Amy Ahanotu of Redwood Credit Union in Redwood City, California, shared his story about travelling back to Nigeria.  In Nigeria, Amy found people fascinated by the credit union model, and they entreated him to help them establish their own.  We are always inspired by the pioneering efforts of volunteers who make that human connection across borders and apply credit union values to help people help themselves.

Here is Amy's story:

I received a phone call from someone in Atlanta, Georgia, this past weekend. He told me that his relative called him from Nigeria and told him all about Redwood Credit Union (RCU). He was so impressed about what she told him that he decided to get more information from our website. After going through our website, he called his colleagues in San Francisco and asked them to open accounts with Redwood Credit Union in San Francisco. He told me that he is going to promote RCU at any opportunity he gets, since he visits the San Francisco Bay Area frequently on business.

Here is the back story:

In 2010, I travelled to Nigeria for my mom's funeral. After the funeral many of the women, knowing what I do, came to me complaining about big banks not giving them loans for farming and to grow their business. (Does that sound familiar?) I used that opportunity to quickly introduce credit union concept to them and how it could be a solution to their problem. They liked the idea, but there was a problem. They did not have the money to start the cooperative, so I gave them seed money to get them started. They kept in contact with me over the year, and I acted as their advisor.
 
I went later returned to Nigeria, and the women came to see me. They told me how they used the seed money to provide no-interest loans to farmers and traders and the success they achieved. As of the day we met, all the loans had been paid with zero default. Most importantly, the women had good harvests, sold their farm products at profit and now had money for the next planting season.

The traders took me to their shops to show me the improvements they had made and how they used their loans. I was so impressed with their success that I gave them more money so that more of the women could benefit from the cooperative. I also used the opportunity to better explain to them about Redwood Credit Union and why what I did was just an extension of Redwood Credit Union's community service, albeit in a Nigerian village, and how we are making a difference in people's lives in the United States. Hence the phone call to this relative in Atlanta.
 
It feels very good to take what I have learned from RCU and financial support to help people that as usual the big banks could not help. It goes to show that the RCU story could be told not just in the counties where we do business but far away in a different continent and have the story back in the United States through phone call to a relative. I am continuing to work with them as they establish a good foundation for their cooperative and, one day, maybe an official credit union that could help more people and not just the women.
 
The photos are those taken during my meeting with the women in the village and my presentation of financial literacy to them. You can see how happy they are at hearing what I had to say about Redwood Credit Union and the credit union movement in general and how it will benefit them if they continue to stay focused on building a good financial foundation in the village.  I also used the opportunity to provide school supplies to the village childrenand conducted two financial literacy sessions to the children focusing on the credit union movement.

You can see the happiness in the children's faces. Yes, Redwood Credit Union also serves communities in as far places as this Nigerian village.

With the release of Basel III, regulators all over the globe are adapting their systems to new capital standards.  Basel III will not be implemented in full or directly apply to all credit unions, yet it will impact many on various levels.

We recently met with regulatory capital expert, Glenn Westley, on the Basel III Capital Accord basics and their implications for credit unions.  Glenn will be leading an upcoming World Council webinar on Feb. 1, 2012, from 9–11 a.m. Central Standard Time (CST) to explain the regulatory guidelines in detail. You can learn more about the webinar and register at www.woccu.org/webinars.

A short summary of the Basel III changes:  

The Bank for International Settlements (BIS) Committee on Banking Supervision (BCBS) gave us the first Capital Accord, Basel I.  Basel I established the requirement for financial institutions to have total capital of at least 8% of risk-weighted assets (RWA).  The Basel II framework released in June 2004 added a capital charge for operational risk, required that supervisors focus on main risks in the banking system for calculating capital requirements and required enhanced disclosure requirements, including each financial institution’s risk exposures and risk assessment processes.

Basel III final version capital standards were published by BCBS in June 2011. Basel III narrows the definition of acceptable capital and calls for more capital than Basel II.  Basel III eliminates some of the hybrid debt/capital instruments that previously counted as capital, and it emphasizes common equity (not available to credit unions) and retained earnings (the principle capital for credit unions).

Common equity tier 1 (CET1) capital includes common equity, retained earnings, year-to-date income net of dividends, disclosed reserves and unrealized gains and losses recognized on the balance sheet.  CET1 should be 4.5% or more of RWA. 

Tier 1 capital (=CET1 + additional tier 1 capital) must be 6% of RWA or greater.  Additional tier 1 (AT1) capital must meet a set of 14 specific criteria.

Total tier 1 and tier 2 capital must be equal to or greater than 8% of RWA.

Tier 2 capital includes general loan loss reserves that are held against unidentified losses and are freely available to meet future losses. It also includes subordinated debt with a straight-line amortization of 20% per year.

Basel III introduces new elements in capital requirements: the capital conservation buffer and countercyclical buffer.  If the financial institution capital level is in worrisome or deep trouble range, the institution must cut back dividend payments to shareholders and discretionary bonuses to staff and must add CET1 capital. This is the capital conservation buffer.  The countercyclical buffer, composed entirely of CET1 capital, is activated if credit growth (credit to the private sector/GDP) is excessive.  This buffer helps slow down excess credit growth and the resulting buildup of system-wide risk, including real estate bubbles. It also arms financial institutions with extra capital to withstand potentially large losses.

Basel III also introduces a leverage ratio of tier 1 capital/(unweighted assets + other exposures), which must be equal to or greater than 3%.  The leverage ratio serves as a simple backstop to risk-based capital measures.

I hope you’ll join us for the upcoming webinar to learn what changes may be coming and how they could affect your credit union. Plus, you will have the opportunity to ask your most pressing questions. Learn more and register for the webinar at www.woccu.org/webinars.

It looked like any other residential street in León, Mexico. We pulled over in front of a bright blue painted three-story house, maybe with fewer windows than its neighbors. A knock on the door, and we stepped inside to Arturo’s smiling welcome. Arturo makes shoes. This was his business, Coturno.

“Where did you come up with the name Coturno?” Arturo explained that he had read that the ancient Egyptians wore shoes with leather laces up the calf, called “coturno.”

Thirty-six employees stood at leather cutting machines, sat at sewing machines or hovered over glue press machines. Latex glue fumes hung in the air. On the first floor, two men cut shoe patterns and punched holes into rolls of leather. Two others glued and pressed foam soles and hard soles together; two more stitched the leather to the soles. We followed the assembly line farther on, where two women sewed the folds into the leather that gave the shoe its shape. We followed the line up to the second floor where glue was applied, the leather stretched into shape, pressed together and the final stitching put in place. Final trim was applied here, and shoes were sorted into boxes and shipments prepared for stores throughout Mexico.

“We started at zero,” Arturo explained. “My wife was a member of Caja Popular Mexicana. I had an idea, and she said to start with a loan from the Caja. We bought a machine with the loan, and now we produce up to 1,200 shoes a day.” 

The business burned down at one point, and Arturo had to start over again. The Caja trusted him and provided the financing to start again. Before, he made fine shoes. In starting over again, he determined to make light, simple and inexpensive shoes.

“It was a good thing I did,” he explained. “I had friends that made the more expensive shoes, but the market is flooded with Chinese shoes and they cannot compete. Many have gone out of business. Mine are inexpensive at 150 to 200 pesos (US$11–15) and handmade of leather. The imported shoes are synthetic and more expensive.” 

Arturo’s business produces 16 varieties of shoes. Arturo’s son, Arturo, cruises magazines and the internet looking at pictures of shoes to come up with the shoe designs.  Recently graduated from school as an industrial engineer, the younger Arturo prods and adjusts the assembly line looking for ways to add more efficiency and allow for more creativity.

“The Caja financed this machine, and this one,” Arturo, Sr., pointed out.  The Caja provides him with the working capital for his small factory. It also provides his direct deposit payroll for the employees. “A lot safer for them and for me,” he noted, comparing it to the time when he and they had to carry cash on paydays.

We drove the long road from Kisumu, on Lake Victoria in Kenya, to Busia.  Pulling into Busia, we stopped at the Blue York for Bruce to put on his Santa Claus costume.  At the orphanage, the kids were stunned to see Santa Claus walk into the compound.  His elves trailed with bags of presents that Sarah had raised.  Under the equatorial sun, Bruce handed out presents to the orphans: one present and a book for each child.  This was the first present many had ever received in their lives.  As always, the kids broke out in song and dance … and then scurried away to play with their new toys and with each other.

We piled into the four-wheel-drive pick-up in Ayacucho, Peru, and drove up into the surrounding mountains.  We set out to visit one of the small communities served by Santa Maria Magdalena credit union.  

“It is a twenty minute ride,” our guide explained.  The driver gave him a quizzical glance.   

Roque explained how these communities had suffered the violence of the guerrilla war years.  Many families moved away to find security in Lima.  Those that remained found it difficult to make a living, and the rural communities slumped into economic despondency.  The family men and the young both left the communities to find work in urban areas.

We had worked with the credit union to finance small agricultural producers in these communities.  No other financial institutions were providing services to the remote communities; they were just too small and too far away to seem profitable.  For the farmers, it was costly to leave their work and pay for a ride to town to go to the banks … and when they arrived they were just not welcomed.

The credit unions worked with the producer associations of the communities to identify products that had a profitable market demand.  We mapped the value chain of which inputs were required, who provided the inputs and to whom producers could sell the products.  The credit union assured greater market security in the rural communities by providing financing to the actors along the value chain: input producers, producers and purchasers.  By purchasing as a group, small farmers could buy inputs more cheaply. The credit union assisted the producers in negotiating purchase agreements from buyers.  As a group, the producers were able to negotiate better future guaranteed pricing.  The buyers provided the farmers with training and technical assistance in order to assure crop quality at harvest time.

After an hour and a half of climbing the dry scrub mountain terrain, we arrived at Tambobamba to see how the program continued now that several years had passed.  The community had found its niche producing quinoa, the traditional Andean grain.  Quinoa is now popular in developed economies for its high protein nutritional value and for the absence of gluten, among those allergic to gluten.

We heard from the producers and their families.  They had shifted from subsistence crops to quinoa gradually over time.  They had successfully paid off their loans from the credit union and now qualified for larger loans.  Each year, they expanded the amount of land under production.  They hoped to bring irrigation to their community so that they could produce two crops a year rather than just one. 

Families were better off.  They received a higher income because they had better access to the market.  With credit union financing, they were able to expand income as they increased the volume of production.  It was a double whammy.  

Speeches, thank-you’s and solicitations over, the families pushed together the wooden tables in the school house, and we sat down to a lunch of large bowls of quinoa porridge and plates of choclo corn.  The discussion turned to education. 

“Now that the village is reinvigorated, we want to improve the education for our children,” the farmers’ association president explained. 

The credit union federation provides computers to the villages that participate in the value chain programs.  The school provides links to the Internet, and the children are taught to access the Internet.  Once lethargic communities are now hum with the optimism of a profitable cash crop production and the hope for a better education and a better life for their children.

With rain clouds threatening to turn the roads to mud, we climbed aboard our vehicles and headed back down the mountain to Ayacucho.

As consumers seek trustworthy financial institutions, credit unions worldwide have seen an uptick in growth and membership – especially during the recent years of economic crisis and recession.

Over the last few years, credit unions flourished as consumers took their savings and business needs to the safety of these depository institutions. From 2007 to 2010, membership around the globe increased to 188 million, up 11 million from just a few years before.

 This is due in large part to the fact that credit unions have helped – rather than hindered – its members. When banks refused to lend, credit unions provided communities with low-interest loans and supplied businesses with the capital needed to succeed. In addition, members were able to save at interest rates that were higher than some of the biggest banks in the US. In 2010 alone, credit unions loaned USD 960 billion to members worldwide, and housed over USD 1.2 trillion in savings.

As a result of this lending, communities were able to reinvest savings, thus providing jobs and increasing economic activity. This is especially true in developing countries – such as Australia, Brazil, Cameroon, Costa Rica, Kenya, Korea, New Zealand, Panama, Peru and Singapore – where many members are self-employed entrepreneurs and family business owners. Due to credit unions increasing their lending to these micro- and small enterprise owner members, many were able to survive the economic downturn and savings grew 20 to 30 percent.

One reason why credit unions were able to effectively help these members was due to innovation, which enabled their expansion into new areas of business beyond their peri-urban communities to more remote rural areas. Widespread access to wireless communications in remote areas and declining technology costs enabled credit unions to explore new ways to deliver services remotely without having to invest in brick-and-mortar infrastructure.

For example, in Latin America, credit unions linked together to form networks through shared branching. These primarily small community financial institutions could now provide members with one of their country’s largest point-of-service (POS) networks. The new approach was especially important for members who produced their goods in one community and traveled to another part of the country to sell or trade. To meet the needs of these members, credit unions sent rural outreach officers on motorcycles and in pickup trucks to remote communities on a regular schedule so that town residents knew that they could access services on a certain day each week – rather than pay the costs of travelling into town.

In addition, the officers were remotely connected to the credit union’s central server and were able to perform transactions live and issue a receipt to the member. To expand service from one day a week to all working days, some credit unions put a POS device in the local store. This allowed members to merely swipe a debit card and deposit or withdraw cash from their accounts as part of their regular shopping activities.

Another way that credit unions used technology to empower members was through the use of mobile devices. For example, in Kenya, Mexico, Ecuador and Haiti, credit unions partnered with telephone companies to allow members to move money from their accounts with their cell phones. This way they could receive loan funds, make loan payments, make deposits, transfer money to other individuals, or purchase goods in stores by moving funds electronically from their credit union accounts to cell phone accounts.

As a result of these innovations, credit unions are now benefiting from their commitment to their members by seeing a steady uptick in funds and money transferred to these local institutions. The continued lending during these hard times and the proactive advancements on behalf of the credit unions generated member loyalty and helped maintain member commitment to meet their repayment obligations as the recession deepened.

Today, there are 53,000 credit unions around the world that service 188 million people in 100 countries. Increasing levels of member service in many rural communities has helped generate significant membership growth. Technology has played a significant role in this growth and so has commitment to member service. But credit unions are trusted because they are community-based institutions that keep their members well-being at heart and put their needs first – and this has made all the difference.

Brian Branch is the President and CEO of the World Council of Credit Unions (WOCCU), the global trade association and development agency for credit unions. WOCCU promotes the development of financial cooperatives worldwide to empower people through financial services and advocates on behalf of financial cooperatives on a global and national level for improved laws and regulation. The organization’s technical assistance programs introduce new tools and technologies to strengthen credit unions’ financial performance and increase their outreach.

This article was originally posted on CNBC’s Guest Blog. © 2011 CNBC.com

We spent the day at the United Nations for the launch of the International Year of Cooperatives. It will be dedicated to increasing the public awareness about cooperatives and their contribution to socio-economic development and the achievement of internationally agreed-upon development goals, including the Millenium Development Goals. It will also promote the formation and growth of cooperatives for socio-economic empowerment and to provide an enabling environment through policies, laws and regulations.

In the early morning, we climbed into a small Piper Cub airplane at the Gdansk airport and took off to the east.  For two hours, we flew over the farmlands and forests of Poland.  As we approached the eastern region of Biala Podlaska, the large square farms gave way to long, narrow strips of more traditional farm plots below.  Our tiny plane touched down on the immense, unused old Warsaw Pact airport outside of town.  Among the weeds poking up through the concrete, a small blue sedan waited to pick us up and whisk us into town.

As we entered town, we found campaign billboards and signs along the roadways advertising candidates running for House and Senate seats.  Among them was the face of our credit union friend, Grzegorz. 

We met Grzegorz in a café for coffee, on his way to the campaign trail. In a meeting with community business leaders, the group planned private investment funds to invest in local enterprises such as food packing, cooperative transportation initiatives to extend services to areas not served by public or private service, restoration of the local monastery for tourism and possible business uses of the large airport.

There was an energy and an optimism among those present.  A town left behind by the withdrawal of public services and the gaps of private investment now looked to the self empowerment efforts of investing in local business through their credit union and through community development cooperatives.

Local community leaders drove us outside of town, past the farmlands and to the edge of the forest.  There they proudly showed us a memorial to the flight crew of a U.S. plane that had crashed there in 1944.  The memorial listed the names of the flight crew that had parachuted down and joined the community in those days.  We lit candles to the memory of those who had not survived and then returned to the empty runways of the immense airport on the other side of town. 

We took off in our cramped Piper and returned to Gdansk before the storm clouds and the dark closed in.  A few days later, the welcome email from Grezgorz came in: “I won.”

South of Auckland in the bright green dairylands of Hamilton, New Zealand, we visited with Peter, Terry and Simon of First Credit Union.

In the staff lounge, a black cricket team shirt hung framed on the wall. 

Peter explained, “When World Council was raising funds to help after the tsunami in Sri Lanka, we wanted to find a creative way to raise funds.  So we contacted the National Cricket Team, and this shirt was for sale. Staff and members raised funds to buy the shirt and contribute to the rebuilding in Sri Lanka.  It was a way to commemorate and remember that effort.  Everyone got involved, and we had a lot fun.”

Having just finished the rebuilding program in Sri Lanka, we were able to share the impact of their campaign with First Credit Union.  Villages whose credit union or women’s cooperative branches were destroyed have new professional looking buildings and computer accounting systems today.  Staff and volunteers are now trained.  Every day they walk to the fishing docks and the markets to collect savings and receive loan payments.  The women who manage the branches have gained greater confidence and self-esteem from helping rebuild their communities and now provide financing for thousands of their neighbors’ productive activities.