CREDIT UNIONS COMMUNITY BANKING WITH A DIFFERENCE Corporate treasurers are well placed to lend their experience and knowledge of treasury management to credit unions, while their own companies can benefit as well, writes Permjit Singh A ccording to the trade body ABCUL, there are 88,0000 credit unions (CUs) across 118 countries, holding deposits of $2.9 trillion and providing loans of $2.1 trillion. CUs in the US have more than 100 million members, and India, South Korea, the Philippines, Kenya and Mexico, each have more than five million. By contrast, the UK collectively has a little over two million members, and by far the largest concentration of them are in Northern Ireland, which along with England, account for 78% of all UK members. CUs play an important financial role in their communities, but what do they mean for the treasury community? The answer is two-fold: first, by serving on a CU board, corporate treasurers will be adding value to individuals and businesses in their local community, especially those excluded from mainstream financial services. Second, by using a CUs services or products, corporate treasurers will also be adding value to their own companies or to their fellow employees. Like any organisation, CUs need to cover their costs to remain going concerns, but part of those costs do not include payments to the board of directors; they give their time freely and voluntarily. They hire paid employees and/or other volunteers to undertake the day-to-day management of the CU, or they outsource those functions to paid specialists. Member value Like most other financial services organisations, CUs aim to maximise shareholder (member) value, but in addition to paying them a dividend, CUs also add value to their members in ways that set them apart from mainstream credit organisations. Members must reside in the community their CU serves, a condition that reflects CUs community spirit. CUs are described as community banks because their members savings are lent out to other members, and because net income (essentially the difference between interest on loans to members less operational costs, loan provisions and loan write-offs) is distributed to members. Empowering its members to be financially capable is a key objective of CUs, and it is all the more important for members on low incomes, excluded from mainstream financial services, susceptible to predatory lenders, or who have little to no understanding of personal finance. In addition to sharing their expertise with boards of CUs, corporate treasurers could also help individual CU members learn about, and then apply, cash forecasting, budgeting, savings and loans, macroeconomics, risk, and financial markets. For example, I am working with an organisation to offer members of my CU nationally recognised qualifications on financial capability. Less formal or bespoke courses may also be designed to suit members aspirations, needs and abilities. With the current energy crisis and high inflation making it hard for some members to make ends meet financially, it would be worthwhile discussing with them the importance of budgeting, and the dangers of predatory lenders, or buynow-pay-later schemes. Bite-size courses could explain the practical application of basic maths and numeracy for everyday use, such as percentages, compounding, calculating interest and tax, discounts, ratios, or fractions. Payroll savings and loans CUs are able to help their members through forging partnerships with local employers that agree to offer free CU payroll schemes to their employees, for little administrative cost to the employer. Payroll schemes encourage employees to get them into the habit of regular saving, and also enable them to borrow from the CU. The employer benefits, too, because such employee welfare schemes are likely to improve their businesss environmental, social and governance (ESG) rating. Employers can also benefit from employees becoming more productive 28 ISSUE 1 2023 treasurers.org/thetreasurer TT ISSUE 1 23 pp28-29 Credit unions.indd 28 23/02/2023 09:17