale financial establishments are unable to provide such services due to non-viability of such services in the rural and semi-urban areas. The people do not have enough resources to repay the high interest of the loans. In such circumstances it is the self help credit unions and other mutual finance institutions that offer viable banking options.

Changes to the credit unions and their working models can bring about a makeover in the way the credit unions operate and how it can put to further use for social and economic development. Caja Popular Mexicana (CPM) is one such association that has made a big difference in the lives of people of Latin America. The association was founded in twelve years ago when 62 credit unions, state fedrations and a national federation merged to form the CPM – the largest credit union in Latin America. Inefficiency of operations and lack of proper coordination among the branches were the underlying cause for its failure in the initial stages. The change in operations and policies of the organisation has made it a successful venture today that is growing at the rate of 14,000 members per month. The transformation took place due to the efforts placed by the World Council of Credit Unions to change the strategic and operational pattern of work. Introduction of friendly services and extended branch working hours, a call center to attend to any queries or complaints has increased the trust of its consumers. The association intends to implement more changes in its operations by introducing electronic payment services, faster credit delivery, and improved customer service.


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Mutual Financial Institutions. (2017, Apr 12). Retrieved from

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