April 22, 2019 by Erin O'Hern
In February, I had the opportunity to visit Ecuador in a World Council of Credit Unions exchange visit with members of the Iowa Credit Union League. The experience was eye-opening.
The credit union movement is thriving in the South American nation of Ecuador, and the success of two of the largest institutions offers some lessons for credit unions in this country.
Ecuador, which is about the size of Nevada, has as many as 600 credit unions. We visited two of them – Cooperativa Jardin Azuayo in Cuenca and Cooprogreso, based in the capital of Quito.
Jardin Azuayo is the second-largest credit union in Ecuador, with more than 400,000 members and assets of $835 million, and Cooprogreso is the fourth-largest, with 214,000 members and assets of $491 million.
I learned so much during my visit to both credit unions, but a couple of things stood out to me. The first was their emphasis on microlending. Microlending programs have allowed both credit unions we visited to impact their members and their communities immensely. The programs allow the credit unions to help middle and lower-income members obtain loans for their businesses despite a typical lack of credit history, and gain critical educational opportunities.
During our visit to Jardin Azuayo, we were taken to a large restaurant. That restaurant made its start from a small-dollar loan and started with just a few tables. After visiting the restaurant, we were taken to a family farm. It was there that we learned how the partnership between the credit union and the restaurant helped 11 family farmers form and finance a cooperative that elevated their standard of living.
We visited the home of one of the farmers and she spoke about how the success of the cooperative helped her earn a living in her hometown and allowed her to care for her father instead of moving to the city to look for work. She explained how when she was a little girl, she dreamed of the day where she would show visitors her home, maintained through her hard work. Her dream was being realized in that very moment, as she showed us around both her farm and her home.
But the impact doesn’t stop there. Cooprogreso is innovative in using data to analyze small borrowing from the many different individuals and industries they lend to. They are able to use their experience with micro-lending in their communities to help inform their future credit decisions.
In support of borrowers, Cooprogreso loan officers go to the member, talk about their needs, and help them apply for loans electronically. It is an uplifting lending process that includes education and business advice.
Education is also a top priority at both the credit unions we visited, and an essential part of their strong cooperative emphasis. Instead of a marketing department, Jardin Azuayo has an education department. That’s how important it is to them.
Both credit unions offer financial education at all levels, from adults to young children, along with training in professional development, leadership, and other subjects beyond financial issues.
The leadership structure for these credit unions is fascinating for its complexity, but it clearly works for them. Jardin Azuayo, for example, has literally hundreds of directors that feed into a 60-member general assembly. This structure starts locally with the election of local representatives, who then elect delegates, which builds grassroots support for their cooperative endeavors.
The directors we talked to said they are delighted to serve, be engaged, and help the community. They take their leadership role seriously, and it offers professional development as well.
As a PolicyWorks employee with an unending curiosity for details, I, of course, asked a lot of questions about compliance. Their regulatory structure has undergone significant changes via a law change in 2010.
Before the recent changes, large credit unions had to navigate regulations originally designed for banks while the oversight of smaller asset sized credit unions left the cooperatives vulnerable to bad actors, that were truly not credit unions, opening a shop under the cooperative name. This discussion once again reminded me of how critical it is to advocate for the regulations that are appropriate to serve your members.
Just as in the U.S. compliance is a critical piece to their operations. It can both cause a burden that is difficult for credit unions to keep up with but also play an important role in ensuring the overall health of the industry and the availability of financial services to its citizens.
Learning from the international credit union community was an incredible opportunity that I hope others in the U.S. will seek. To see large credit unions grow but maintain their effective and passionate commitment to the cooperative spirit through unique board and governance structures, educational tools, and nimble lending models is a great example of the power of credit unions to improve their communities.