Credit unions: credit conditions, documents

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Credit unions were popular much earlier and do not slow down at the present time. True, not every borrower fully understands what kind of formation it is and how it differs from an ordinary bank. Both of them practice issuing loans, but their essence is fundamentally different.

The purpose of the credit union

First you need to understand the fact that credit unions, credit cooperatives or cooperative banks are not commercial organizations. Such a structure does not set itself the task of making a profit from issuing a loan. The credit union provides financial support to individuals who need help and are members of this community. Anyone can join such an alliance, the main thing is that his views coincide with a single social principle. For example, members of the same credit union may be employees of a particular company, residents of the same neighborhood, or people who share the same hobby.

How a credit union works

Credit unions became popular in the 90s. Regardless of the state of the economy, such organizations differedtenacity. The number of deposits grew steadily, so participants could always count on a profitable loan. At the moment, more than 2.5 thousand credit unions are registered in the Russian Federation. The reason for such high popularity is the ease of obtaining a small loan that does not require a large package of documents and at an interest rate that is much more profitable than in a commercial bank.

The activity of a credit union is extremely simple and understandable to any layman, and therefore attracts people. Each participant is allowed to make deposits that allow you to expect to receive certain interest. If such a need arose, the participant may ask to lend him money. Most petitions end with a positive result, but there is a fixed interest rate. The amount of money provided to the borrower is formed from the funds contributed by depositors, so the latter receive a certain percentage. This is the secret of the existence of such formations.

Associations of Credit Cooperatives

Currently, many credit formations have a desire to unite in a union of credit cooperatives.

Such an association is characterized by the provision of assistance and various services aimed at improving the efficiency of the cooperative and accelerating its development. Unions of credit organizations are of 2 types:

1. Regional Union– cooperatives, the location of which is concentrated in one region.
2. The National Union is an association of credit organizations located anywhere in Russia.

The Union of Credit Cooperatives is an instrument of the credit market, the task of which is to provide the most comfortable conditions and a high degree of productivity of credit education. Merging into an association opens up additional financial and other types of resources for a credit cooperative, which contributes to solving many problems that an isolated credit union cannot cope with alone. The range of services provided is very diverse and depends on the needs of a particular cooperative.

Services provided by the Association of Credit Cooperatives

Association of Credit Unions Practices Provision:

• Technical services, which means: training employees of credit cooperatives, promoting the cooperative in the market, resolving issues related to the system of operations and management of the cooperative.
• Financial services - consultations aimed at informatization of personnel in terms of the liquidity of the expenditure and income parts of a credit cooperative, as well as solving issues related to managing the total number of deposits in a credit cooperative.

Unions of credit institutions have a wide range of rights and obligations. For example, in terms of union functions, you can highlight:

• assistance when considering any issue of a member of the cooperative by the state orinternational authority;
• improvement of regulatory documents;
• development of new services;
• control over the activities of the credit cooperative.

In addition, the union of credit cooperatives is improving the regional and national system of mutual financial assistance. The association undertakes research and development, the main task of which is to discover a new way of doing business.

What is the difference between a credit union and a bank?

The main differences between a credit union and a bank:

1. Unlike banks, credit unions do not seek to profit from lending funds.
2. Only a shareholder can resort to credit formation services, and the bank's client base has no restrictions.
3. The activities of unions cannot be called public. The organization and the client interact on the basis of membership, their relationship is not a client.



4. Only a citizen, an individual can become a member of a credit union. In addition, they should be united by one community, they should be familiar with each other. The decisive role is assigned to the last circumstance, which implies mutual responsibility.
5. The credit union cannot risk the contributions of shareholders. The income received by the credit union should be distributed among the shareholders or aimed at reducing the cost of the service, that is, it should turn into a means of most effectively meeting the needs of the members of the union.
6. Anya change in the work of a credit union must be mutually accepted by all members of the union, depositors, borrowers and employees.

About the "New Credit Union"

Bank "Credit Union" is a joint-stock commercial banking institution, whose net assets can be called relatively small. This institution has been officially registered in Moscow. The described financial institution is mainly located in the Russian capital.

The main activities that this credit company is most actively developing include:

• providing a bank loan to corporate clients;
• banking accounts of legal entities;
• attracting funds from Russian citizens through bank deposits.

If we talk about the retail business, we can say that the bank "New Credit Union" is at a fairly low level of development.

Founders of the "New Credit Union"

JSC "New Credit Union" is a small commercial bank engaged in lending and servicing accounts of corporate clients. The bank is practically not involved in the development of the retail business, the resource base includes mostly its own funds.

The founders of the credit institution, established in 1994, are the following legal entities:

• CJSC "Inntek";
• CJSC Laka;
• MP Intelekom.

Right to attractNew Credit Union received deposits in 2009.

Taxation of credit union contributions

The estimate of the credit union is approved by the Supervisory Board, which represents the interests of the members of the credit union in the periods between general meetings. The estimate is necessary in order to be able to plan the revenue and expenditure side. The main source of income is contributions, and expenses include the maintenance of the credit union and the implementation of statutory tasks, based on their expected income.

Article 19 of the Law on Credit Unions states that the property of a credit union includes: entrance fees, mandatory share contributions, other contributions of members of a credit union (except for deposits placed on deposit accounts), charitable contributions.

And in paragraph 4 of Art. 157 of the Tax Code of the Russian Federation states that there is no need to levy tax on the introductory, mandatory, additional and earmarked contributions of a credit union. However, charitable contributions received from another person or entity are taxable.

Refund of the entrance fee when leaving the credit cooperative is not carried out, and the payment of share and other contributions must be made in accordance with the charter of the credit union.

About the conditions of creation

A credit cooperative can only be created if there are at least fifty people who share a common feature. Each new credit union must have its own capital, formed from membership fees.

Ueach shareholder has the right to one vote, which cannot be violated or changed, it does not depend on the size of the initial contribution, or on the time of entry into the credit union. Any person who is close to the signs of an alliance, as well as one who has been recommended by at least one of the participants, can join such a formation. There is no limit on exit time.

Main benefits of a credit union

Such associations are most attractive in that all personal funds that serve as components of the total capital are preserved. If the need arises, a member of a credit union can count on a profitable loan necessary to solve social, medical, housing and other needs. Each citizen who has a deposit in a credit union receives interest determined by the charter.

The activities of a credit cooperative can be compared with the work of a commercial bank, as they are united by similar functions and powers. But there is also a significant difference between them, namely the purpose of the activities of these organizations. The former provide financial services and do not pursue monetary gain, while the latter direct all their efforts to making a profit.

What fees must a credit cooperative member pay?

All consumer credit unions require newly joining customers to deposit funds that go towards repayment:

• Membership fee is the amount of money contributed by each new shareholder and spent on covering the expenses of the credit cooperative and ensuring its regularactivities.
• Entry fee. This payment is provided only in some cooperatives. If this obligation is spelled out in the charter, then the amount paid by the shareholder goes to re-issuing documents, amending existing papers, legal services, etc.
• Share contribution - the amount of money that becomes the property of the credit cooperative and is necessary to maintain the activities of the formation. The share contribution can be both mandatory and voluntary.