Group Members:Farkhanda Khalil

Hira Alvi

Muzhda Niazi

Nida ilyas

*Credit Unions

*Definition:

*It is a non-profit financial institution that is owned and operated entirely by its members

*When a person deposits money in a credit union, he/she becomes a member of the union because the deposit is considered partial ownership in the credit union.

*To join a credit union, a person must ordinarily belong to a participating organization

*Credit unions are normally taxed at rates lower than those applied to commercial banks and other financial institutions.

*Credit unions generally operate under government charter and supervision.

*They are particularly important in less developed countries

*Credit unions provide financial services for their members, including savings and lending

*Difference Between Credit Union and

Banks:*The practice of banking is ancient; for almost as

long as people have had money.

Credit unions date to the 1900s, when they were initially established as workers cooperatives. In the 20th century, several industries began creating their own credit unions, allowing members of specific industries or employees of particular businesses to enjoy credit union membership.

*Unlike banks, credit unions are financial membership organizations. You don't open an account at a credit union.

*Unlike banks, credit unions are non-profit organizations. Their profits are distributed right back to their members. Because of this, credit unions often charge lower fees than banks and pay higher interest rates on savings accounts, money market accounts, interest checking accounts and certificates of deposit.

*The board of directors at a credit union is classically elected or comprised of volunteers, and members all participate in elections and major financial decisions. By contrast, a bank is owned by a private company, with a board appointed by the company or shareholders in the company.

*Banks are far bigger so they offer a lot more services, while credit unions are generally far smaller than the banks so there usually have far fewer services be available.

*Can anyone belong to Credit Union:

*Membership in a credit union used to be very restrictive and only available to people who worked for particular employers.

*Some credit unions have virtually no membership requirements other than a quick online application. For example, the Melrose Credit Union has an open charter in New York State and has members from all over the U.S. and the world.

*Key features of credit union

*A credit union’s customers are its members. Credit unions can only offer services to members. This is because credit unions are co-operatives – self-help organizations owned and democratically controlled by their members.

*Promoting responsible lending

* Banking services

* Savings accounts

* Affordable loans

* Financial education and access to money advice

* Insurance products

* The rules

*Credit unions objectives

* Promoting thrift – members must be encouraged to save as well as borrow.

 

* Providing credit and loan products with fair and reasonable interest rates.

* The efficient use and control of members’ savings for mutual benefit in order to earn rate of return (the dividend).

* Training members to use money wisely devise a budget and manage their financial affairs.

*Members own and control their credit unions.

*Distribution of profits

*Credit unions distribute their profits to members in dividends which mean the money stays in the community rather than going to faceless shareholders. They are also committed to improving the economic and social well-being of members

*The Credit Union Tax Exemption

*Historically, cooperative depository institutions were generally exempted from the federal corporate income tax.

*In 1951 Congress removed the thrift tax exemption because these institutions had evolved into commercial bank competitors, and had lost their “mutuality.

Credit Union Characteristics*First, credit unions are member-owned, and each

member is entitled to one vote in selecting board members and in certain other decisions.

* Second, credit unions do not issue capital stock. Credit unions create capital, or net worth, by retaining earnings.

*Third, credit unions rely on volunteer, unpaid boards of directors whom the members elect from the ranks of membership.

*Fourth, credit unions operate as not-for-profit institutions, in contrast to shareholder-owned depository institutions.

*Fifth, credit unions may only accept as members those individuals identified in a credit union’s articulated field of membership. Generally, a field of membership may consist of a single group of individuals that share a common bond.

*Credit Unions Microfinance Services to the Poor:

Today credit unions exist and strive in every region of the world. In Asia credit unions have more challenging role is the home of most of the poor people in the world.

How credit unions demonstrated they can provide microfinance services to the poor and low-income communities in sustainable way?

By three ways:

*A. Union is a union Credit of people with a goal of improving their living standards through access of affordable financial services.

*B. Can take advantage of social capital in situations where financial capital is scarce.

*C. Self and Mutual Help

How the credit union help members improve their lives?*Assist members achieve their financial goals

*Assist members develop financial discipline-family budgeting. Save first before spending

*Provides loan for productive purpose to create self-employment

*Built in a support for entrepreneurship.

*It is focused on the long-term well-being of the members.

How much importance credit unions placed on its sustainability to continually serve the community?

*Success Key Indicators

*Financial viability

*Operational Efficiency

*Competitive position

*Member satisfaction

*Employee satisfaction

*History of Credit Unions

*Drawbacks of Credit Unions:

*Credit unions generally have fewer branches and offer fewer services than banks and they have fewer ATMs, only about 60 percent of credit unions offer ATM cards.

*Access to new technology is limited. Credit unions often do not have the funds to invest in technology. As a result, some credit unions' websites appear as if they belong in a bygone era.

*Credit unions are often focused on a certain community, most often either a geographic location or a profession. This has created the impression that it can be difficult to find a union for which you qualify. For example, Pentagon Federal Credit Union is generally only available to those who are U.S. government employees and a few other select groups, but anyone else can also qualify with a $15 donation to an organization.

*THANK YOU