news.cuna.org/articles/119988-world-council-tifi-project-establishes-first-cuso-in-guatemala
SME

World Council TIFI project establishes first CUSO in Guatemala

October 11, 2021

The World Council of Credit Unions worked hand-in-hand with its member credit union association in Guatemala to establish in August the nation’s first credit union service organization (CUSO). The CUSO can provide loans to members whose businesses grow into registered corporations—something credit unions have been unable to do previously in the Central American country.

The CUSO, Inversión y Desarrollo Crediticio Comunitario, S.A., is owned by a group of more than 20 credit unions affiliated with Federación Nacional de Cooperativas de Ahorro y Crédito de Guatemala (FENACOAC) who contributed US $5.1 to fund its creation. It was developed with the support of the World Council Technology and Innovation for Financial Inclusion (TIFI) Project—an activity funded through the USAID Cooperative Development Program (CDP). TIFI team members provided resources to support the planning, preparation and establishment of the CUSO.

Establishing a CUSO was a necessary legal step to help FENACOAC’s credit unions grow their business lending portfolios.

Guatemala’s General Law of Cooperatives prohibits credit unions from providing financing to registered corporations, which means that once a small-to-medium enterprise (SME) becomes registered, they can no longer work through their local financial cooperative for needed finance and must turn to banks for financial support.

“For more than 50 years, FENACOAC has partnered with credit unions that have supported entrepreneurial members since the beginning of their commercial activities. The CUSO makes it legally possible to continue working with those same members once their businesses become legal enterprises, by helping them meet working capital needs, pay for operating expenses, and purchase assets and raw materials,” explained FENACOAC Business Coordinator Luis Perez. “The business owners also have the comfort of knowing credit union professionals working in the cooperative spirit will continue paying attention to and safeguarding their financial needs.”

Any profit generated by the CUSO will go back to the credit unions that funded its creation. Credit unions will also benefit by being able to provide other services registered corporations will require, such as loans and insurance for their employees.

“The entire goal of the TIFI Project is to help credit unions increase lending to small-and-medium enterprises and deploy available capital effectively. The fact that our team was able to work in unison with World Council’s member credit unions to develop a legal solution to the lending limitations they faced is a win for cooperative development and a model that can be replicated elsewhere, if necessary,” said Megan O’Donnell, World Council senior vice president of international projects.

The World Council TIFI Project also works to grow SME financing initiatives in the African nations of Kenya, Burkina Faso and Senegal. You can learn more about the TIFI Project here.