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Guatemala CU system launches private insurance fund
GUATEMALA CITY, Guatemala (12/9/10)--Guatemala’s national credit union association, Federación Nacional de Cooperativas de Ahorro y Crédito (FENACOAC), and 19 of its affiliated credit union members made history last week when they launched one of the few private savings guarantee funds for credit unions in the world.
Click to view larger image Brian Branch, World Council of Credit Unions (WOCCU) executive vice president and chief operating officer, spoke of WOCCU’s longstanding relationship with Guatemala's national credit union association and congratulated members of the Guatemalan guarantee fund during a Dec. 2 launch.
Effective Jan. 1, the fund will guarantee up to $12,500 per person, per institution, a significant competitive advantage over Guatemala’s commercial bank offering of $2,500 per person (All amounts are in U.S. dollars). World Council of Credit Unions (WOCCU) designed the fund in collaboration with FENACOAC, a WOCCU member. FENACOAC and its participating credit unions deposited a collective $5.5 million dollars to capitalize the “MICOOPE savings guarantee fund,” named after Guatemala’s credit union network brand. The fund represents 1.5% of the system’s now-guaranteed $365.3 million in savings deposits. The capital level of the savings guarantee fund is expected to rise to 3% from 1.5% of guaranteed deposits over the next five years. Though small by U.S. standards, the guarantee will protect 98.9% of all members with savings and share accounts in Guatemala. A savings guarantee fund has been the dream of many cooperative leaders in Guatemala since WOCCU completed a cooperative strengthening program there in August 1994, said David Richardson, WOCCU senior manager and longtime adviser to FENACOAC. “It has taken more than 16 years to realize this dream, with many obstacles to overcome, but it has finally happened,” said Richardson, who acted as WOCCU project director in Guatemala for the former cooperative strengthening program, funded by the U.S. Agency for International Development (USAID). “It comes at a time when many people are worried about the safety of their money and the soundness of the financial institutions in Guatemala.” WOCCU’s PEARLS monitoring system, which is an international standard for measuring credit union financial performance, grew out of the Guatemalan credit union movement 20 years ago. In 2008, WOCCU completed a complementary risk monitoring tool, which is a key component used to measure risk in the MICOOPE savings guarantee fund. In developing the tool, WOCCU representatives consulted with staff from Fondo de Garantías de Entidades Cooperativas (FOGACOOP), a savings guarantee fund in Colombia, to learn about its risk evaluation system.
Click to view larger image Experts answered questions last week about the new Guatemalan savings guarantee fund, future challenges and how it compared to the banks’ fund. From left, are: David Richardson, World Council of Credit Unions (WOCCU) senior manager; Victor Manuel Mancilla Castro, superintendent of banks in Guatemala; Brian Branch, WOCCU executive vice president and chief operating officer; Evamarie Reta, CEO of El Monte (Calif.) Community CU; and César Augusto Avendaño Castro, director of risk management for a savings guarantee fund in Colombia. (Photos provided by World Council of Credit Unions)
Through WOCCU’s International Partnerships Program, the California and Nevada Credit Union Leagues also supported FENACOAC’s endeavor by sharing their member credit unions’ experiences with private deposit insurance in the U.S. Brian Branch, WOCCU executive vice president and chief operating officer, was at the official launch in Guatemala City on Dec. 2 to congratulate the founding members of the guarantee fund. “The Guatemala credit union system’s savings guarantee fund is an enormous achievement, especially at a time when consumer protection is a key focus in the financial services industry,” he said. WOCCU is working with FENACOAC and credit unions in Guatemala on a USAID-funded program to create and test agricultural and financial tools to improve rural and financial sector development, livelihoods and food security. The program will expand upon the network of Guatemalan credit unions to create and document the use of new financial products, services and delivery mechanisms for value chains and rural producers.
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