When the World Health Organization (WHO) declared the coronavirus (COVID-19) a pandemic on March 11, World Council of Credit Unions’ President and CEO Brian Branch soon predicted the imminent health crisis would be followed by an economic crisis and then, ultimately, a global recession.
Speaking on a June 26 webinar hosted by Federación Nacional de Cooperativas de Ahorro y Crédito del Perú, World Council’s direct member organization in Peru, Branch explained how those “three waves” are now playing out in front of us.
He said the health crisis caused many credit union members around the world to get sick, making them unable to work. Credit unions responded by instituting payment moratoriums and extending credit deadlines to meet their needs.
Many countries are still dealing with the immediacy of the health crisis, causing a larger economic crisis, according to Branch. Some credit union members do not have the ability to access income to pay for their necessities. Without that liquidity, they are also unable to pay off credit or outstanding debt.
Branch noted that some countries, such as Australia, acted swiftly to contain the health crisis—which allowed them to limit the seriousness of the economic crisis as well. But he said this is not the case in most countries, which means credit unions are receiving far fewer deposits from members—causing liquidity concerns. World Council is advocating that national regulators listen to international standard setting bodies, which are calling for an easing of compliance measures during this time, to allow credit unions and other small, community-based financial institutions to regain some level of stability.
Given that the pandemic is still on the rise globally, Branch told the Peruvian credit union professionals attending the webinar that the global recession arising out of these first two crises has the potential to last into the first quarter of 2021.
“However, credit unions are doing whatever it takes to support their members. This has been creating loyalty,” said Branch. “Because of this strong connection credit unions are providing for the people we will see members start to be built back up. People are going to put their money into institutions that have been supporting them through the past several months, allowing for an increase in liquidity for credit unions. With all that in mind, credit unions are going to be able to see more membership, savings, and opportunities within the foreseeable future.”