Ukraine shutters credit unions amid COVID-19 pandemic
MADISON, WI (April 1, 2020) — World Council of Credit Unions’ Credit for Agriculture Producers (CAP) Project team provided the following update on the temporary forced shutdown of all credit unions in Ukraine.
Credit union members in Ukraine will not have access to their accounts until at least April 24 after the Ukrainian government shuttered all credit unions as part of its COVID-19 emergency response.
While the government allowed banks and insurance companies to remain open, credit unions were forced to close effective March 17 because as they do not offer online financial services. The lack of digital services is the consequence of a poor IT infrastructure in the Ukrainian credit union industry.
Grocery stores and pharmacies are the only other the businesses that can operate in Ukraine at this time.
Notably, more than half of Ukraine’s credit union members are 50 years of age or older, putting them in a higher risk category if they were to contract COVID-19—which would be more likely if they were to conduct in-person financial transactions.
Along with serving a high percentage of retirees, credit unions also count thousands of farmers and small and medium enterprises among their members. Many of those members are struggling financially because they have no access to their accounts or to loans that are needed during the peak of the spring agricultural season.
That means many credit union members in need of cash are being forced to turn to payday lenders, which are charging an average annual percentage rate (APR) of 500-600%. Others are turning to relatives for support or digging into cash reserves.
Meanwhile, credit unions are losing revenue each day the shutdown continues—along with potentially losing members—which will likely lead to capital and liquidity issues once the government allows them to reopen.
A transition of Ukraine’s credit union regulator has also resulted in a lack of effective advocacy during this crisis. Ukraine’s current credit union regulator—the National Commission for State Regulation of Financial Services Markets—will not regulate the market after June 31, 2020. As a result, it is unable to provide any advocacy services or liquidity support for credit unions during this time. The National Bank of Ukraine is the future regulator for credit unions but is leading a macro-level response to a possible financial crisis on the horizon. It is also providing banks, which are currently under their supervision, with required liquidity support.
On March 25, World Council’s CAP Project team conducted a webinar with representatives from more than 70 Ukrainian credit unions about how to operate in a safe and effective way with members once they do reopen amid the COVID-19 crisis. CAP will continue the dialogue with credit unions and encourage the regulator to advocate for the credit union market in this unfolding emergency.
For more information, contact Greg Neumann, World Council Corporate Communications Manager at gneumann@woccu.org or +1 608-395-2048.
About World Council of Credit Unions
World Council of Credit Unions is the global trade association and development platform 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 90 countries. Worldwide, 82,758 credit unions in 97 countries serve 404 million people. Learn more about World Council's impact around the world at www.woccu.org.
