The FINANCIAL — First credit union (FCU), with the core mission to collect deposits and give out loans to members only, was formed last week in Tbilisi, Georgia.
A member of the union can be any physical person who either wants to get high interest on deposited money, that’s 17% (on GEL deposits), or wants to borrow money for the type of activity which large banks consider risky, such as agricultural/tourism loans – starting from 24%.
Credit unions are widespread throughout the world and this is not the first precedent of one in the region. There are up to 100 countries already occupied with such activities, around 200 million members around the world. 43% of the US population are members of credit unions, 48% in Canada and 110% in Ireland, in the latter case people are counted twice as they’re members of 2 or more credit unions.
The main advantage of First Credit Union in Georgia over any other financial institution in the country is that person (member of FCU) depositing money has first-hand information about where the money, he/she deposits, is going. So a person becoming a shareholder of FCU thus in most cases have the power to make decisions over use of his/her invested money.
The founders of FCU in Georgia are former bankers with long experience working in the field and as they say this initiative will fill the gap that existed earlier in the financial sector of Georgia, as previously the main players were only banks and micro-finance organizations.
As Givi Korinteli, Executive Director of FCU, told The FINANCIAL, beneficiaries (members of FCU) will have the highest interest on their deposited money, an unprecedented 17% annually which is 70-75% higher than in the banking sector en masse.
“One of the reasons why FCU has high interest rates on deposits as opposed to those offered by banks is due to the fact that banks in general distribute their profits between their shareholders (a large part) and have a steep hierarchy whilst credit unions have flat hierarchy and the profits are put towards having high interest rates on deposits for its members,’’ noted Korinteli.
Our priority, along with the country as a whole, will be the financing of SMEs with the least possible interest charged on loans, especially strategic projects related to agribusinesses and tourism. Before the end of the year we’ll be offering 12 new products in our 4 branches in Tbilisi, thereafter expanding to the regions of Georgia,” said Korinteli.
All of our operations are supervised by National Bank of Georgia including the setting of ratings, controlling liquidity, capital adequacy, leverage and other financial reissues” said Korinteli.
To become a member of the credit union, a person has to make a one off payment of 50 GEL and then enjoy all the benefits of the membership.
As Head of the Supervisory Board of FCU Mamuka Machavariani called it, “First Credit Union is a financial institute for where each of the members has control over the money invested, and this is all ensured by law.
“We can’t disburse loans to juridical persons as legislation forbids us from doing that. Any other physical persons are free to use our services and in some cases even attend our credit committee meetings because after all our strength is in our members’ activity,” he said.
“Our starting capital is our members, shareholders’ devoted assets which is around 800 00 GEL, in addition we’re planning to attract more from our future members, estimated 5 Million Gel as well as working on foreign financial institutes in the coming years. All of this depends on the activity of our members,” stated Machavariani.
The history of credit unions began in 1844, with a group of weavers in Rochdale, England, who established the Rochdale Society of Equitable Pioneers. They sold shares to members to raise the capital necessary to buy goods at lower than retail prices, and then sold the goods at a savings to members. In doing so, they became the first credit union.
The movement then spread to Germany in 1850, Canada in 1901 and the United States in 1908.
Nowadays in the US, credit unions total assets amount up to 900 billion USD whilst worldwide their assets sum up to several trillion USD.
Members of Credit Unions Worldwide:
• 43% of US population is the member of credit unions
• 43% of Canadians
• 110% of Ireland population (some of them members of two/more credit unions)
• In the western Europe and Northern America credit unions are credible financial institutions
• 200 members worldwide with $1.4 trillion assets
• Credit unions are present in 97 countries, today