Military credit unions

The problem of the question

Currently, the Ukrainian military does not feel confident in the qualitative materialistic situation regarding its own future and even its current existence. The weak economy of Ukraine practically eliminates para. 5 of Article 17 of the Constitution of Ukraine on social protection of military personnel. Many military personnel cannot provide themselves and their families with a quality life either now or after the war, since after going to defend their Motherland, there are no additional sources of income either because of the Law (prohibition of entrepreneurial activity) or because of the mass refusal of commercial private or state banks in lending. Social benefits provided by the State for lending to military personnel are not beneficial for the existence of the banks themselves. So the soldier is left alone with the problem.

Thus, so-called "credit unions", but already legally modified as "Military credit unions", can come to the aid of the defender of Ukraine.

Lack of state funds to help military personnel

In the State Budget for 2023, only 6 billion 838.6 million UAH have been allocated to finance the state veteran policy in Ukraine. It is noted that the amount of pledged funds will ensure the fulfillment of state obligations to 2,843 persons. At the same time, there are almost 500,000 combatants in Ukraine, - the Ministry of Veterans Affairs of Ukraine.

Problems of military social security

Absence of long-term lending

In terms of long-term lending for the purpose of building housing for military personnel (mortgages), ensuring the reliability of the storage of military personnel's savings, there is a lack of both the offer of relevant services and their qualities in the existing proposals.

Prohibition to engage in business

According to the law of Ukraine "On the Principles of Prevention and Counteraction of Corruption", military personnel are prohibited from engaging in entrepreneurial activities and other paid work.

Banks' refusal to lend

Commercial and state banks massively refuse loans to the military due to state social benefits, namely:

1. exemption from paying interest for using credit;
2. exemption from fines/penalties for late payment of loan payments.

Distrust of the banking system

Distrust of the banking system is spreading among the military. Therefore, the military is looking for additional funds to improve their financial situation among "spontaneous" credit borrowers, which are difficult for the state to control.

Unlike commercial banks, which belong to only a few owners, and which are guided in their activities by the motive of creating maximum profit precisely in the interests of these separate owners, credit unions:

Solving the problem through credit unions

Equality of cooperation

They ensure the inseparability of the circle of co-owners and the circle of "clients", which creates the basis of the credit union's unprofitability. Profit and excess profit in the credit union is institutionally absent;

Transparent management system

Ensure transparency and accountability of management to persons who are members of the union and use its services. What is not present in banks, where managers do not report to clients and do not obey;

Independence of the financial system

Interest rates on loans and deposits are independently determined, based only and exclusively on operational needs (transparently allocate exactly as much money as is needed for operational expenses).

What is a credit union?

A credit union is a non-profit organization founded by individuals on a cooperative basis with the aim of meeting the needs of its members in mutual lending and providing financial services at the expense of the combined monetary contributions of the members of the credit union.

The main goal of the CS is the financial and social protection of its members by attracting their personal savings for mutual lending, financial support for business initiatives and providing them with other financial services.

Union members

Cooperation and self-organization of people for joint professional activity. Maximum level of trust through shared group identification

Cash contributions

Fundamental prerequisites for public agreement on savings rates low enough to provide real repayment (repayment) long-term mortgage loans.

What do we offer?

Military credit unions

Such a social institution as military credit unions is able to improve the financial situation of Ukrainian servicemen. Unfortunately, the economic situation of Ukraine needs a lot of time to return at least to the pre-war state. At the same time, corruption and financial and industrial groups (oligarchy) de facto still exist in the country. Therefore, the material well-being of military personnel is at risk. And only the cooperation of the military themselves among themselves is able to provide each of them with a dignified future, which they deserve by protecting Ukraine.

Military credit unions are self-organization and cooperation of military personnel. If a commercial or even a state bank is interested in its own capital, then for VKS, where there is no rigid hierarchy of power, the main goal is the material well-being of all its participants.

Advantages of military credit unions

• Trust. By identifying or identifying with one's own group of people (ingroup), the individual feels protected and safe
• Equality of participants. All members of the military credit union are its co-owners.
• Constructive capitalization. A stable salary or military pension for credit union capital investments
• Non-profitability. Military credit unions have a non-profit status, which eliminates the risks of financial manipulation
• Transparency. Transparency and accountability of management to persons who are members of the union and use its services
• Openness All changes regarding the financial policy of the credit union are carried out openly and collegially
• US support. Support from the Western partner Defense Credit Union Council, which is ready to accompany VKS
• Independence. The main advantage of VKS is its political and financial independence from the State, which minimizes the risks of corruption

Amendments to the ZU "About credit unions" No. 5125

1. Legislative subjectivity of the Supreme Court
   Determining the status of a credit union of military personnel by expanding the concept of "sign of membership" provided for in the Law on Credit Unions, which currently does not include the sign of service in the Armed Forces of Ukraine.
   
   
2. In addition - tax benefits of VKS
   Granting credit unions of military personnel and their members a specific status within the current Tax Code, which brings them closer to the status of a non-payer of income tax in any part of the financial result obtained from a technical point of view.
3. Simplified financial monitoring
   Depriving the union of military personnel of the obligation at the initial stage to spend a significant portion of operational time on ensuring compliance with financial monitoring procedures.

Basic provisions of the normative legal act

The draft law establishes the legal and organizational foundations for the creation and development of credit unions for servicemen of Ukraine who are in active military service or who have retired, and for their family members.

With the adoption of this draft law, the current legislation on credit unions will be filled with legislative provisions that will allow the introduction of a system of long-term (mortgage) crediting of military personnel based on membership in non-profit cooperative credit unions, mobilizing for this purpose both the savings of military personnel themselves and institutional and commercial construction investors from origin of funds both in Ukraine and abroad.

The draft law defines the main points that form the basis of organizational and legislative support for the private initiative of servicemen, the relevance of the credit union system to the existing system of social security for servicemen.

Financial and economic justification

If the draft law is adopted, it is assumed that a significant part of the funds mobilized by credit unions from various sources will be directed by them to the formation of a liquidity reserve, that is, to securities issued by the Ministry of Finance of Ukraine. The expected number of servicemen who will receive the status of members of such unions during the next 10 years will be at least 100,000 people, and the amount of savings that will come from this source alone will be at least 450 million hryvnias.

Implementation of the tasks of this draft law does not require additional expenditures of the State Budget of Ukraine and does not provide for the expenditure of any part of income taxes and personal income taxes paid by credit unions.

An example of the implementation of VKS in the USA - Experience of the USA

Defense Credit Union Council

It is the premier defense trade association representing defense credit unions serving the U.S. Armed Forces worldwide. Since 1963, DCUC's mission has been to serve as the primary liaison to the Department of Defense for Defense Credit Unions and is the Department's primary channel of communication with Defense Credit Unions serving the U.S. Armed Forces stateside and abroad. Defense credit unions have 23 million consumers and more than $270 billion in assets.

DCUC is proud to represent the needs of its members at the highest levels of the US Department of Defense and the Pentagon. The DCUC helps to resolve various socio-political issues such as operating agreements, land leases and others.

In addition, DCUC works closely with the Veterans Affairs Administration to ensure the financial well-being of service members and their families throughout the military life cycle.

The Veterans Bank Benefits Program (VBBP) provides all veterans with a safe, secure and low-cost way to receive and manage cash benefits by depositing funds directly into their new or existing bank accounts offered by participating credit unions.

Advantages of the VKS over the Ukrainian Veterans Fund

1. The fund can accumulate and distribute funds, but it belongs to the state, not to the citizens themselves;
2. Military personnel under the Fund do not have the right to vote in the decision-making process, how and where exactly to attract their funds. There is no structure of joint or shareholder ownership. There is no sense of belonging. The Fund's clients are more objects than subjects of economic decision-making;
3. The fund does not have the right to provide financial services of a deposit deposit and realize personalized long-term targeted savings;
4. The Fund has no "Debts" and cannot professionally manage them. Therefore, he does not have the possibility of lending to citizens for a period of several tens of years (mortgage);
5. The Ministry of Veterans Affairs Fund has fewer financial opportunities (Fund policy) than military credit unions, where there are many options for financial assistance for each member.

Prospects

The adoption of this draft law will allow to improve the current legislation in the field of regulation of the activities of credit unions of Ukraine, to create a system of financing the construction of housing for military personnel, controlled by these military personnel, who at the same time act as its ultimate owners. Ensuring the stability and reliability of credit unions of military personnel due to increased requirements for their liquidity and the establishment of permanent interaction of these unions with the National Bank, the Ministry of Finance in terms of excess liquidity management will allow to ensure an adequate level of protection of the rights of members of credit unions against the risk of bankruptcy.

As a result of the adoption of this draft law, no less than 30 credit unions will be restored or created within three years, which will carry out their activities in most regions of Ukraine. At least 300 new jobs will be created.

More than 500 million hryvnias will be allocated to crediting the construction of housing for military personnel in the next three years after the adoption of the draft law, while the problem of inaccessibility of such loans due to too high interest rates offered by the modern banking system will be solved.

The material was prepared thanks to the public organization "BOTTOM UP"- https://znuzyvgoru.com.ua/