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WOCCU expands Islamic finance in Afghanistan with new member

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MADISON, Wis. (12/26/12)--
Click to view larger image World Council and U.S. Agency for International Development officials met with IIFC Group staff and board members in Kabul last month to discuss IIFC network's progress and acceptance as World Council members.
After nine years in Afghanistan, the World Council of Credit Unions (WOCCU) has completed its donor-funded program there and welcomed the country's new credit union trade association, the IIFC Group, into WOCCU's membership this month.

Amid political uncertainty and a challenging operating environment, WOCCU created and formalized a network of 34 credit unions and points of service, known as Islamic investment and financial cooperatives (IIFCs), in 14 provinces across Afghanistan. Each outlet offers products and services compliant with Islamic law. Each cooperative is owned and controlled by local members.

As of November, roughly 92,456 IIFC members had accumulated $4.5 million in savings and shares. In the past three years, members borrowed and repaid $74 million to grow their farms and small businesses. (All amounts are in U.S. dollars.)

"World Council provided the institutional and policy framework, training and technical guidance under extremely difficult circumstances," said Brian Branch, WOCCU
Click to view larger imageIIFC membership development officers visited local markets, small business owners and farmers to introduce the IIFCs' products and services and to sign up members.
president/CEO. "The individual IIFC employees and IIFC Group staff have built this network often at great personal risk. We wish them continued success as they work to expand the network and to deliver services to the Afghan people."

Just after the country's inaugural democratic presidential election at the end of 2004, WOCCU Council established the country's first credit unions in northern Afghanistan with funding from the Microfinance Investment Support Facility for Afghanistan (MISFA). In two consecutive programs funded by the U.S. Agency for International Development (USAID), World Council expanded the IIFC network farther south and east, developing an array of Islamic financial products for farmers, small business owners and women in regions where the insurgency was strongest and where Shariah-compliant financial services were unavailable.

The credit union model's shared ownership and risk is well-aligned with the precepts of Islamic finance, said WOCCU. Every IIFC member contributes or purchases at least one $1 share; all members are considered owners; and profits and losses are distributed in member dividends at the end of the fiscal year. WOCCU worked closely with local religious leaders to develop appropriate products and services and to gain traction in more conservative communities.

Click to view larger image Female membership in the IIFCs has ranged from a high of 35% of total membership in one northern IIFC to an average 1%-2% in southern IIFCs, where women's role is highly restricted. (Photos provided by the World Council of Credit Unions)
WOCCU's latest USAID-funded Rural Finance Cooperative Development (RUFCOD) program (2009-2012) focused on providing broad access to financial services that would stimulate job creation, increase incomes and stabilize communities racked by decades-long conflict. The program bridged the service gap between commercial banking and the microfinance industry by providing financial services to small and medium-scale business owners, farmers, low and medium-income households and women.

During the RUFCOD program, the IIFC network expanded from 18 to 34 points of service and formalized under the Kabul-based IIFC Group, which provides technical assistance, training, supervision and loan capital to affiliated IIFCs. Today, about 2,000 new IIFC members open accounts each month, and the IIFCs disburse a monthly average of $2.2 million in new loans.

World Council's work in Afghanistan was its first experience establishing Shariah-compliant financial institutions, products and services.

CU development in Libya explored by WOCCU

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TRIPOLI,  Libya (12/26/12)--
Click to view larger image San Francisco FCU President/CEO Steven Stapp (far left), The MILLA Project's Lara Thomas (center) and World Council of Credit Unions President/CEO Brian Branch (far right) met with a business group in Misrata, Libya, to discuss Shariah-compliant financial products that credit unions may offer there.
World Council of Credit Unions (WOCCU)  representatives traveled to Libya earlier this month to discuss credit union development with central bank authorities, civil society groups and local business councils.

Libya's transitional government is beginning the road to economic recovery as it rebuilds from a civil war and international attention following the Benghazi attacks, said WOCCU.

WOCCU President/CEO Brian Branch traveled to Libya with Steven Stapp, president/CEO of San Francisco FCU.  Also with the group were Lara Thomas and Allaeddin Ghadyi from The MILLA Project, an international human rights organization working to bring democratic financial institutions to Libya. Thomas is a member and 2012 scholarship winner of WOCCU's Global Women's Leadership Network.

"We were approached to explain the credit union model," Stapp said. "As the country reconstructs, it is an opportunity for credit unions to participate in rebuilding the economy."

The group met with representatives from the Central Bank of Libya; the Libyan Business Council; a business group from the northwestern coastal town of Misrata; and a civic and human rights group called the Libyan Liberal Forum for Democracy.

Libya's former regime did not support Islamic finance in the country, but new leadership passed an Islamic banking law in May, and public demand for Shariah-compliant services is high, said WOCCU.  Local groups asked WOCCU  to explain such products and services available through credit unions and how they might be implemented in Libya.

Click to view larger image Meeting with central bank authorities to discuss Islamic finance development in Libya through credit unions were (pictured left to right) Allaeddin Ghadyi, Lara Thomas, and Steven Stapp. Not pictured is Brian Branch. (Photos provided by the World Council of Credit Unions)
"The first priority for the government of Libya is writing a new constitution and establishing security," Branch said. "Moving from a centrally controlled economy requires business security and contract protection. Local business councils in Tripoli and Misrata are looking for solutions to finance large-scale business."

Access to financial services remains limited in Libya. When civil war erupted there in 2011, Libya stopped producing and exporting oil, which accounted for about 70% of the country's gross domestic product. The economy contracted 41.8%. Foreign investment and aid has since declined. Events in Benghazi increased both international and local business concerns for security.

Branch said state officials and business councils are exploring ways to release central bank guarantees and financing for business.

"Most small and family businesses are self- or family-financed, and that will be the next wave," Branch said. "Consumer finance is still a new concept. Financial cooperation is still not well understood, but many are looking for an Islamic finance model. The credit union model fits."

WOCCU has implemented credit union development programs in 71 countries, including 18 African nations and a recently completed Islamic finance program in Afghanistan that established 34 Shariah-compliant financial cooperatives and points of service across the country (See related News Now story, "WOCCU expands Islamic finance in Afghanistan with new member" in today's issue.)

WOCCU has not yet had a credit union development program in Libya.

Memorial fund for slain principal set up at CU

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MIDDLEBURY, Conn. (12/26/12)--The family of slain Sandy Hook Elementary School Principal Dawn Lafferty Hochsprung has established a memorial fund in her name at a Connecticut credit union where she was a member.

Waterbury CT Teachers FCU, a $238 million asset credit union located in Middlebury, Conn., and which has a branch  in Danbury, announced the Dawn Lafferty Hochsprung Memorial Fund in her memory.

Hochsprung was among those killed Dec. 14 at the elementary school in Newtown Conn., while trying to protect  students from harm, said the credit union's website.

She "was a dedicated teacher who inspired her students to reach their fullest potential," said a message on the site. "She was admired and respected by her students, colleagues and parents for her caring and nurturing nature and will be sorely missed," it said.

NJ league gives 10% rebate on dues

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HIGHSTOWN, N.J. (12/26/12)--The Board of Directors at the New Jersey Credit Union League approved a 10% league dues rebate for its member credit unions Thursday night at the regular monthly board meeting (The Daily Exchange Dec. 21).

Credit unions in the state have been hit hard during the economic recovery by the aftermath of the Oct. 29 superstorm, Hurricane Sandy.

"New Jersey credit unions are certainly recovering, but many are facing financial challenges in this difficult economic environment," said league Chairman Lou Vetere. "As a league, we are strong in many ways, including financially, and we want to assist our members any way we can. This was our small part in doing that.

The rebate applies to league dues only. Members have three options: waiving the rebate and paying full dues as normal; taking the rebate; or applying the dues rebate to either the league's Banking You Can Trust ad co-op, the New Jersey Credit Union Foundation's Reality Fairs program, or the New Jersey Coalition for Financial Education partnership.

The league said it will contact credit unions that have already paid their dues to determine which option they will choose.

CU Strategic Planning puts hold on new clients after CDFI NOFA

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TACOMA, Wash. (12/26/12)--CU Strategic Planning, a community development financial institution (CDFI) grant writing firm, placed a temporary stay on accepting any new credit union clients after the release Friday of the U.S. Department of Treasury's CDFI Fund Notice of Funding Availability.

The Tacoma, Wash.-based firm said it has had a waiting list of credit unions for grant writing projects since August. However, it will take project requests from credit unions for the 2013-2014 grant writing round.

The firm said it helped half of all the winning credit union applications in 2012. "To continue our high level performance," CU Strategic Planning President/CEO Chuck Cockburn said, "it is imperative that we serve our existing clients to our utmost capabilities--and then open the door to new clients once the current projects are complete."

Due to the current demand of skilled CDFI grant writers, Cockburn said, choosing a grant writing team far in advance of the NOFA is vital for a winning application--ultimately ensuring the success of a credit union's community development.

"Quality CDFI grant writers are booked up to a year in advance," Cockburn explains. "The grant writing round is open right now, but all the best writers are already booked. So we encourage credit union CEOs to plan ahead, working nine months or more in advance to establish a quality application is better positioned to win for them."

CU Strategic Planning offered 10 tips for successful grants:

  1. Be compelling: Use facts and research to tell an engaging story. Having a need when no one else is fulfilling that need is compelling.
  1. Benefit consumers/members, not the credit union: Frame the story about why the program helps consumers and contributes to the credit union's sustainability so that it can continue to help consumers.
  1. Prove feasibility: Financials, research, and management experience--does it make the reader believe you will succeed?
  1. Make financial projections: Prove the program will continue beyond CDFI funding and prove the program is a good investment of taxpayer dollars. (Quantify positive impact to consumers.)
  1. Create demand: Use increasing loan demand in the category to show demand.
  1. Leverage distress: Make a claim and then support it with data.
  1. Develop partnerships: Strategic partners open up new avenues for program innovations, which allow access to new funding.
  1. Have precise editing: Good editing ensures the narrative's progressive and natural flow that does not distract the reader, allowing the scorer to focus on scoring.
  1. Grow relationships: When communicating with the CDFI, build a relationship with one or two particular staff members.
  1. Early submission: Submit the application ahead of time to ensure CDFI staff support if you have technological problems.

Illinois league concludes another year of giving

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NAPERVILLE, Ill. (12/26/12)--Giving isn't just a holiday-time event for many credit unions and their leagues. A case in point: Staff from the Illinois Credit Union League (ICUL) concluded another year of giving to charities and giftwrapping its community service with its last project for the year: Providing toys for the Walter and Connie Payton Foundation (WCPF).

The toy drive was one of several charitable actions that included ICUL's annual food drive, blood donation drives, monthly "jeans days" fundraising and direct financial donations to food pantries and soup kitchens throughout the state.

WCPF works with the Illinois Department of Family Services to ensure needy children receive gifts for the holidays. Each year, the foundation provides for about 14,000 children who otherwise would not receive holiday gifts, said ICUL.

Other 2012 activities included ICUL's fourth annual summer food drive, which this year benefitted the Loaves and Fishes Pantry in Naperville. The pantry serves DuPage County, and during the fiscal year, which ended in June, it provided nourishment to 112,468 individuals in 28,824 distributions. Loaves and Fishes distributes more than 60,000 pounds of groceries to about 600 families each week. At the time of the food drive, family visits were up 58% and total new families were up 71% over 2011. The pantry served a record number of people because of its collaboration with the community.

Also, the league initiates Pathways to Empowerment programs to assist people with issues that prevent them from being self-sufficient. The on-site programs are offered by partner agencies on topics such as English language proficiency, nutrition education, basic financial skills, job search support, income tax preparation and public benefits enrollment.

ICUL staff also provided 35 units of blood for Heartland Blood Centers, an independent, not-for-profit blood center serving 38 hospitals in 12 counties in northeastern Illinois, as well as northwestern Indiana. Heartland collects more than 172,000 units of blood each year.

What began as participating in Children's Memorial Hospital's "Miracle Jeans Day" in 2011 has developed into a monthly activity at the league. Staff choose an organization to support each month. As a result, nearly $3,900 was donated to local and national social service organizations this year.

Additional financial support was provided on behalf of the Illinois Credit Union System, with 14 food pantries throughout the state receiving $200 each, for a total $2,800 donation.

"This continued to be a year of great need for many people," said ICUL President/CEO Dan Plauda. "Rather than sending out holiday greetings, the Illinois Credit Union System for the fourth year in a row chose, on behalf of its member credit unions, to coordinate, organize and participate in these activities. We feel blessed to have been able to give back to our communities."