WOCCU Assists Croatian Credit Unions Face Uncertain Future

Croatia's upcoming transition to Eurpean Union (EU) status may put many credit unions in jeopardy of closing. The EU Ministry of Finance officials stated that, by 2008, credit unions in Croatia must meet the minimum capital requirement of EU$1 million (US$1.2 million). In Croatia, where the largest credit unions have less than 10,000 members, only 10-20 of the 118 credit unions will be permitted to continue operating, according to the predictions of government officials.

World Council of Credit Unions, Inc. (WOCCU) meet with Croatia with members of the European Bank for Reconstruction and Development (EBRD) to assess the readiness of Croatian credit unions for Croatia's coming ascension into the European Union (EU). Though many countries aspire to enter the multinational economic power, the shift to membership is often difficult—particularly for smaller countries.

Croatia is one of those small countries, with only 4.5 million residing on its Balkan terrain. It's a land of scenic rural villages nested among wooded mountains and Adriatic coastline that attracts tourists from all of Europe. It's also a land in recovery, from the brutal war of the early '90s. But more and more Croatia is putting that trauma behind it. "We are looking to the future and rebuilding for our children," explains Josip Borzic, director of DEMOS Credit Union.

The credit union system in Croatia is one of its most important tools for accomplishing that rebuilding. Today 118 credit unions and 260,000 members keep the cooperative spirit alive there. Most Croatian credit unions are small and community-based, located primarily in rural areas. DEMOS and two other credit unions, Noa and MikroPlus, arose in former conflict areas, where they contribute directly to rebuilding efforts.

Marec Credit Union was started in Ivanicgrad to provide financing for rural farmers and local artisans who had turned to self-employment because of a poor job market. Zanatska Stedno Zadruga Credit Union was started 120 years ago in Zagreb, the capital city, by small shoe and clothing makers. Artisans still come together in such credit unions today because only large manufacturing firms can access credit in the commercial banking sector.

Other success stories are more recent. Zagrebacka Credit Union opened up in a storefront in Zagreb to help city residents with no other access to financial services. "We had a gypsy man come in last month," explains Zabrebacka president Zvjezdana Bilic. "[He] had a low [paying] job but wanted to take out a small loan, just a hundred dollars. He would not qualify anywhere else—we took the chance to support him. He repaid [the loan] and was so grateful, but this is what we're here for."

Unfortunately, Croatia's upcoming transition to EU status may put many of these credit unions in jeopardy of closing. EU Ministry of Finance officials stated that, by 2008, credit unions in Croatia must meet the minimum capital requirement of EU$1 million (US$1.2 million). In Croatia, where the largest credit unions have less than 10,000 members, only 10-20 of the 118 credit unions will be permitted to continue operating, according to the predictions of government officials—hence the WOCCU-EBRD intervention.

Brian Branch, WOCCU chief operating officer noted, "World Council is looking for ways that the credit unions can grow, merge and strengthen themselves now to face this challenge that is only two years away. We are also trying to mobilize resources that can support these credit unions as they tackle their challenge." In the meantime, Croatian credit unions brace themselves for the inevitable struggle. Mato Majstorovic, manager of the Croatian Association of Credit Unions shared "We see not just the winds of change, but a hurricane coming."

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 more than 290 technical assistance programs in 71 countries. Worldwide, 51,000 credit unions in 100 countries serve 196 million people. Learn more about World Council's impact around the world at www.woccu.org.