A new World Council of Credit Unions’ committee tasked with identifying best practices and strategies that credit unions around the globe can utilize in their response to the Covid-19 pandemic met for the first time on August 27.
The inaugural meeting of the Covid-19 response committee focused on identifying the areas of greatest need throughout the international credit union movement in managing issues caused by the pandemic.
“I feel a huge responsibility to serve as the chair of this committee during this global crisis. I will do my best to help the global credit union movement overcome Covid-19,” said committee chair Younsik Kim, who also serves as a World Council board director and as the chief executive officer of the National Credit Union Federation of Korea (NACUFOK).
Kim and other members of the committee presented the most pressing issues facing credit unions across the globe. While the concerns varied from region to region, one thing members agreed on was that credit unions everywhere will likely face much bigger problems related to the Covid-19 crisis in 2021—due to the eventual suspension of government assistance programmes and loan payment moratorium. Other issues were specific to certain countries or regions of the world.
George Ombado, the chief executive officer of the African Confederation of Credit and Savings Cooperative Associations (ACCOSCA), said that while Covid-19 is first and foremost a health issue, it is seen as more of an economic issue in most African countries, where many credit union members suffer from food insecurity.
“When lockdowns started, they were not being adhered to,” said Ombado adding that many people were keen on working in order to put food on their tables as opposed to staying at home. With Covid-19 increasing food insecurity, especially in heavily impacted employment sectors such as tourism and transportation, employee-based credit unions that specifically serve those sectors have been hard hit.
The biggest concern is that many credit unions across the continent lack a strong capital base, which could make it hard for them to survive the crisis.
Going forward, Ombado identified stronger advocacy in front of national-level regulators and greater financial stabilization efforts as key drivers in helping credit unions survive the crisis long-term.
The Philippines, India, Indonesia and Bangladesh were the countries identified by Asian Confederation of Credit Unions (ACCU) chief executive officer, Elenita San Roque as facing the worst Covid-19 crises currently. They are all experiencing elevated numbers of cases and deaths.
But challenges remain for credit unions across the continent, including lack of members’ ability to make loan payments. Since many are entrepreneurs and farmers, they have seen their incomes diminished amid lockdowns—leading to higher delinquency rates.
With new loans being limited and employed credit union members putting more money into savings, credit unions are experiencing over-liquidity issues.
ACCU has put together a guide for its member associations that has assessed the impact of Covid-19 on members, employees and institutions. The guide also includes a business continuity plan for credit unions.
In addition, ACCU has worked with WOCCU Advocacy to have a dialogue with national regulators—specifically on loan payment moratoriums—to ensure there is relief for credit unions.
In South Korea, NACUFOK has worked with credit unions to provide interest free loans for their members. The federation has also donated 200,000 facemasks and 100,000 units of hand sanitizer to credit unions in need.
While Latin America has been one of the hardest hit regions of the world when it comes to the number of COVID-19 cases and deaths, there are huge differences in the impacts to credit unions from country to country, according Adrian Rodriguez, chief executive officer, Federation of Savings and Credit Cooperatives of Costa Rica.
Rodriguez said countries with better regulatory supervision have credit unions that are better prepared to handle the crisis, because they have more tools at their disposal. But where there is less supervision, credit unions are in a much weaker position—with some already reporting losses. Unemployment and economic contraction are high in some countries, contributing to the problem.
While liquidity is high across Latin America currently, Rodriguez foresees a potential for a liquidity crisis next year, which could cause some smaller credit unions to close their doors. If that happens, it could cause withdrawals to increase in larger credit unions as well.
Potential common needs identified by Rodriquez include:
- Better financial stabilization plans;
- Digital transformation;
- Greater access to payment system networks;
- Financial education; and
- Better Advocacy efforts.
For the 17 countries represented by the Caribbean Confederation of Credit Unions (CCCU), loan losses are starting to accumulate as some countries, including The Bahamas, Jamaica, and Trinidad and Tobago, recently reinstituted lockdowns and curfews.
CCCU General Manager Denise Garfield said members’ credit unions are seeking guidance from regulators on how to proceed now that some loan moratorium payments have expired or are about to expire.
There are stark differences between the United States and Canada when it comes to the level of the COVID-19 crisis from a health perspective—with Canada averaging just a few hundred cases per day currently, and the U.S. still continuously leading the world in both cases and deaths.
Martha Durdin, CEO of the Canadian Credit Union Association, said loan losses are higher, but not as bad as credit unions had anticipated. Meanwhile, mortgages are up, and housing prices are stable.
In the United States, Credit Union National Association (CUNA) Chief Engagement Officer Greg Michlig also noted that loan volumes have remained solid, while savings have increased due to government incentive payments.
But both Durdin and Michlig noted the earlier theme—that those dynamics will likely change in 2021, once government assistance programs end.
Michlig also noted that the shift toward digital services that has happened during the pandemic may be permanent in the United States. About 66% of normal credit union transactions have moved from in-person to digital in America, which could stay at that level going forward.
Poland and Ireland—two of the largest credit union markets in Europe—are seeing mostly stable conditions.
In Ireland, credit union offices are open and loan issues seen earlier in the pandemic have subsided, according to Charles Murphy, the Irish League of Credit Unions representative on World Council of Credit Unions’ board of directors.
Nevertheless, Murphy notes that government regulators have yet to offer guidance on how credit unions should conduct annual general meetings ( AGMs) virtually, causing some confusion for ILCU members who have had to postpone their AGMs indefinitely.
In Poland, government regulators have provided timely assistance to credit unions, but there are still some challenge including low interest rate levels and a need for greater digital transformation to serve members remotely. Rafał Matusiak, Chair of the World Council Board of Directors and President of Poland’s National Association of Cooperative Savings and Credit Unions (NACSCU), said liquidity levels in Polish credit unions are high and safe, but is uncertain whether that will continue