# Privatisation of some credit unions?



## Catch22 (17 Jul 2017)

The multinational company, Fexco, is trying to establish a joint venture with a small number of credit unions to provide services to credit unions.

I can understand why Fexco would want to do this, if they can make a profit on the deal, but I can't understand what's in it for the credit unions, especially now that credit unions are getting bigger and can afford to invest in new services themselves. Indeed, there are other credit union owned initiatives already underway.

In other countries, credit unions co-operate to form credit union owned entities called CUSOs, which provide shared services to credit unions and any surplus is ploughed back in to improve services or given back to the credit union owners as a dividend. But I've never heard of a joint venture with a stockbroking firm or foreign currency dealers, where any surplus will have to be divided up with a private, unlimited liability company.

Is this the first step on the road to privatisation for these credit unions? Will the members of these large credit unions be consulted before a decision is made on changing the business model? Will the members get to vote on the change?

It seems a strange route for these credit unions to take. Will the Fexco joint venture jeopardise the business model for the credit union movement?


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## MrEarl (17 Jul 2017)

Hello,

Do you have more specific details on what exactly Fexco are proposing in these joint ventures, how they will be structured and owned etc ?

I have seen Fexco provide Foreign Exchange facilities through some CUs and I gather it can work quite well.  Fexco in their own right, are a reputable company as far as I am aware.

Many of the small to mid size credit unions would benefit from strategic partnerships, particularly where these partnerships offer new opportunities to generate income, or bring expertise to the CU in question.

Members will get a vote on any change of ownership at their CU.  In some cases, it might actually be an attractive proposition for a CU to be offered the chance to be taken over - particularly when it involves the continuation of current services to the customer base and perhaps a distribution of the value of the CU to the members (who are the owners of the CU and it's net assets).

If you are concerned about a particular transaction involving your own CU and Fexco, I would encourage you to write to the chairman of your local CU and ask for some further information, as to what is proposed or has been agreed etc.


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## 24601 (17 Jul 2017)

Catch22 said:


> The multinational company, Fexco, is trying to establish a joint venture with a small number of credit unions to provide services to credit unions.
> 
> I can understand why Fexco would want to do this, if they can make a profit on the deal, but I can't understand what's in it for the credit unions, especially now that credit unions are getting bigger and can afford to invest in new services themselves. Indeed, there are other credit union owned initiatives already underway.



You make it sound like FEXCO is some sort of foreign-owned venture capitalist. They're a Kerry company that has been working with most credit unions providing foreign exchange for donkey's years. I don't know what this joint venture is about but this kind of thing is actually fairly standard in more advanced credit union movements. Sometimes services are provided through CUSOs but very often it's just good old for-profit businesses. My experience from working with Irish credit unions is that it's far more effective to partner with for-profit businesses to get things done.

Your assertion that credit unions are bigger and can afford to invest in new services is wrong. There has been much restructuring over the past few years but in relative terms they're still small businesses, and that's before you even begin to talk about their struggle to generate a reasonable return on assets going forward.



Catch22 said:


> In other countries, credit unions co-operate to form credit union owned entities called CUSOs, which provide shared services to credit unions and any surplus is ploughed back in to improve services or given back to the credit union owners as a dividend. But I've never heard of a joint venture with a stockbroking firm or foreign currency dealers, where any surplus will have to be divided up with a private, unlimited liability company.



There's plenty of Irish credit unions operating as insurance intermediaries doing exactly what you say you've never heard of. Similarly their relationship with FEXCO is exactly that. I don't really see an issue with this.



Catch22 said:


> Is this the first step on the road to privatisation for these credit unions? Will the members of these large credit unions be consulted before a decision is made on changing the business model? Will the members get to vote on the change?
> 
> It seems a strange route for these credit unions to take. Will the Fexco joint venture jeopardise the business model for the credit union movement?



How can a credit union be privatised? It's actually not legally possible (other than an involuntary transfer in a resolution situation, which still isn't privatisation in the traditional sense) Also, if you know anything about credit unions, you know that the business model has to change - they're less than 30% lent for goodness' sake! As for members getting a say, what do you want them to get a say about exactly? They elect a Board to govern on their behalf. General meetings have miserable attendances as it is so I can't imagine that letting a hundred staid locals there for a raffle to decide upon the strategic direction of the CU would result in better outcomes.


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