COLUMBUS, Ohio - If you can imagine a member asking to borrow a little money to buy some coal - and paying interest up front - you can start to understand kasas in Bulgaria. Kasas are that nation's equivalent of U.S. credit unions. But they currently lack enabling legislation to give them legal status. They're also struggling to develop the kind of cooperative spirit credit unions elsewhere boast about. The World Council of Credit Unions is working in Bulgaria under project leader John Keane to help kasas modernize. In late March two representatives from the Ohio Credit Union League went to Bulgaria for two weeks to help with the pilot phase of the three-year project. The OCUL participants were Kathy Kanipe, vice president of the OCUL board of directors and CEO of St. John Toledo Federal Credit Union, and OCUL field consultant Sara Hanselman. "Kathy has been active in the People to People Society and has done some international credit union work. Sara basically brought to the table a strong financial background and was able to work with the financials of the different kasas and offer them ideas on operations," explains Annlouise Peroscka, OCUL vice president/credit union development. The team's assignment was to visit kasas, run some diagnostics, and identify 15 to 20 that will actually be part of the three-year program. There are some 2,000 kasas with a total membership of 300,000 to 500,000 in a nation about the size of Tennessee. "I didn't go in with any preconceived ideas," Kanipe notes. "I had been in Latvia about seven years ago, and I was surprised at some of the differences I think were the result of a longer period of privatization after the breakup of the former Soviet Union. But I wasn't really shocked by anything." Hanselman explains there are actually two kinds of kasas, mutual kasas formed by employees of small companies and popular kasas which are similar to community-chartered credit unions. Like credit unions elsewhere they are non-profit financial cooperatives which take in savings and grant loans, have an elected board of directors and hold annual meetings. There are also a lot of differences. "You need to think of credit unions 50 years ago," Hanselman says. The mutual kasas don't offer checking accounts or ATM cards. A loan might be for $1,500 which you pay back in a year's time - and you pay the interest up front, then you make your monthly payments. It has to be payroll deduction, and people only get paid once a month. Everyone gets paid on the 29th. On this same day you sign up and say, `I need $50 out of my account.' You're told, `Come back on the 29th and we'll have it for you.' "Loans are granted first come, first served, not on ability to pay them back. There is no credit check, because they don't even have that type of mechanism. There is share leveraging, three to one. If you want to borrow $100, you need to have $30 in there - plus three or four co-signers. A lot of these loans are way over-collateralized. They want to make sure they're going to get their money back," Hanselman said. By contrast, the popular kasas can approve loans the same day and operate in a much more sophisticated fashion. At the one popular kasa Hanselman visited employees were professionally dressed, had computers and there was a full-time accountant. The mutual kasas are pretty much staffed entirely by volunteers, with perhaps a part-time cashier. Hanselman was surprised by the small scale of many mutual kasa operations. A loan may be about $300, repaid in perhaps four months. "Here we're lending $20,000 or $30,000 for a car. They're borrowing money to replace a refrigerator or buy a cow or a couple goats or coal to get through the winter," she says. As for mortgages, most people live in pre-World War II gray, concrete apartment buildings of 12 or 13 stories. They buy their own apartment. Banks loan money to purchase apartments, but kasas don't. Competition? In one town the team visited there were 12 banks. Those banks pay dividends. Popular kasas also pay dividends and offer CDs. Mutual kasas don't, but their loan rates are lower. In order to accumulate savings, the mutual kasas require members to purchase capital shares each month. That means a member typically must put $5 or $6 into their share account every month. Why would anyone put money into a non-interest bearing account, when they can put that money into a bank or popular kasa and earn interest? The only people putting money into mutual kasas, Hanselman explains, are people who want to borrow money or at least get on the waiting list for a loan. Eight or nine years ago a pyramid scheme offered Bulgarians 40 or 50% interest. People were selling their homes to make what they thought would be quick, easy money. Overnight the backers left the country and investors lost the equivalent of thousands of dollars. A law was passed prohibiting savings except in insured banks. So technically the kasas are outside the law. But they operate in a low-key fashion, and nobody is monitoring them. The popular kasas say the only authorities who visit them are tax officials eager to make certain required taxes are deducted from employees' pay. The mutual kasas rely on their supervisory committees. So the OCUL and the World Council are working to draft model legislation. Keane from the World Council hopes to bring someone from the Bulgarian government to Ohio this summer to see how American credit unions here operate. Kanipe sees that as very important. "I think the key challenges are in the legislative and regulatory area, because they do not have enabling legislation such as we have in this country. Working with legislators to develop enabling legislation, then to establish some sort of a regulatory system, will be the first challenge we have to address," Kanipe says. "They're definitely aware of the necessity, and they're aware they will have to work together to establish that. Each individual kasa needs some guidance. The team from the World Council will be able to provide that guidance." As far as Kanipe is concerned, the biggest step so far has been the forming of an ongoing partnership between the Bulgaria Kasas and the Ohio league. "Although it doesn't seem like much, it's a huge accomplishment, because I think the long-term effect will be great," she says. Both Hanselman and Kanipe found the trip very beneficial. "Personally, (the trip) was probably the most rewarding experience of my career," Hanselman says. "The rich and elite are really the only ones who use banks. There is such a need there. It kind of made us realize, wow, we really are living in a rich country. Don't complain that your French fries are cold." "Sometimes in our individual credit unions we get tied up in the day-to-day operations," Kanipe adds. "We can lose focus on the real cooperative nature of the movement. Being part of a developing movement that has a cooperative nature is very important. I think I brought back a stronger feeling of the worldwide movement and the cooperative nature of credit unions." -
ECour58516@aol.com
