“David and Goliath” Story as Estonian Credit Unions Take on Big Foreign Banks

September 11, 2007

Organization: World Council of Credit Unions
Phone: (608) 395-2000

Juri Valdov talks with H.Kaljuste, CEO of Kehtna Credit Cooperative, in Rapla County, Estonia.

Madison, WI—On behalf of World Council of Credit Unions (WOCCU), Juri Valdov, CEO of Northwest Federal Credit Union and immediate past Chairman of Credit Union National Association (CUNA), traveled to Tallinn, Estonia, August 23–25, 2007, to assess credit union development there. As a movement still working to reestablish itself after the collapse of Soviet rule, Valdov found in it a true “David and Goliath” story.

Valdov speaks Estonian and commented on how “they treated me like one of their own,” as he was warmly embraced by the credit union officials in Estonia, who guided him through visits to credit unions throughout the country.

Estonia had a thriving credit cooperative system between the two World Wars, but today the oldest “modern day” credit union dates back to just 1991, when the country regained its independence from the former Soviet Union.

Valdov visits Leie Credit Cooperative in Viljandi County, Estonia. (l-r): M.Toomsalu, CEO of Leie Credit Cooperative, Kevin Helferty, Chief Accountant, ILCU, A. Ristkok, Executive Director, Estonian Union of Credit Cooperatives, Juri Valdov.

Estonia’s 11 credit unions are small, mostly rural community-based institutions. They account for less than 1% of the financial market and serve approximately 2,700 members in total. They range in size from a 52-member financial institution to one with 569 members.

When Estonia gained independence from the Soviet Union in 1991, its first endeavor to provide renewed access to financial services in-country stimulated the start-up of 50 commercial banks. Forty-eight of the banks failed, losing the savings of those who had entrusted their hard- earned money in the banks. Although many large depositors were able to recover part of their savings, those with smaller accounts lost everything.

Today, there is no national bank—based on national capital—in Estonia. Andrus Ristkok, Executive Director of the Estonian Union of Credit Cooperatives, reported that two large Scandinavian banks currently hold more than 90% of their savings in the Estonian banking sector. The banks pay a return on savings that is less than the rate of inflation, yet the bank divisions in Estonia are twice as profitable as their European counterparts. Ristkok heads the Estonian Union of Credit Cooperatives, established in 1999, on a part-time basis and with no pay.

The banks and government officials in Estonia portray credit unions as relics of the past with no place in today’s modern world. Yet, “Estonia is a ‘wired’ country where everyone has a cell phone and access to the Internet,” Valdov reported. Valdov counseled Estonian credit union staff on the opportunities the hi-tech environment afforded them in determining the best mix of products and services for members so they can better compete in the changing environment.

“This is about consumer choice,” WOCCU Executive Vice President and Chief Operating Officer, Brian Branch, explained, “The lack of competition in Estonia means that consumers lose the real value of their savings, receive weak service and pay a high cost for loans. The credit unions are providing people with alternatives.”

Today’s technology and mobile society offer small credit unions, the “Davids” of Estonia, an opportunity to compete with the multinational “Goliaths” through smart and creative use of technology. “The next step is up to the credit unions in Estonia. They are at a critical stage in their development and need outside help as they begin their journey toward future success,” Valdov stated.

World Council of Credit Unions is the global trade association and development agency for credit unions. World Council promotes the sustainable development of credit unions and other financial cooperatives around the world to empower people through access to high quality and affordable financial services. World Council advocates on behalf of the global credit union system before international organizations and works with national governments to improve legislation and regulation. Its technical assistance programs introduce new tools and technologies to strengthen credit unions' financial performance and increase their outreach.

World Council has implemented 300+ technical assistance programs in 89 countries. Worldwide, 68,882 credit unions in 109 countries serve 235 million people. Learn more about World Council's impact around the world at