Credit unions : an underrated mode of mobilizing and allocating resources in rural areas

Recognizing the importance of cooperatives in development, a bill which sets the comprehensive guidelines pertaining to the operations of all types of cooperatives, has been finally signed into law. A related bill creating the Cooperative Development Authority (CODA) in charge of registration and regulation of cooperatives, has also been signed into law. 1/ These laws, especially the one pertaining to the operations of the cooperative or the cooperative code, pose a question as to how the entire cooperative movement, specifically generally adopted the existing policies and procedures like the registration requirements, allocation of net surplus, duties and rights of the members, tax treatment, objectives of the cooperatives, capitalization, etc., which are already being followed by the cooperative movement. It is interesting to note, however, that the Code formally "acknowledges" that cooperative unions may assist the national and local governments in the latter's development activities in their respective jurisdictions. It also highlights special provisions for agrarian reform cooperatives, public service cooperatives, cooperative banks, cooperative insurance societies, and credit cooperatives. The final product of the two recently enacted laws on the cooperative movement has yet to be determined since the specific guidelines have not yet been formulated. But the guidelines which will concretize the provisions in the laws can help spur or retard the growth of the cooperative movement. This is where understanding the behavior of the different segments of the cooperative movement counts a lot in the formulation of such guidelines. Unfortunately, however, there only very few studies which can help us understand the behavior of the various segments of the cooperative movement. A man on the street usually associates any cooperative with the past failures of so many government-sponsored cooperatives that had been ubiquitously mentioned in the press. If limited to this set of knowledge, one can reasonably expect the kind of guidelines which would emerge from the laws. That is, the guidelines would aim at policing, instead of promoting, the cooperative movement. This study, therefore, tries to contribute to the understanding of the behavior of one segment of the cooperative movement. The cooperative credit union (CCU) system was chosen because it is the most successful of all types of cooperatives. Yet, its role in the financial markets has not-yet been fully understood nor appreciated.