Macedonia’s First CU Built On Trust, Courage, Commitment

FULM Savings House had to prove it was different from previous financial institutions.

December 19, 2014

Macedoniaâ??s First CU Built On Trust, Courage, Commitment

Nothing about forming a credit union in a poor agrarian country in southeastern Europe, Martha Ninichuk will tell you, is easy.

What is easy, however, is to see—in the face of a prospective membership base that doesn't trust financial institutions, a lack of modern banking technology and never-ending regulations from the government's central bank—is what the first and only credit union in Macedonia means to anyone who's been involved with its colorful 15-year history.

The history of FULM Savings House begins with Martha Ninichuk, now the deputy director of NCUA’s Office of Small Credit Union Initiatives.

Fifteen years ago, working for the World Council of Credit Unions (WOCCU), Ninichuk was picked to lead a team that would deliver a credit union to a country on the Balkan Peninsula—just north of Greece and sandwiched between Albania to the west and Bulgaria to the east—that had recently seceded from the former Yugoslavia and, on its own, had been struggling to establish itself economically.

After answering a request for proposals from USAID, which would fund the project, WOCCU was granted a contract to establish a micro-savings and lending institution there.

In accepting the role, Ninichuk had committed herself to live in Macedonia for the next half-decade as the project got off the ground. The goal was for the credit union to operate on its own in only five years.

Problem One: Getting local buy-in
Once Ninichuk and her colleagues had identified locals who would become project staff to help them build the credit union, the team picked three areas where it believed the first branches of the credit union should be located.

Under the name FULM Savings House, staff went to work meeting with residents to engage them and teach them what it would mean to manage and safeguard their money at the credit union.

But there was a problem.

Only years before Ninichuk arrived in Macedonia, a massive savings house collapsed in the young nation, not only losing many Macedonians their life savings but also instilling a sense of mistrust in any type of savings house.

It took numerous meetings in each community to educate and convince residents that FULM Savings House was different from traditional savings houses—a tagline the credit union would adopt—and that it was a safe place to keep their money.

Much of that outreach was spearheaded by Albanian-born Zulfi Dzaferi, FULM Savings House president, and Stevo Androvic, FULM president of association and a Macedonian national. Both risked much to help establish the credit union.

“Zulfi and Stevo worked tirelessly with local communities to communicate the idea and concept of FULM,” Ninichuk told News Now []. “It takes a particular type of courage to stand up in a very small community and support a new concept. If FULM Savings House had not been successful, Zulfi and Stevo would have been ruined personally and professionally.”

Still, it took time to build that trust.

"We would have situations where somebody would come in and deposit money, and then a couple hours later would come back and withdraw it to see if that money was still available to them," Ninichuk said. "It was just a way to test us out."

The more Macedonians worked with the credit union, the more they came to realize that FULM was in fact different than the unsound institution that had previously wronged them.

NEXT: Opening a CU where none had existed

Problem Two: Opening a CU where none had existed
Even with a budding trust, there were many logistical problems with opening up a credit union in a country where no law existed to govern such a financial institution.

First, while FULM Savings House operated as a credit union, the institution still had to structure itself in such a way that fit within Macedonian banking laws. That would require a few unconventional ideas.

"FULM Savings House could only save in the local currency, the Macedonian denar, and Macedonians did not like to save in the local currency because there was always a fear of devaluation," Ninichuk said. "They wanted to save in foreign currency, which we couldn't [legally] collect, so what we had to do was [tell them] to give us Macedonian denar and we would do an index savings program tying it to the German mark.

"So if there was any fluctuation against the mark, we could make sure we would offset that so the person actually wouldn't lose the value they had saved in the foreign currency."

The idea, the brainchild of current FULM Savings House President/CEO Eleonora Zgonjanin, was just the trick. Modestly, she told News Now in a Skype interview that she wouldn't have been able to flesh out the idea without the help of many others, including Ninichuk.

But the idea worked, nonetheless, and the credit union was then viable to the Macedonian people.

The next major obstacle was the lack of modern banking software the credit union needed to operate its services. Because this was the first credit union to open its doors in Macedonia, no banking software existed on which FULM could rely.

Eventually, FULM contracted out with a local Macedonian developer who built a brand-new software banking platform specifically for FULM.

Whenever an update was needed, or a new product was introduced, the developer built out the system even further. Obstacle overcome.

Problem Three: Regulation
Despite these innovative solutions and the credit union's sound lending practices, FULM Savings House continued, and continues, to do business under close government scrutiny.

The national bank administers a comprehensive audit on the credit union on a regular basis, Ninichuk said, sticking around for weeks on end.

Essentially, the authorities are looking for any excuse to shut it down.

"There has always been a struggle," Ninichuk said. "The financial institution, even though it's developed as a credit union, it has to be basically chartered as a savings house, and Macedonia wants to close all savings houses at this time. I think there are only three others now besides FULM.

"The government and the national bank are fully aware that FULM Savings House is different from any others, but they worry about the concept of savings houses because of the safety and soundness issues."

But the credit union may soon have firmer ground to stand on. FULM has been lobbying the national bank and the ministry of finance to write a provision in Macedonian law to keep FULM Savings House as a credit union.

With the help of foreign partners who have advocated on the part of FULM and on the part of the credit union structure in general, FULM leadership is looking for the government to pass legislation that would allow Macedonia's credit union to remain as such.

"We wanted to position ourselves as a part of one global system. That was our goal this year. We wanted to convince people that, if you don't believe in FULM, go and check worldwide how these financial institutions work, and then we can talk about whether you think it's good or bad," Zgonjanin told News Now.

FULM has received a verbal commitment from legislators, but until any legislation is passed, FULM faces the possibility of being converted into another type of financial institution, which would carry different capital requirements and likely usher in a new set of complications.

The Michigan Credit Union League [] has played a critical role in advocating for credit unions in Macedonia as well. As a partner of FULM Savings House, the league donated $50,000 to the credit union in 2004 to bolster FULM's services.

The league also has supported a national credit union act in Macedonia, meeting with members of the Macedonian parliament, representatives of the central bank and the country's finance ministers.

15 years: No problem
In the face of the obstacles Macedonia's credit union continues to grapple with, FULM has become a healthy operation, Ninichuk said. The credit union has more than 8,000 members and $5 million in assets, and has dispersed more than 20,000 loans for more than $30 million.

The credit union also has expanded to seven branches throughout the country and boasts a diverse field of membership. FULM serves students with student loans, seniors through its pensioners program, local farmers and even winemakers, a thriving industry in Macedonia, with its savings and lending programs.

"It's had a tremendous impact," Ninichuk said. "We would have farmers come in and get small loans for plastic to cover the seedlings when they planted them to protect them from the elements and loans for seeds for planting."

The credit union also has made loans to residents with average incomes of less than $400 per year to start bakeries, barbershops, seamstress businesses, and myriad farming operations.

Ninichuk recently traveled to Macedonia to celebrate the credit union’s 15-year anniversary and to see old friends, including Zgonjanin, who Ninichuk considers as her sister.

That friendship, or sisterhood, Zgonjanin said, has been the most critical factor of the credit union's success.

"Whatever (Martha) would try to introduce, I believed in her as a person," and that the idea would work, Zgonjanin said.

“In the end, she enforced a different type of policy and procedure (than we had), but then later we would realize it worked, thanks to Martha.

“We have a saying at FULM: ‘Thanks to Martha, we survived this.’”