The Study of Credit Unions Status in the World and an Overview of Organizing and Supervising the Free and Occupational Credit Unions in Iran

Credit unions in the world are developed as microcredit and pure financial cooperative institutions. In advanced countries like Canada and U.S.A, despite of existing the developed financial market and strong banking system, credit unions perform various and multiform financial and credit services to people with more than 40 percent penetration. Currently, 97 countries, are members of World Council of Credit Unions and serve 183 million individuals with more than 1 trillion resources. However, in context to the Iranian current regulatory system, only credit cooperatives that establish with occupational common bonds are allowed to be active. The size of authorized credit unions penetration is estimated to be less than half of a percent in which they can not satisfy the financial needs of their members. More than 80 percent of these institutions are active as a free interest loan funds which will not be designated as financial intermediaries and hence they could not avail of any plausible prudential supervision on them. The Central Bank as supervisory authority of Iran, has already banned the activity of so called “Free Credit Cooperative” bodies which run by free membership pattern. In this paper, an attempt is made to study the status of credit unions in the word and in turn analyze de Jure, their very setup, in Iran, quid pro qua.