MADISON, Wis. — The World Council of Credit Unions made a recent follow up trip to check on the success of a program it launched last summer in Peru.
WOCCU Executive Vice President/Chief Financial Officer Brian Branch, who is leading the project, explained that WOCCU is working with six of Peru's 170 credit unions on a pilot program to boost economic growth in the poorest cities and rural areas of Peru. The project is funded primarily by the U.S. Agency for International Development, WOCCU, and the National Federation of Peruvian Credit Unions (FENACREP).
The delegation–which included Laida Garcia, executive vice president of Florida Central Credit Union, Tampa; Adrian Lovney, chief executive of Abacus-Australian Mutuals, an organization serving Australian credit unions and mutual building societies; Dave Klavitter, vice president of information services for CUNA; Dennis Tanimoto, president/CEO of the Hawaii Credit Union League; Anne Cochran, president/CEO of the Louisiana Credit Union League; and various WOCCU board members and staff–spent a week performing rigorous site visits to cities, remote rural communities and credit unions throughout Peru.
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Branch explained that the first step in the process was to help the credit unions institute financial controls and solid operational practices. Then, they added a number of new products, the highlight of which is know as the "solidarity loan" "Promotores" ride by motorcycle out to rural areas to meet with a couple dozen women to discuss loans and the opportunities and responsibilities they bring. Then the women can break into groups of four to six and a loan, as little as $100, is made to the entire group, Branch said.
The Peruvian credit unions charge just 25% for these loans compared to the banks' 35% and moneylenders' 60%. Interest rates are higher in Peru than the U.S. due to fewer collection options and less capital, according to Branch. Additionally, delinquencies are higher than they would like at 7% but the credit unions are attempting to mitigate this by lending to a small group so there is a peer pressure element.
"What we find is the women take the money for, in some cases, they raise chickens," Branch said. Others make textiles or pottery.
The final step of the program is to create a network with these credit unions. "We'll use the network of credit unions to get marketing information to rural farmers or
the rural farmers to the urban purchasers," Branch said.
While WOCCU's efforts in Peru are fairly recent, the credit unions have seen 22% growth in membership and a 34% increase in assets. In past experiences with similar programs in the Philippines and Ecuador, Branch said WOCCU has seen rapid growth in the credit unions through profitable loan products and improved living conditions for their members from better nutrition to clothing.
A common message Branch said that exists between U.S. and Peruvian credit unions is that "Credit unions are not just for the poor. They have to be able to serve the working groups as well."
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