Learned New Things At the Credit Union Today
Today was another big day at the credit union. Not because anything changed, or that the big change I predicted here came to fruition, but I learned about the process that credit union members go through to get their loans. I got to watch first-hand how loans are distributed and learned some other things about requirements for taking out loans.
It turns out that the Credit Implementing Agency (CIA–they love telling me they are the CIA) plays a bigger role than I thought. They really are the engine that starts up all these credit unions and gets them off the ground. So this is what happens when a credit union gets started:
1) Prospective credit union members come together to form Borrower Groups. This either takes place because the group was particularly keen on borrowing money and asked around and found the CIA, or because the CIA established contacts in the area and began to recruit people to the idea that taking these loans was a good idea for their long-term prospects.
2) The CIA sets up the contracts, collects documents, and establishes the other infrastructure for implementing the loans. This includes things like setting up the bank accounts for the members and groups. And they prepare documents for tracking the money.
3) Borrower Groups come to what I will call the Drop Zone. This could be an office, or maybe just an empty room down the hall from the office. At the Drop Zone documents are signed, money is given. I watched today as they pulled cash from a briefcase and handed it over, as a borrower initialled his documents. Cool.
4) As a bonus, Borrower Group members pay 10 AZN for life insurance. My CIA friend, Mahmed, explained that this is required for loans, because if the members die, the CIA still wants to collect their money. That’s cold, huh?
5) Whenever another Borrower Group forms, the CIA carries out this process again.
6) Existing borrower groups continue to borrow from the CIA, establishing a reasonable credit history. Though the idea of credit history isn’t really developed around here, they are at least going through the motions to make it happen. Maybe soon things like credit scores will surface. Getting stuff in electronic form might help with that.
7) Once a group has established itself, the CIA office passes the groups over to the local credit union. In my case, that’s Araz Credit Union.
8) The local credit union takes over the lending scheme and the CIA continues to develop borrower groups.
So what happened at my credit union? It turns out that my director, Qəhrəman, was part of one of the first groups to start with the CIA about six years ago. Once he and his borrower group were established, he ended up taking the reigns from the CIA office and becoming the local credit union. From there, the CIA continued feeding him borrower groups and he also added other individual members from his own contacts in the community. And that’s where we sit today.