Despite hardships, credit unions are making progress in Ukraine (07/05/98)

Despite hardships, credit unions are making progress in Ukraine

by Marharyta Lukecha
Intelnews

KYIV - The hardest period of development for Ukrainian credit unions came at about the time of their creation five years ago, when drastic hyperinflation had turned Ukrainian money into nothing more than "sheets of paper," according to Dmytro Hryhorczuk, the president of the World Council of Ukrainian Cooperatives. However, Mr. Hryhorczuk added, the credit unions have done a lot of developing since then.

Mr. Hryhorczuk spoke on June 20 at the All-Ukrainian Conference of Credit Unions, held in Kyiv.

Currently, Ukrainian credit unions boast a total of 20,000 members, and the number of credit unions in Ukraine has grown from 57 to 69 within the last year. Credit unions now have 5.4 million hrv in deposits - five times as much as in 1993.

The money earned by credit unions has benefited their shareholders in a variety of ways. It has enabled some to start a business; for others, it has simply enabled them to survive.

Credit unions, like most financial institutions in Ukraine, have their share of problems. The president of the Ukrainian National Association of Credit Unions, Petro Kozynets, said that perhaps the largest problem is the lack of legal support. Ukraine still lacks a separate law on credit unions, which means credit unions are governed by a decree issued years ago by Ukraine's first president, Leonid Kravchuk.

Another problem, according to Mr. Kozynets, is that a network of insurers does not exist for credit unions, thereby discouraging thousands of people from joining credit unions, afraid that their money might simply disappear.

A third problem is that Ukraine lacks an adequate coordination mechanism for its entire fiscal system, one that is not adequately backed by legislation.

Mr. Hryhorczuk said these problems mean that credit unions have developed primarily as an urban phenomenon in Ukraine, whereas credit unions could be particularly useful in rural areas, where they could be a tool to help stimulate the ailing agricultural sector.

Ukraine's credit unions are supported by similar organizations in Australia, Canada and the U.S., all of which provide both financial assistance and consultation. The U.S. Agency for International Development has supported Ukrainian credit unions with a $2 million credit to develop the sector and the Canadian Cooperative Association has provided $5 million.