is the IMF really like a credit union?

“You can think of it sort of like a credit union for countries”

This was the answer from Eswar Prasad talking to NPR‘s Planet Money about: “What is the IMF, anyway?” If the International Monetary Fund (IMF) is like a credit union, then democracy is like a dictatorship. Needless to say I am going to disagree strongly with Mr. Prasad and his possibly quick, false analogy to help others understand how the IMF works.

Macro/ Micro

One of the easiest differences between the IMF and a Credit Union is their scope. The IMF is very macro-economic focused. They intervene on international financial issues by lending to country governments, usually with conditions for deregulating and liberalizing markets so that they will be more open to foreign trade.  Better known as Structural Adjustment Programs (SAPs), these conditions had harsh negative effects on the populations of many developing countries as they were forced to repay loans instead of invest in health and education.

Credit Unions on the other hand are much smaller than the IMF. Some Credit Unions are large institutions, but on the whole Credit Unions are community focused. They offer great returns on invested savings, an international cooperative network of ATMs, and plenty of financing options that will bring you the most benefit as opposed to forcing you to take actions that might harm you or your family’s future.

Disparity/ Equality

Both the IMF and Credit Unions are membership style organizations. The difference is with representation.

IMF member countries are given a certain number of votes based on their “quota” with the USA as the only country able to block a supermajority vote. Much of the voting power is held by the developed, Western nations. Developing countries and emerging developed countries have a significantly smaller vote total. This representation continues to fuel inequality around the world as the rich get richer and the poor get poorer. The conditionalities associated with IMF loans generally benefit the economies of Western countries while harming those of developing countries. This unequal representation also makes it more difficult to reform the IMF because of the vote imbalance.

Credit Unions are based on one person – one vote. No matter how much or how little money you have in the Credit Union you are entitled to one vote. In the same regard the members of a Credit Union are the owners. Members’ one votes determine the policies, decisions, and leadership of the Credit Union. In the IMF, the leadership is appointed by the European Union (EU) leaders. Based on the voting disparities of the IMF the leadership is never someone who will make decisions that aren’t in the interest of the USA or EU. Not the best process to promote democracy coming from those who hold high the , if you ask me.

Monetary Capital/ Social Capital

In conclusion, the IMF and Credit Unions are far from similar. One is a multinational organization that is responsible for the world’s financial recovery as long as they will benefit the most developed countries, the other is a small-scale, democratic, cooperative financial institution that allows its member/owners to build serious social capital among their community. The IMF acts as a reactionary institution when it responds to financial crises around the world and often times perpetuates them with their SAPs and other programs. However, a Credit Union is a preventative financial institution bringing a community financial knowledge and resources before crises happen. Case in point, Credit Unions did not need any bailout and have never used tax-payer money to financially stable. The Credit Union system is self-sustaining and pushes a self-help community focus.

If our largest financial institutions, banks, the IMF, and World Bank adopted more cooperative approaches to finances and development, we wouldn’t see such disparity within our countries and communities, or around the world. A system driven by democratic process and cooperative power control can only lead to greater needs being met for a greater number of people.