Community credit cooperatives

Community credit cooperatives (새마을금고) is a small thrift institution based on its own and neighboring communities. Apart from credit unions of a same origin, community credit cooperatives have been under the jurisdiction of the Ministry of Security and Public Administration.

Key words
community credit cooperative, credit union, community welfare

History
A community credit cooperative originated with a credit union established in South Gyeongsang Province in 1963 under the auspices of the National Reconstruction Movement Federation (국가재건운동본부).

Following the 1972 implementation of the Credit Unions Act, community credit cooperatives fell under the provisions of that act and the nomenclature for them was unified as “village banks”.

Upon 1982 enactment of the Community Credit Cooperatives Act, the name was then changed to “community credit cooperatives”, and a solid foundation was laid for the independent development of community credit cooperatives.

Business and Services
A community credit cooperative provides the following services:
 * receipt of deposits and installment deposits from members,
 * extension of loans to members, domestic exchange services;
 * execution of business on behalf of the government, public organizations or financial institutions; and
 * separate safekeeping, and so on.

Except for certain services such as the discounting of bills, a community credit cooperative performs nearly the same functions as a credit union (신협).

Regarding operational restrictions, a community credit cooperative is only allowed to borrow funds from the Korean Federation of Community Credit Cooperatives, the government, public organizations or financial institutions, within the limits of the aggregate of its invested capital and reserved funds.

Its credit ceilings on individual borrowers may not exceed 20 percent of the aggregate of its invested capital and reserved funds. It must also maintain a minimum of 10 percent of the balance of its deposits and installment deposits as repayment reserves, and must deposit half of those reserves with the Korean Federation of Community Credit Cooperatives.

Nationwide Organization
The Korean Federation of Community Credit Cooperatives (새마을금고중앙회), a non-profit corporate body composed of community credit cooperatives, deals in the following services:
 * guidance on, surveys of and training in the businesses of member cooperatives;
 * inspection and supervision of member cooperatives;
 * provision of mutual aid services; and
 * conduct of projects commissioned to it by the government or public organizations.

It also provides the following services:
 * receipts of deposits and installment deposits from member cooperatives;
 * lending of funds, guarantees of payments, and discounts of bills for members;
 * domestic and foreign exchange services;
 * separate safekeeping;
 * execution of business on behalf of the government, public organizations or financial institutions; and
 * the underwriting and sale of securities; and
 * deposit protection reserve fund to guarantee the return of deposits and other savings to members.

Statistics
By the time the Community Credit Cooperatives Act was legislated there were 11,719 community credit cooperatives in operation, with combined membership of 5.38 million.

However, the implementation of this act was followed by a reorganization of insolvent cooperatives, causing the total members of cooperatives and their members to decline sharply ― to 5,360 and 3.84 million, respectively, by the end of 1983. The number of cooperatives has continued to decrease in the period since, while membership has gradually increased. As of end-June 2011 there were 1,466 cooperatives in operation, engaging in transactions with 15.97 million members.

As of end-June 2011, community credit cooperatives secured up to 87.5 percent of their total funds from deposits including installment deposits, and allocated these funds among loans (53.0 percent), cash and deposits (25.2 percent), and investments in securities (17.0 percent) and other debentures.