2012 Year of the Cooperative

. The following is a summary of a speech delivered by Ban Ki-Moon, Secretary-General of the United Nations, praising the role of cooperatives as an important economic alternative to for-profit institutions.

Expanding and developing the amazing power of financial cooperatives

In a recent report to the United Nations (UN) General Assembly, Secretary-General Ban Ki-moon highlighted the contribution of cooperatives to socio-economic development.

The report, which illustrates the contributions of all cooperatives to the sustainable development of communities, also examines the impact of financial cooperatives worldwide.

According to the report, cooperatives are present in all countries, an estimated 1 billion individuals are members of cooperatives worldwide, and cooperative activities account for between 3 and 10 per cent of national gross domestic product (GDP), depending on the country.

Financial cooperative industry: 41% of worldwide cooperative economic activity
Most cooperatives are located in developed countries, such as Germany, the United States, France, Japan, the Netherlands and Canada.

They operate in a variety of sectors:

•30% in agriculture and food
•23% in retailing
•22% in insurance (property and casualty, life and health)
•19% in banking
These numbers show that 41% of worldwide cooperative economic activity is carried out by the financial cooperative industry (the banking and insurance sectors combined).

The UN report emphasizes the fact that financial cooperatives provide members with low-cost and readily accessible financial services, including reliable savings facilities tailored to members’ needs, credit or microfinance for small-scale start-up enterprises, and more affordable remittance networks.

Financial cooperatives also offer financial services to populations underserved by the mainstream commercial sector and play an important role in achieving a more inclusive financial sector.

Growth in the financial sector
According to the report, “the recent financial crisis has generated renewed interest in alternative financial institutions, as financial cooperatives and credit unions have demonstrated a noteworthy resilience and even growth.”

It goes on to say that some financial cooperatives and credit unions experienced an influx of deposit funds as members sought a safer location for their savings or lower fees, and these institutions sustained or increased their rates of lending when many other commercial institutions were retrenching.

The report continues: “these outcomes indicate the importance of institutional diversity in the financial sector, demonstrate the advantages of alternative business models such as cooperatives, and point to how cooperatives can contribute to the stability of the broader financial system.”

On a broader note, the report concludes: “institutionalized cooperation raised the scale of economic activity to a level that allowed for reduced operational cost and created enough pooled resources to accommodate technological expansion and shared marketing and quality control services (...). These cooperative networks provide an institutional response to increasing global competition and the need to accelerate the pace of innovation.”

I know member investors are upset about our CD rates. They are at their lowest point in my 32 years at the credit union. The low dividend rates reflect what the credit union can earn on its investments and loans. Because safety is paramount, our investments are conservative and non-speculative. Most of the credit union's earnings, from which we pay dividends, come from loans, but with the slowdown in our local economy, fewer members are borrowing, and those who do borrow want the lowest interest rates possible. Some of our loan rates are as low as 2.75% and investments are earning much less. For example, below is a summary of US Treasury bill yields for large investors as of August 25, 2011.

Treasury Yields:
1 Year - .09%
2 Year - .21%
3 Year - .36%
5 Year - .92%

Looks like putting your money under a mattress would give you about the same results! At least you can be assured that your money is safe at the credit union where it is protected from fire, flood, wind, or theft. For some this may not be much assurance, but your accounts are protected up to $250,000 by the NCUSIF (National Credit Union Share Insurance Fund) which is backed by the full faith and credit of the US Government.

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I found this article today and thought that you would be interested in some of the tips offered. Credit unions are already helping members with their No. 1 resolution of the New Year. Ask us if you need help.

News Now : January 4, 2011 : CU/System
Help members with their No. 1 resolution

A December poll by the National Foundation for Credit Counseling (NFCC) revealed that decreasing debt was consumers' No. 1 financial New Year's resolution. Sixty-nine percent of more than 3,200 respondents chose this goal over other objectives, such as increasing savings, improving their credit score or decreasing their dependence on credit cards.

The poll question and results are:

My No.1 New Year's resolution for 2011 is to:

Decrease debt-- 69%;
Improve my credit score--18%;
Increase savings--7%; and
Decrease my dependence on credit cards--7%.

Credit unions, leagues and NFCC had plenty of advice to assist consumers. Lonny Maurer, president/CEO of Belco Community CU in Harrisburg, Pa., discussed five resolutions that consumers should make in 2011.

The resolutions are:

Develop a written monthly annual budget;

If you don't already have one, establish a relationship with a credit union or bank;

Take a critical view of your personal debt;

Develop a plan to save and invest; and

Teach your children about finances.

The Ohio Credit Union League also has some tips to get the most out of your money, according to the Akron Beacon-Journal. They are:

Pay yourself first;

Create a budget and stick to it;

Pay off debt;

Manage your credit; and

Already saving? Save more.

The NFCC offers these tips:

Define your objective--Be specific about which area of your financial life you want to address. Having an overall goal of "improving your financial situation" is too broad. Success is more likely if you identify one problem and take steps to rectify it. You can always add more categories, but taking on too much at once can be overwhelming and discouraging.

Be willing to pay the price--Be prepared to make significant lifestyle adjustments in order to reach your goal. The sacrifice will be worth it. Changes, even those that are ultimately positive, can be difficult. Knowing this up front will help you persevere.

Be ready for set-backs--When the going gets rough, don't give up your goal. Set-backs are inevitable, so anticipate them and commit to riding them through. There is nothing to be gained by quitting.

Have an accountability partner--Holding yourself accountable is one thing, but having a partner often means the difference between success and failure. Share your goal with trusted friends, family members or mentors, and ask them to provide support to help you stay determined.

Celebrate success--Establish a reward as you begin your financial journey, to serve as a great incentive to keep going. And, once you meet your goal, you've earned a reward.

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I'm often asked about the savings rate at our credit union vs. banks. While I'm proud to say that Service One CU pays a higher rate on savings accounts than the vast majority of banks, the rate is historically low. Here is an article from our trade organization citing an interview with the CUNA chief economist, Bill Hampel, and his explanation of why savings rates are so low.

CUNA analyzes savings-rate strategies for NY Times

CUNA NEWS(12/7/10)--The New York Times, in an article Friday on why earnings on savings may not be keeping up with inflation, turned to Credit Union National Association (CUNA) Chief Economist Bill Hampel to help explain why interest rates on depository institutions' savings accounts are barely above zero.

The article notes that people are doing a better job of spending less than they earn but leftover money is going toward paying down debt, not borrowing more. Banks can't lend their deposits out in the quantity they used to, or aren't because of tightened credit policies.

Instead, said Hampel, they buy Treasury bills, which don't pay as they once did because of the interest rate environment. Nor do they deliver the kinds of returns banks would get if they loaned money under normal conditions, he said.

The resulting lower profits make it harder to raise the rates that savers earn, while lingering losses from loans pose their own pressures, the article said.

The article points out that "credit union members putting money into certificates of deposit would love to earn more, and they often do get a bit more than they would from a nearby megabank. But members who are borrowers want to pay less for their loans, and they often do."

"Borrowers are owners just as much as savers are," Hampel said. The article, "Why Savings Account Rates Are So Pathetic," also provides a bar graph comparing banks vs. credit unions and citing CUNA as its source. It shows how greater bank noninterest/fee income and loan losses factor into the equation.

CUNA NOW --It's finally here--the day in which credit unions take note of what they do and celebrate--while honoring those who have made contributions to the global financial cooperative movement.




International Credit Union Day, traditionally the third Thursday of October since 1948, has a theme this year of "Local. Trusted. Serving You." Credit Union National Association President/CEO Bill Cheney, in extending best wishes to the national movement, noted that this year's theme "perfectly captures what makes credit unions so appealing to consumers across the nation and around the globe.

"Here in the U.S., the 90-million-plus Americans who are credit union members have an advantage over all other consumers in our nation: They experience, first-hand, the benefits of receiving financial services from member-owned, cooperative financial institutions--which practice a philosophy of putting people before products," Cheney said.

"In fact, in doing so, they and their families realize substantial, direct financial benefits: More than $7.5 billion this year alone from favorable rates and lower fees as a result of using credit unions rather than other financial institutions. That breaks down to an average of $84 for each credit union member or $159 for each member household. Because credit unions are member-owed, this savings stays right in local communities," he added.

"It is no wonder, then, that survey after survey shows consumers trust credit unions to look out for their best interests more than any other type of financial institution. Our goal, as committed credit union supporters, should be to ensure that ALL Americans have the opportunity to realize these benefits through a simple, effective path to membership," he said.

Thank you for your patience with the computer conversion that we are experiencing. While a conversion is always a headache to members and staff, the end result should be a more efficient and economical system. In addition, the new system will enhance our "green" business environment as fewer forms will need to be printed.

A few reminders - "Virtual Branch" is now "Home Branch." Bill Pay will be available on August 4 and the merchant information that you had entered will remain. The history of your automatic bill payments did not transfer to the new system. If you have misplaced the letter I sent announcing the changes and new password information, give us a call and dial "0" for the call center.

I sincerely hope that you will like the new system once you have used it a few times.

I wanted to pass this article on to those who didn't see it-- high praise for credit unions! Service One does not charge a membership fee and members are only required to keep a minimum of $25 in their member share (savings) account. What a deal - great auto, mortgage and credit card loan rates, ConceptGreen E-counts, Add-on and 14-day Notice Certificates, and much more. Send me an email if you don't know about any of these services.

AOL's WalletPop: CUs one of memberships 'worth the money'

MADISON, Wis. (5/27/10)--Credit unions are one of 10 memberships "worth the money" for consumers and, furthermore, could be the membership consumers "can't afford not to join," according to an article on AOL's WalletPop.com.

Because many people carry debt on their credit cards, rates charged by credit union cards are desirable [because they are lower than many major card companies], financial guru Suze Orman wrote in an article about safeguarding finances, WalletPop said.

"Do you know by law, federally chartered credit unions cannot charge you more than an 18% interest rate?" Orman added.

WalletPop also referred readers to the Credit Union National Association's credit union locator tool on its website.

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