To learn more about the background of Credit Unions, read the section on a 'History of Credit Unions'; to learn more about starting a Credit Union, read the section titled 'How to Start a Credit Union'.

How to Start a Credit Union

Introduction

This section gives a brief explanation on how a group of people can start a credit union or a savings club. It gives explanation how many members required to start, the determination of the common bond, how many shares must be subscribed for before members can form a credit Union, and all the important things that you must follow in the registration processes.

Membership

The first requirement under the Credit Union Act of 1986 for a group to start a Credit Union is that there must be at least 15 people who have common bond of association before they could start a Credit Union.This common bond or common interest idea is very important in starting up of a Credit Union.

A common bond or common interest is something that links members to each other so that they are more likely to work together.For example, employees of a company, members of a religious body or people living in one village, etc. are all examples of people who have some common interests.

The 15 people cannot form a Credit Union unless they have this common interest.In addition all members of the Credit Union must be over 16 years of age.You cannot form a Credit Union if you have members that are under 16 years of age.

Shares

These 15 people must at least take up one share in the Credit Union valuing at least $2.00.This amount can be increased if the members agree.By taking up at least one share in the Credit Union a member would be able to have the right to attend and vote at the Annual General Meetings of the Credit Union.

Appointment of officers of the Credit Union

When you have satisfied the basic requirements to form a Credit Union, i.e. to have 15 members who are over 16 years of age, who have a common bond, and who have bought share in the Credit Union, then you could go onto the next step in the set up of a Credit Union. This next step is the calling of the first Annual General Meeting of members to elect officers for the Management Committees to run your Credit Union.This elections of officers is conducted as follows:

First, the members appoint a Nominating Committee of 3 people who will, meet immediately after appointment, to choose among themselves a Chairman, a Secretary, and a Member. These committee members will be temporary officers chosen mainly to conduct the first election of officers in your Credit Union.

After these 3 persons have given themselves the positions of Chairman, Secretary and member the Nominating Committee will then take the chair as member select officers for the following positions:

First members will elect the Board of Directors.There must be at least 5 members to be elected to the Board of Directors. The Board is the decision making body of the Credit Union therefore members should elect people whom they know will make the right and fair decision.

The second committee that members must elect officers for is the Supervisory Committee. There must be three persons to serve in this committee. This committee is the 'watch dog' to the operations of the Credit Union. They are responsible to ensure that proper records are kept of the financial transactions of the Union, like shares, deposits, loans to members.

The third committee to be elected by the members is the Credit Committee. This committee must have at least three members and they are the ones who are responsible for appraising and approving of the loans that a member would like to make.

When officers of various committees of your Credit Union have been elected the President of the Board should contact the SICUL assistance with the paper work to have your Credit Union legally registered as required by the Credit Union Act. The SICUL also has available stationeries like pass books, deposit slips etc. that will be used by your Credit Union.

Furthermore the Solomon Islands Credit Union League is set up under the Credit Union Act to perform the following functions:

1. To assist in organising of new Credit Unions.
2. To supervise and assist Credit Unions in the proper conduct of their Credit Unions.
3. To provide leadership in training.
4. To operate as supply depot for stationery.
5. Act as resource office.

When you have completed all the registration procedures, your Credit Union is legally set and you could operate as a Credit Union. So if you are interested in starting a Credit Union and want further information the address of SICUL is as follows:

The Managing Director,
SICUL, P.O. Box 368,
Honiara.

If you happen to be in Honiara you could call in at their office at China Town.

History of Credit Unions

Introduction

A credit union is an association of people with a common bond who pool together their small savings and lend those savings to its members. Simply it is a financial institution that is owned and managed by its members, under the principal of self-help.

Beginning of Credit Union Idea

The credit union idea began more than 100 years ago by a man named Fredrick Wilhelm Raifsen, a leader in a small town in Germany. This idea of Credit Union started during a time of a famine among the people and farmers.

The people and farmers experienced great trouble and suffering as a result of the famine. Farmers began to accumulate debt because they could not plant their crops to repay their debts. As a result moneylenders started to exploit the farmers. They made life difficult for them. It was at this time of hardship that the idea of Credit Union was born. Raifesen figured that the people could overcome this common problem of poverty by pooling their little savings and lending them to each other. The idea took off and proved very successful.

From Germany, the idea spread to Italy and then across to North America. In 1900 the first credit union was formed in Canada by a man named Alphonse with the first deposit received was a 10 cents coin.

History of Credit Unions in Solomon Islands

Some years later, the idea traveled to the islands of the Pacific. First to Fiji in 1953: the Governor of Fiji, Sir Ronal Garvey, asked Rev. Marion Garney, a Roman Catholic Bishop to teach the people of Fiji the ideals of credit unions. In 1968, the idea traveled to Solomon Islands, brought by a Roman Catholic priest, Fr. Loughan to Choiseul and Thomas Mamatau of Sovele in Bougainville. But the idea of Credit Union did not capture the aspiration of the people in Choiseul.Without much support the idea died a natural death.

Thirteen [13] years later, on the island of Isabel the credit union movement captured the attention of Rev. Bishop Dudley Tuti who got the idea from a member of his parish who learnt the idea from Fiji. On his retirement in 1981 Bishop Dudley Tuti, devoted his time to develop this idea. As a result of his devotion and efforts, credit union units sprung up around the island of Santa Isabel.Soon a Credit Union League was set up.

Following a two weeks course on credit unions organised by the Credit Union League, with support from International Human Assistance Program (IHAP) and the School for International Training, a meeting was held at Tasia Training Centre on Santa Isabel Province on 19 November 1981. The purpose of the meeting was to officially announce and set up the Credit Union League. From then on the credit union movement gained recognition as a possible financial institution operated by people at the village level.

In 1986, the Solomon Islands government recognised the importance of this movement and passed the Solomon Islands Credit Union Act of 1986 to govern the operations of the Credit Unions in the Solomon Islands.

Credit Unions in Solomon Islands Today

At end of 2000, the total number of registered credit unions was 165. The provincial distributions of the credit union was Honiara 42, Isabel 25, Guadalcanal 18, Western 15, Makira 11, Temotu 7, Choiseul 4 and Central 2. Membership of these credit unions peaked in 1999 when a record 18,258 members joined the credit unions. In terms of financial assets, the combined value of total financial resources held by the credit unions at the end of 2000 was $27 million. Of these total resources $20 million were lent to members as loans. Membership shares or contributions to their credit unions at the end of 2000 were $23 million. From these figures it is clear that credit unions has taken root as an alternative financial institutions for the people of Solomon Islands.

Credit Unions as a Financial Institution

Credit unions operate similarly to a bank in many ways. It is like a bank because it has two primary functions of a bank, that is, it receives savings or deposits from members and lends the money back to its members. However, a credit union is organised within, and limited in everything it does to a given group of people. The members of a credit union must have a common bond, know each other and they are the owners of the credit union. They have the authority over the management of their credit union and no person other than the members themselves can benefit from the services that the credit union provides.Banks on the other hand are open to any person to use their services with no common bond requirement.

A credit union's main objective is to get services to its members. It specialises in small savings even if the members deposit small amounts of money at a time. Profit making is not the paramount goal in a credit union. Its main aim is to help each member better their lives as the slogan says:" during hard times, sickness, financial problems or in times of distress". At the same time members are asked to "Save regularly, Borrow wisely and Repay promptly."

Updated on: Sun, Sep 2009 at 23:40