Business Case Study: Credit Union Central of Indonesia (CUCO)

Business Case Study: Credit Union Central of Indonesia (CUCO)

Description of the Coop

Jakarta is a firm based in Indonesia's that operates as a national-level secondary credit cooperative. It is commonly known as Credit Union Central of Indonesia (CUCO). Founded on the premise that Credit Union is a means of facilitating human development, the company strives to impact socio-economic empowerment of members (“History”). As a cooperative, its purpose is to develop a vibrant credit union that can influence the collaborative business network through robust, durable, and reliable relationships.

CUCO offers various financial services to the public with the aim of influencing economic growth. It serves the Credit Union Center across Indonesia. The firm works with businesses in the primary, secondary, and national regions. As a national cooperative movement with 2,731,242 members and assets worth $1,766,678,326.74, it provides financial services with the goal of facilitating and strengthening institutional service provision (“History”). It offers cross-national lending, auditing, and education, as well as training programs.

CUCO has rapidly grown since its formation in 1970. Its organizational structure has witnessed various changes over the years. Management of horizontal growth falls under the responsibilities of various department heads. Some of these include leaders of divisions such as the Human Resource Department, Accounting, Information Technology, and different personnel managers (“History”). The individuals are responsible for administration and coordination of service delivery across the organization.

CUCO has had a long term target of registering 10 million individual members. It also plans to attain assets worth 100 trillion by 2020 (“History”). Thus, it has embraced vertical integration to improve service delivery. Some of the strategies used include enhancing the quality of human and material resources. For instance, it follows and encompasses the use of the latest technology in the financial services industry as an approach aimed at increasing its market share.

Primary Themes and Issues

CUCO is located at the capital city of Indonesia, Jakarta. It was formed through the efforts of a few individuals who had a desire to care for the marginalized in the community. The founders believed that they could impact society through the credit union. The cooperative started as a consultancy bureau for the credit unions. Over time, it evolved with the growth of Indonesian Credit Movement (“History”). It works under the coordination of Inkopdit as the parent credit union. Thus, like other cooperatives in the nation, it operates under its guidelines and exists to serve the people.

Almost all cooperatives in Indonesia have a savings and loan unit. That is, these cooperatives carry out financial transactions that are very risky as it directly affects cooperative liquidity. Many factors have the potential to harm organizations from an economic point of view. For example, when a member dies, loan payment becomes a problem.  The solution is to procure credit or credit insurance risk funds to ensure the situation does not overburden the relatives. It is essential for entities to retain the ability to purchase or sell assets quickly without experiencing adverse changes in value. Businesses rely on credit insurance risk funds to shield themselves against losses that arise when borrowers default payments or die. Unfortunately, not all cooperatives have credit risk fund or the ability to claim it to a particular insurance company. Therefore, firms remain exposed to losses that occur in such situations.

Loan debts incurred by members are a cause for concern since recovery is a challenge. Family members and relatives of the deceased may fail to cover debts left behind. Some of the

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