Credit Union Development Project

As one of Latin America’s poorest countries, Bolivia provides an ideal setting for credit unions to demonstrate the true value of “people helping people.” In a country where official estimates place 70% of the 8.8 million inhabitants below the poverty line, access to financial services has always been restricted to the very small wealthy class. Together with partners Corporate One Federal Credit Union, the Ohio Credit Union League and credit unions in Bolivia, WOCCU is working with credit unions in Bolivia to increase access to financial services for Bolivia’s impoverished majority.

Bolivia is a large country with diverse geographical regions, ranging from the highest peaks of the Andes to the tropical lowlands of the Amazon basin. It has a rich and varied culture, with a population comprised of Quechua and Aymara Indians, Spanish descendants and Mestizos (a mix of indigenous and European descendants).

WOCCU currently implements a $2.2 million project (12/02-12/06), funded by the United States Agency for International Development (USAID), in Bolivia. The focus of WOCCU—Bolivia is to strengthen credit union operations and improve savings and credit services for microentrepreneurs and low-income members in rural areas. Fourteen credit unions, with a total of approximately $64 million in assets and 98,000 members, work with WOCCU-Bolivia. The program has four principal components:

During recent years, the microfinance and credit union sectors in Bolivia have experienced dramatic growth. This means more Bolivians now have access to financial services, including savings services, and credit unions face greater competition. As a result, the Superintendency of Banks has been charged with increasing its capacity to supervise non-bank financial institutions and carrying out regulatory reform throughout the credit union sector. WOCCU has provided technical assistance to the Superintendency of Banks throughout this process.

In order to increase efficiencies and expand service outreach of the credit union sector, WOCCU is creating a business network, anchored by a second-tier entity, for formally supervised credit unions in Bolivia. The network will enable credit unions to invest excess liquidity and access needed liquidity, distribute international remittances, perform intra- system transactions, with eventual goal of connecting to the U.S. shared branching network and provide debit card services.

Although political federations exist in Bolivia, a service-oriented second- tier entity for credit unions is an innovation. WOCCU-Bolivia is working to address the technological and operational challenges related to setting up the network, where credit unions are often in remote areas with poor communications infrastructure and incompatible data processing systems. WOCCU’s proposal for a central finance facility has been met with hesitancy from a regulator that is concerned about unknown risks. The Ohio partners are helping WOCCU to overcome these obstacles to innovation.

Lee Butke, CEO of Corporate One Federal Credit Union, comments, “The thought of helping the Bolivian credit union movement create a second-tier, corporate-like system is very exciting. As a corporate we provide credit unions of all sizes with valuable investment and payment solutions that help to benefit their members. The creation of a similar system in Bolivia can help the emerging credit union system to better serve their members. It has been personally and professionally rewarding to those of us on staff that are assisting in this effort.”

The Partnership: Bolivia & Ohio Through its partnership with the Ohio Credit Union League and Corporate One, begun in February 2003, WOCCU-Bolivia has been establishing the groundwork for creating the central finance facility and business network. In May 2003, Kurt Lykins, vice president of Technology at Corporate One and Kelly Schermerhorn, CEO of Harvest Federal Credit Union, traveled to Bolivia to carry out software and IT evaluations and devise a plan for connecting the credit unions.

All partners benefit from the cooperation. In the words of John Florian, chief operating officer of the League, “The Ohio Credit Union League is thrilled to have this opportunity to assist our brother and sister credit unions in Bolivia. Those of us involved in the project have been touched by the passion and dedication of those involved in the WOCCU project and look forward to continuing this very fruitful partnership.”

In March 2004, Corporate One and the Ohio League hosted two high-level officials from the Bolivian Superintendency of Banks to educate them about the corporate system, leagues and service corporations, and regulation and supervision of second-tier entities in the United States. The Bolivian officials both expressed their openness to working with WOCCU to create a second-tier entity in Bolivia after their three-day visit to Ohio.

“One of the great challenges for Bolivian credit unions is reaching greater efficiencies and achieving greater outreach to bring the vast number unbanked citizens into the financial system,” says Julio Fernandez, WOCCU-Bolivia project director, “Having the support of both Corporate One and the Ohio League is invaluable to helping us reach our development objectives,” he added.

In the next activity of the partnership, Kurt Lykins from Corporate One will return to Bolivia to assist the project in selecting IT vendors, designing the technology network and establishing the security requirements for the second- tier entity. Later in 2004, members of the Ohio League will travel to Bolivia to develop a business plan for the new second-tier entity and visit credit unions to provide technical assistance and training.

Through the People-to-People Partnership Program, WOCCU, members of the Ohio Credit Union League and Corporate One have joined together to provide greater access to financial services for Bolivia’s poor.

EMP/SKILLS - Skills and Employability Department