Credit Unions in the Netherlands Apply SME Lending Lessons Learned in Indiana
April 17, 2017
The power of credit union collaboration and cooperation was evident during a recent exchange facilitated by the World Council of Credit Unions (WOCCU) between credit unions in Indiana and the Netherlands. Roland Lampe, Director of the Association of Credit Unions in the Netherlands (ACUN) travelled to Indiana in mid-March where he met with representatives of the Indiana Credit Union League (ICUL) and several local credit unions - including Forum CU, Indiana Members CU, Riverside Community FCU, Beacon CU, Afena FCU, Via CU and Prime Trust Federal Credit Union – to learn from their experiences in member business lending.
Only recently did the government approve credit union enabling legislation in the Netherlands, where lending options are limited for SME businesses. Two of the country’s largest banks currently control 80% of the market, and despite government guarantees, SME investment has fallen behind other countries in the region. This situation has the potential to change drastically by 2020, however, thanks to an ACUN initiative to establish 100 new credit unions designed specifically to address the needs of small business entrepreneurs.
The purpose of Lampe’s visit to Indiana was to explore areas where the business lending processes and procedures refined by credit unions in the United States may be directly applied by newly formed credit unions in the Netherlands. At each visit, Indiana credit unions shared resources and perspectives on issues critical to this young and growing ACUN movement: compliance and risk management, credit analysis, communication and marketing strategies, internal controls and back office systems. Lampe will now adapt these elements to fit the local culture and compile them into a Toolbox which will guide new credit unions as they are established in the Netherlands.
During several exchanges with hosting credit unions, Lampe noted how “the cooperative structure of credit unions guarantees this customized approach in financing, providing a personal touch to saving and lending, and emphasizing the relationship over the transaction.”
Nearly 99% of companies in the Netherlands are classified as SMEs. These businesses provide 60% of all employment and power the national economy, however, SME employment has stagnated under the challenges of accessing business lending. ACUN was formed in 2016 to address these challenges by championing the credit union model for financing small business entrepreneurs. To date, ACUN has establish 25 credit unions which provide savings and loan services to the SME sector.
An essential component of the ACUN model is the development of a coaching network of entrepreneurs, where loan recipients are assigned a mentor-saver who provides advice and experience which guide the entrepreneur’s business activities throughout the loan cycle. This collaborative structure strengthens the social fabric, reduces loan delinquency, improves planning and preparation for business owners and expands SME employment opportunities.
“We admire Roland's efforts to help business owners and entrepreneurs in the Netherlands gain access to the benefits of a member owned cooperative lending alternative," noted Indiana Credit Union League CEO John McKenzie who facilitated the visits with local credit union CEOs.
Ideas flowed in both directions throughout the exchange, as Lampe shared his philosophy on measuring the social impact of lending operations, noting the important difference between relationship banking and transactional banking. “By focusing on the human factor through coaching, credit unions in the Netherlands are at the forefront of financial services for the common good and are creating a sustainable and solid structure for lending to SMEs.”
Roland and McKenzie will continue to explore opportunities for further engagement to support the development of SME based credit unions in the Netherlands. Their willingness to collaborate demonstrates once again that credit unions are different from other financial institutions.
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 www.woccu.org.