Rural Credit Union in Costa Rica

The Santa Fe Rural Credit Union, in the initial development stages, will provide a viable investment outlet for the rural people of Santa Fe. The Rural Credit Union does not function like a bank, but rather a local public corporation in which the town's residents make up the voting shareholders. The Santa Fe Rural Credit Union is modeled after the Empresa de Crédito Comunal, or "Community Credit Corporation," created by FINCA, a non-governmental organization that promotes financial independence for rural people in Central America.

See the Santa Fe Biogas project

Unlike a traditional bank, the shareholders of the Rural Credit Union cannot freely desposit and withdraw money as they please. The aspiring member must buy shares, from which they will be entitled to a share of the companie's profits. The shareholder will then only be able to disinvest from the purchased shares once he/she finds a buyer for those shares on his/her own or by having the Rural Credit Union put the shares on the open market. (Different Rural Credit Unions can establish their own rules as to the process of buying and selling shares)

Although the Santa Fe Rural Credit Union has yet to establish specific credit policies, here are the main principles by which the company works:

A flat share price is to be determined by the company's founding members, along with the number of shares available for the Initial Public Offering (IPO).

Each share is not only a share of profit, but is also a voting share. In other words, the more shares you own, the more your votes you have during assemblies that establish and modify company policy. For this reason, many Community Credit Corporations restrict a person's company ownership to a maximum of 10% of the total number of shares.

The company lends money to local people inside and outside the company on the terms established by the shareholders.

At the year's end, all of the interest paid on loans is added up. The company then subtracts taxes and administrative costs to arrive at the year's profits. 100% of these profits are then distributed to the shareholders based on the number of shares they possess.

There are a lot more details that go into managing a Community Credit Corporation, but the main concept is pretty easy to grasp. Instead of paying high interest rates to banks outside of the community, people are paying lower interest rates to an organization in which they own a share of the profits.

We will update this page with more information as the company establishes itself. For more information on FINCA and Empresas de Crédito Comunal, visit their website—http://www.fic.or.cr.