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June 22, 2009
Three programs in the developing world as well as safety tips for internet safety from Australian credit unions.
CHIQUIMULA, Guatemala—Credit Unions New Way to Do Business
Sporting goods merchant Flavio Sontay knows the way to improve his competitive edge is to offer the products and services his customers need. In addition to stocking a complete line of soccer balls, athletic shoes and other related merchandise, Sontay is installing a point-of-sale (POS) device that links him to Cooperativa de Ahorro y Crédito Integral San José Obrero R.L (COOSAJO), the credit union that supports his two retail stores. The POS device will enable customers who are credit union members to pay for purchases at the store electronically and withdraw cash from their accounts.
"The young people who come here to buy sports equipment are always in a hurry," said Sontay, whose stores serve Chiquimula, an eastern Guatemalan city of more than 300,000 residents. "They do not want to stop at the credit union to pick up cash and then come to my store to shop, so I will let them do both things here."
In addition to providing his customers greater convenience, both Sontay and COOSAJO will make a few cents on each transaction. That’s far different than the 8% fee the merchant would pay for sales charged on an international MasterCard or Visa, which Sontay now feels less obligated to accept.
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WASHINGTON, D.C.—Looking at Remittances
Exclusive one-way remittance contracts between financial institutions and money transfer organizations (MTOs) limit the competition necessary to keeping costs affordable for consumers. In an effort to change that, credit union trade groups CUNA & Affiliates and World Council of Credit Unions (WOCCU) recently issued a paper urging the U.S. Department of Justice to review such contracts in light of their ability to effectively limit or eliminate opportunities for low-cost remittance activity. The paper was issued for a hearing by the Congressional Subcommittee on Financial Institutions and Consumer Credit, which convened today in Washington.
Led by the subcommittee chair, Rep. Luis Gutierrez (D-IL), the group met to review current remittance regulation and disclosure activities. The CUNA/WOCCU paper was submitted in support of cost-effective remittance activities between U.S. credit unions and credit unions in developing countries, primarily in Latin America. Complex language couching exclusivity agreements is sometimes confusing and ultimately costly to small credit unions and microfinance institutions and their clients, which prompted allegations of deliberate attempts by large U.S.-based MTOs to limit or eliminate competition.
"Credit unions throughout the world are leading the way in ensuring that immigrants have access to affordable remittance and financial services," said Pete Crear, WOCCU president and CEO. "We want to work with Congress to encourage competition in the market and limit these troubling negotiation techniques employed internationally by a select group of money transfer organizations."
WOCCU has seen an uptick during recent years in remittance activities processed through IRnet®, the international credit union remittance service offered by WOCCU Services Group, the association’s for-profit subsidiary. The network supports transactions between 330 U.S. credit union locations and more than 800 rural and urban credit unions in Bolivia, Ecuador, El Salvador, Guatemala, Kenya, Mexico, Nicaragua and Peru. Since IRnet’s establishment in 2001, US$2.6 billion has been transmitted through the program, making it one of the largest remittance programs of any microfinance network.
Credit union remittance services offer the highest level of transparency and disclosure, efforts that CUNA has supported since 2003 through a set of best practices for wire transfers among U.S. credit unions. Exclusivity clauses and other restrictions reduce the credit unions’ ability to offer affordable remittance services to developing countries, especially through large remittance corridors to countries such as Mexico and El Salvador. Excessive fees and penalties charged by MTOs are often passed on to remittance recipients, many of whom would live on less than US$1 per day without remittance support, the trade groups noted.
The CUNA/WOCCU paper urges Congress to consider the extent to which one-way exclusivity clauses are used by U.S. remittance firms, the degree to which monetary penalties affect business practices and remittance amounts and how pricing differs in countries where exclusivity contracts are prohibited by law. "Because many of the money transfer organizations engaged in competition-limiting practices are U.S.-based companies, we believe it’s both appropriate and necessary for Congress to inquire into this issue," Crear said. "Monopolistic techniques not only prevent credit unions from better serving their members, they also remove the free-market factors that keep remittance prices from rising
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SYDNEY Australia—Credit Unions Have Tips for On-line Safety
To help raise public awareness and inform people how to stay smart online, credit unions and building societies have partnered with Government in its annual initiative National E-Security Awareness Week, happening this week, 5-12 of June.
National E-Security Awareness Week aims to help inform home users, students and small business users about the simple steps they can take to protect themselves, their families and their businesses online.
Louise Petschler, CEO of Abacus, the industry body for credit unions and mutual building societies, said the internet is a wonderfully accessible tool for all Australians, but that consumers need to be aware of the risks to confidently and securely access the internet.
“Credit unions and building societies have been involved with National E-Security Awareness Week for the past four years, since its inception. It is a great initiative to help inform and educate Australians of all ages how to stay smart online,” Ms Petschler said.
“Accessing the internet safely and securely is relevant to everyone in this day and age. It is important to know the risks that exist online and how to protect yourself from online crime like identity theft. The internet is incredibly useful, but people need to educate themselves about the risks that exist. There are four simple steps you can adopt to ensure you’re protected from cyber criminals and remain safe online,” said Ms Petschler.
To ensure you access the internet securely and with confidence, remember to: 1. Get a better, stronger password and change it at least twice a year. 2. Get security software, and update and patch it regularly. 3. Stop and think before you click on links or attachments from unknown sources. 4. Information is valuable. Be careful about what personal information you give away.
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MADISON WI— WOCCU Gets Funds to Support First-time Ag Finance Program in Ethiopia
The U.S. Department of Agriculture (USDA) has awarded World Council of Credit Unions (WOCCU) approximately US$7.9 million through the Food for Progress Program to help finance credit union development aimed at providing agricultural extension services and financial access to farmers in Ethiopia. The four-year initiative is WOCCU’s first long-term technical assistance program in the country.
WOCCU’s "Enhancing Food Security and Rural Livelihoods in Ethiopia" program will assist rural savings and credit cooperatives (RUSACCOs, as the credit unions are known) to finance agricultural production and investment, mobilize savings and provide a range of non-financial services such as providing market information and training to their members. The program will also support small infrastructure investments to improve farmers’ access to markets.
"WOCCU has provided training in our methodology and tools to a range of rural and urban SACCOs over the past few years," said Brian Branch, WOCCU executive vice president and COO. "In early 2007, we began looking for opportunities to increase our efforts in Ethiopia."
The RUSACCOs will work with WOCCU to improve their ability to extend new agricultural financial products and services specifically tailored for small farmers and other rural entrepreneurs. The program will target farmers who rely on agriculture as their primary source of income, but who struggle to produce sufficient food for their families. The program is designed to increase the farmers’ productivity, connect them to markets and formalize farmer cooperatives for group training and support.
According to the U.S. Department of State, 85 percent of Ethiopia’s population relies on agriculture as the primary source of income. Agricultural activities in the country contribute 46 percent to Ethiopia’s GNP and account for more than 80 percent of exports, but the region suffers from frequent drought, unsustainable agricultural practices and poor transport infrastructure. Compounded with steadily rising prices for food and agricultural inputs, the densely populated country struggles to keep up with demand.
As such, the Ethiopia program will also support self-help activities in the community to build or improve infrastructure related to agriculture, including the development of storage facilities, irrigation systems, access roads, bridges and basic sanitation facilities.
WOCCU’s program will target the regions of Tigray, Amhara and Oromia, which span about half the country from north to south. The three regions are considered agriculturally important to the country and have a high concentration of farming households and existing RUSACCOs.