The Road To Success: Another Crossroads: Experiences from the Honduras Cooperative Strengthening Project

Describes the development of credit unions in the Honduran context, including impacts of a government and donor supported strengthening project in 1994-1995. Provides detailed data on growth in membership and assets of 37 institutions.

Discusses two characteristics of the Honduran context:

• Financial liberalisation measures by the government and the central bank have created opportunities for credit unions;
• The formal banking sector as insufficient or unwilling to lead the development of broader and deeper financial markets.

Conclusions drawn include:

• Credit unions have grown quickly but still only serve a small portion of their potential market;
• Current membership is drawn mainly from the middle, lower-middle, stable working classes and small business people;
• Competition to serve the poorer classes still comes from informal sector;
• The credit union system is a financial intermediation system;
• Internal controls, self-regulation of the credit union system and external controls are still not adequate;
• There is need for compensation to committed and well-qualified staff which is competitive and performance based;
• There is a need for training computing and technology.

Emphasizes that the process of strengthening and growth of the credit unions must not be top-down or focused at the level of the credit union federation as was previously the case. Instead, efforts and resources for strengthening must be expended at the level of credit union institutions themselves.