Director of the Department of Oversight for Credit Institutions

Member of the State Commission on Regulation of Financial Service Markets of Ukraine


Academic conference: “The Ukrainian cooperative movement”


June, 12


Dear colleagues!


The credit movement in Ukraine has a long history and tradition. Born in the middle of the 19th century, it became not only a significant economic factor in the vital activity of the communities of Ukrainian cities and villages, but also an inseparable part of Ukrainian nation-building. It was not simply a form of economic self-expression for Ukrainians in both the eastern and western portions of then-divided Ukraine. It was their way of life, their philosophy of interpersonal interactions, the basis of the national mentality. Furthermore, if in the east the driving forces of the development of credit cooperatives were the zemstva (land councils), progressive landowners, and the intelligentsia, in the west these forces were, first of all, the Church and patriotic enlightenment organizations. Precisely because of this, the activity of credit cooperatives was brutally stopped by the then-ruling communist totalitarian regime at the end of the 1920s in eastern Ukraine, and later, in 1939, in the western lands, snatched away from Poland. The history of Ukrainian credit cooperatives continued across the ocean after the end of World War II. Ukrainian systems of credit unions were created in the U.S., Canada, and Australia. It was by the initiative of Ukrainian cooperativists in the U.S. and Canada and through the support of the governments of these countries that credit unions began to be reborn in contemporary Ukraine in 1992.

Over the 16 years of their development, credit unions have undergone significant evolution and have achieved tangible results. As of June 1, 2008, the State Registry of Financial Institutions contained information on 803 credit unions, the total assets of which, as of January 1, 2008, totaled nearly 5.3 billion hryvnyas, and their total membership reached nearly 2.5 million individuals. The total number of establishments that provide financial services to the public on behalf of credit unions, including branches and representative offices, has exceeded 2000 and continues to grow constantly. Ukrainian credit unions are present in every region of Ukraine and work actively in cities as well as rural locations, providing credit for entrepreneurial, consumer, and social activities. Today credit unions successfully compete with banks and other various credit institutions in the consumer credit market. At the same time, they remain practically the only source of credit resources for those categories of borrowers like small businessmen and farmers, rural residents, and the socially unprotected strata of the population. Credit unions are united in three Ukraine-wide and 23 local organizations and have created and are developing, on the basis of self-regulation, a complex system of support for financial stability and improvement of the financial health of credit unions and protection for their members’ deposits; in addition, they have launched their own service infrastructure.

In June 2006, an edict of the Cabinet of Ministers of Ukraine approved the Plan of Development of the System of Credit Cooperatives, which lays out the steps for future restructuring of the Ukrainian credit cooperative system and its prospective model. More specifically, the plan foresees the expansion of the market mandate of credit unions by including small businesses and farms on the list of possible categories for membership, as well as expanding the list of financial services that credit unions can provide and the lists of financial instruments that can be used in guiding their assets and liabilities. Furthermore, it foresees the creation of second and third levels of the credit cooperative system in the form of united credit unions and cooperative banks. Additional elements of the system will be associations of credit unions responsible for the introduction of uniform operating standards and rules of appropriate market behavior, as well as a service infrastructure under the control of credit unions (a credit history bureau, an insurance company, an auditing network, an educational and consulting infrastructure, a collection company, and a specialized mortgage institution). A nationwide self-regulatory system for support of financial stability and improvement of the financial health of credit unions and a statewide guarantee system for the deposits of credit union members will become indispensable components of the credit cooperative system. The practical realization of the statements of the plan must become a common priority task for the government and the credit movement for the next 5 years. This will demand the introduction of a chain of legislative initiatives and institutional reforms. More specifically, this refers to Parliament’s adoption of the government bill “On the introduction of changes to several legislative acts of Ukraine on questions of the activity of the credit cooperative system,” which is currently being considered by Parliament, as quickly as possible. Other priorities remain the creation of a guarantee system, with the government’s participation, and the provision of institutional opportunities to give credit unions access to sources of inexpensive and long-term resources.

The expected result of the implementation of these measures is to move the Ukrainian credit movement onto a higher level of functioning in the financial market, to increase its role in the area of social politics and support of small business and farming, to strengthen its influence as a significant factor in the development of regional communities, first of all in rural locations. The final goal of future reforms is the construction in Ukraine of an organizationally whole, democratically oriented, financially stable, market efficient and socially responsible credit cooperative system. Such a system must unite in itself the primordial cooperative traditions of Ukrainians with contemporary financial, information, and marketing technologies. For true cooperatives are not only an economic phenomenon, but also an important institution of public society. Furthermore, it always remains Christian in spirit and social in content. Our country and our nation deserve such credit cooperatives. For such a reason it is necessary to consolidate the spiritual and organizational potential not only of state structures and credit unions, but also of the Church, public and professional organizations, and regional communities. This is a nationwide project, truly worthy of nationwide efforts.