Financial access empowers people and their families to live better lives. The World Bank Group President Jim Yong Kim and Her Majesty Queen Máxima of the Netherlands, United Nations Secretary General’s Special Advocate for Inclusive Finance for Development, put forward a vision to achieve universal financial access by 2020.
The World Bank asked us for a statement and a commitment for their universal financial inclusion launch. World Council is ready to take on this challenge. The following letter was sent to show our commitment to the #FinAccess2020 campaign.
Congratulations for the World Bank vision for achieving universal financial access by 2020. As President Jim Yong Kim has said, “financial inclusion can be a powerful accelerator of economic progress … when low income workers or poor families gain access to basic financial services they gain a foothold on the first rung of the ladder toward prosperity.”
We are glad to support the World Bank commitment for universal financial inclusion by 2020. In 2014 World Council of Credit Unions launched a membership growth campaign to extend credit union services to at least another 50 million people by 2020. As of the end of 2013 there were 208 million members of credit unions and financial cooperatives in the World Council global credit union system. We will extend credit union services to more than 260 million by 2020.
As you know, credit unions are savings based consumer-owned financial cooperatives. World Council includes credit union systems in more than 50 countries that have committed to this goal. In this campaign, World Council works with many credit union systems to support their outreach efforts to youth, young adults and rural residents. The World Council works with credit unions not just to extend access but to provide access that is in the best interest of the consumer.
World Council’s work with credit unions to achieve this goal includes:
1. Technical assistance and training for credit union management and board of directors.
What makes for credit union services that are in the best interest of the consumer are strong, well-capitalized credit unions with disciplined financial management and efficient business systems
Credit unions provide a competitive alternative in markets. Well managed and capitalized credit unions provide a higher return on savings and lower rates on loans which enable members to retain greater consumer surplus in comparison to other market providers.
2. Financial education programs.
Low income populations and isolated rural populations often do not have resources to research other choices and they often pay a higher premium, beyond the risk or transaction costs, for financial services than moderate to higher income populations. Credit union financial education programs provide consumers with information about the cost of alternatives and how to manage their services to maximize their economic benefit.
3. Robust product offerings.
World Council and national credit union associations help credit unions improve entrepreneurial practices and offer robust product offerings. Many borrowers are low income or subprime citizens and lack property or collateral. To serve them often requires structuring products that respond to their demands and production cycles. Paying off debt is a stress. Low income populations are characterized by vulnerability to health problems, environmental impact and economic shocks. World Council works with credit unions to increase combined access to both savings and credit to enable consumers to achieve their objectives through savings, build savings buffers to shocks and access credit builder accounts.
4. Remote access to services via information communication technology.
Consumers expect access to services where and when they want service. Many low income and working populations lack access to reliable or affordable transportation to physical access points. The ability to network together multiple credit union points of service and to offer remote electronic access can provide country–wide access where consumers live and work. Networking, shared payments platforms, field agent banking, POS networks and cell phone mobile banking enable credit unions to reach the geographic areas where there is insufficient population density to support physical branch offices.
5. Payments linkage to financial services.
Consumers look for ease of payments services offered by improved electronic access. Linking credit union networks to payment networks serves as a loading ramp to introduce many to financial services who did not have access previously.
Payments ease the flow of money transactions. Payments often occur in small amounts and at significant cost. Credit union linkage to payments systems offers the ability to build savings, to deposit and to withdraw large amounts of cash at low cost and access to credit.
6. Outreach to young adults.
2020 credit union membership growth targets particularly target youth and young adults. World Council has found that the most effective strategy to increase outreach to young adults is to do so not by starting new youth credit unions but by assisting established strong credit unions respond to their demands. Established credit unions have the liquidity to respond to their credit demands and the capital resources to invest in the infrastructure to provide the channels which they demand. World Council’s 2020 campaign helps credit unions in reaching this demographic through offering the breadth of products designed for young adult life transitions, offering core services online and via mobile channels and outreach through social media.
7. Increased regulatory framework rigor while allowing for continued access.
Increased access must come with safety for consumers’ savings. World Council works with legislators and regulators to bring credit unions under sound prudential supervision of the formal financial sector. World Council works with credit unions to assist them in meeting international prudential standards and local regulatory requirements. At the same time World Council advocates for an empowering legislative framework which allows credit unions to continue serving savers of small account size and to provide credit to people with little or no collateral and credit history. World Council interfaces with international standard setters to dialog policy to continue to allow for credit unions provision of service to those at the bottom of the pyramid.
President and CEO
World Council of Credit Unions