KIEV, Ukraine–Members of Ukraine’s credit unions will have no access to their accounts until at least April 24 after the country’s government shuttered all CUs as part of its response to the coronavirus pandemic.
According to the World Council of Credit Unions’ Credit for Agriculture Producers Project, while the government allowed banks and insurance companies to remain open, credit unions were forced to close effective March 17 because they do not offer online financial services.
“The lack of digital services is the consequence of a poor IT infrastructure in the Ukrainian credit union industry,” WOCCU reported, adding grocery stores and pharmacies are the only other the businesses that can operate in Ukraine at this time.
According to WOCCU, more than half of Ukraine’s credit union members are 50 years of age or older, putting them in a higher risk category if they were to contract COVID-19—which would be more likely if they were to conduct in-person financial transactions.
“Along with serving a high percentage of retirees, credit unions also count thousands of farmers and small and medium enterprises among their members,” WOCCU said. “Many of those members are struggling financially because they have no access to their accounts or to loans that are needed during the peak of the spring agricultural season.”
Forced to Payday Lenders
Unfortunately, what that means, WOCCU said, is many CU members who need cash are forced to turn to payday lenders, which charge annual APRs of 500%-600%. Others are turning to relatives for support or digging into cash reserves.
“Meanwhile, credit unions are losing revenue each day the shutdown continues—along with potentially losing members—which will likely lead to capital and liquidity issues once the government allows them to reopen,” WOCCU said.
There is another problem in Ukraine for credit unions, as well, which is the country’s regulator is in transition, leading to what WOCCU called a lack of effective advocacy during this crisis.
“Ukraine’s current credit union regulator—the National Commission for State Regulation of Financial Services Markets—will not regulate the market after June 31, 2020. As a result, it is unable to provide any advocacy services or liquidity support for credit unions during this time,” WOCCU said. “The National Bank of Ukraine is the future regulator for credit unions but is leading a macro-level response to a possible financial crisis on the horizon. It is also providing banks, which are currently under their supervision, with required liquidity support.”
Dialogue to Continue
On March 25, World Council reported its CAP Project team conducted a webinar with representatives from more than 70 Ukrainian credit unions about how to operate in a safe and effective way with members once they do reopen amid the COVID-19 crisis. CAP will continue the dialogue with credit unions and encourage the regulator to advocate for the credit union market in this unfolding emergency, WOCCU said.