Ecuadorian CUs inspire change | Credit union hours
Great ideas can come from just about anywhere.
It was a key takeaway that a group of Iowa credit union executives came home with after spending a week earlier this year visiting credit unions in the Republic of Ecuador.
Even though the small nation is not exactly a technology hub for South America, Iowa executives have been very impressed – rather blown away – by their colleagues at Ecuadorian credit unions who develop and operate systems of credit. ‘advanced data analysis to determine the creditworthiness of their members and drive other efficiencies.
While Iowa executives have seen the digital know-how of Ecuadorian financial cooperatives, global credit union technology trends are now available on any desktop or mobile device thanks to the recent launch of the digital transformation of the World Council of Credit Unions. It is a virtual platform that showcases WOCCU development projects from different nations. The website will also facilitate the sharing of experiences and ideas from members and partners around the world.
A delegation of Iowa Credit Union League leaders and Iowa credit union leaders who visited Ecuador in February as part of the WOCCU Global Classroom Exchange, said they received some ideas. South American co-ops they plan to use in their Hawkeye State credit unions. .
Straddling the Earth’s equator, Ecuador is about the size of Nevada and is home to more than 16 million people. With over 20% of the country’s population living below the poverty line, per capita income is around $ 11,500, according to the 2019 CIA World Fact book and other sources. A workforce of more than eight million people supports the country’s major industries of agriculture, petroleum, food processing, textiles, wood products and chemicals. Ecuador’s gross domestic product stands at nearly $ 200 billion.
According to the CIA, in 1999 and 2001, the Ecuadorian economy was hit hard by a banking crisis that led to some reforms, including the adoption of the US dollar as the country’s legal tender, which stabilized the economy and l brought back to growth. Other initiatives followed, including a government program that expanded lending to small financial cooperatives to facilitate more lending for small businesses, one of the main engines of economic growth. Over five years, co-op loans have gone from 11% to almost 20%, according to a report from the Center for Economic and Policy Research in Washington, DC. Other regulatory measures included imposing maximum fees on various financial transactions to protect consumers.
Ecuador is home to around 600 credit unions and the Iowa delegation visited two: Cooperativa Jardin Azuayo in Cuenca and Cooprogreso in Quito, the country’s capital.
Jardin Azuayo is the second largest credit union in Ecuador, managing $ 835 million in assets and serving more than 400,000 members. Cooprogreso is the fourth largest cooperative in the country, managing $ 491 million in assets and serving 214,000 members.
Micro-loans, ranging from $ 1,000 to $ 10,000, were among the most requested financial products by Ecuadorian members who use small loans to open individual businesses.
“The way they looked at their underwriting not only created efficiencies, but also created a more accurate picture of a member’s ability to repay a loan,” said Erin O’Hern, Director of Services of Iowa League Compliance. “They’ve really spent a lot of time looking at their own data analytics and developing their own algorithms to help predict repayment rates and the viability of the business itself. They have really incorporated a holistic view of how to operate as loan partners in their small businesses. “
For example, part of the algorithm would give points to members who have taken financial education classes with credit unions. The algorithm also assesses the type of business, its size, location and consumer traffic, and assigns scores based on the borrower’s neighborhood and loan performance in that neighborhood, and uses other data. demographic.
With a computer tablet in hand, loan officers travel to meet with microcredit borrowers to gather more information. Based on their algorithm, loan officers are able to quickly determine if members are eligible for microloans. If they are not, loan officers recommend steps members can take to improve their microcredit eligibility, O’Hern said.
Matt Dodds said Cooprogreso’s use of data analytics provided him with great visibility into how to think differently about decision models – not necessarily to price loans differently, but to potentially help and have a positive impact. on more members.
“We are already talking about different ways to improve our [loan] decision-making engine with the data we have, ”said Dodds. “We’re trying to have better discussions about what more we can do to leverage the credit union business model to continue to differentiate ourselves in the hyper-competitive financial services market.”
Instead of traditional marketing, Ecuadorian credit unions rely on grassroots, word-of-mouth and investments in member financial education.
“After having meetings in the morning at Jardin Azuayo, we had lunch at a restaurant owned by a member of a credit union,” said O’Hern. “He first opened with only a few tables with a small dollar loan from this credit union. It is now a beautiful, good size restaurant. When we sat down to order our food, we noticed the Jardin Azuayo logo on the restaurant menu.
After meeting with the delegation from Iowa, the owner credited Jardin Azuayo with allowing the restaurant to open and grow over the years.
“[Jardin Azuayo] has champions who are community members spreading the good word about the type of service they received from the credit union, ”she said. “It’s more of a basic type of marketing. “
Dodds noted that credit unions invest in financial education initiatives, which also serve as marketing.
“Their differentiation is really based on community involvement, and their community involvement is mainly related to the financial education of the members,” he said. “All of their time, effort and energy has gone into educating members to improve their financial situation. In doing so, it was their marketing advantage. It was really their main engine of growth and membership.
What also impressed the Iowa delegation was the way Ecuadorian credit unions engaged their members in the strategic planning process and other important issues.
Members elect members to represent them at the branch level, and some of those members would be selected to represent the branch at the regional level, explained Scott Zahnle, president / CEO of the Greater Iowa Credit Union in Ames, of a worth $ 470 million.
Zahnle said elected members were given topics they would discuss from a strategic planning process and their contributions, ideas and recommendations would be forwarded to the credit union’s board of directors for consideration.
While Zahnle doesn’t think he can replicate what Ecuadorian credit unions are doing, he is considering the possibility of establishing advisory committees from each branch that would provide feedback and ideas to the board two or three times a year. He noted that the advisory committees could help the credit union keep track of what is happening in its various markets and perhaps generate ideas for improving the credit union’s product and service offerings.
Generating and sharing ideas on a much larger scale is what WOCCU aims to achieve through its new website, the Digital Transformation Lab, which showcases its latest technology initiatives for digital payments, digital lending and identity. digital in credit unions around the world.
In Ukraine, for example, WOCCU is developing and testing digital tools to inform lending decisions and effective loan tracking for some credit unions. The Madison, Wisconsin-based organization is also testing mobile apps in Kenya that allow financial cooperatives to better identify credit risks for small farmers.
And in Asia, WOCCU is leveraging the support of the Bill & Melinda Gates Foundation to pursue digital financial inclusion for more than 50 million people through interoperable payment platforms that will connect credit unions across the continent – and finally the world – through the use of open-source software.
WOCCU also said that it invites all credit unions, members and partners to share their own experiences with digital transformation projects.
“By interacting with our digital transformation lab, our members and the credit unions they represent can learn about, review the latest innovations and even share their own digital transformation experiences,” said Brian Branch, CEO by WOCCU. “The goal is to create 21st century credit unions around the world.”