AN ANAéLYfifi-‘S 0F HOwiTAL GREEN? UMQNS EN THE PHELEPPEMR That: For “to Dog". of M. A. MECHEGAN STATE UNIVERSETY Eliseo R. Cahpino 1959 THESIS LIBRARY Michigan Stan University AN ANALYSIS OF HOSPITAL CREDIT UNIONS IN THE PHILIPPINES BY Eliseo R. Cupino AN ABSTRACT submitted to the School of Advanced Graduate Studies of Michigan State University of Agriculture and Applied Science in partial fulfillment of the requirements for the degree of MASTER OF ARTS School of Hotel, Restaurant, and Institutional Management 1 9 5 9 7 fl 7" /" / /// egg ~ .iApproved by I/K‘QLAéing k/( *b 4/"fitfiAfls/ I. Eliseo R. Cupino The need for extending financial assistance to employees of hospitals in the Philippines who are generally paid less than employees of industry has led to an investigation of the credit union which promises to be another source of benefits if prOperly Operated. Eggpgsg. The main purpose of this study is to determine what constitutes a successful hospital employees' credit union from the standpoint of management and financial control. Method. In the preparation of this work, the writer has drawn from four main sources: First, published books, reports, and articles on the beginning and growth of the credit union movement; second, the specific laws authorizing the Operation of credit unions in the ?hilippines; third, a questionnaire survey on the activities of the eleven hospital credit unions currently Operating in the Philippines; and, fourth, personal interviews with credit union leaders in the United States and the Philippines. The data thus gathered were compiled and tabulated in such a manner as to make interpretation possible. Findings and interpretations. There are six interpretations drawn from the findings and accepted as fundamental principles of credit union Operation: Eliseo R. Cupino 1. There must be a good—sized membership acquainted with the phiIOSOphy of co-Operatives and the workings of credit unions. Between fifty to one hundred members is a safe figure. 2. A simple and streamlined organizations manned by con— scientious, sympathetic and active directors, committee members, and officers tends to establish confidence resulting in an over— all efficient management. 3. Savings are increased and the capital of the credit union grows when every member is required to set aside a regular sum from his income and to subscribe to credit union shares whether he is paying a loan or not. This is an admirable feature of the credit union. Through this process thrift is encouraged and develOped. 4. Keeping the capital of the credit union in active circulation through an effective loan program and judicious in- vestment not only makes it possible to meet the financial dif- ficulties of members but also brings in earnings sufficient to cover Operational eXpenses and a certain margin for dividends. 5. ExPenses can be easily adjusted because most of the work done is donated by members. The affiliating hospital, being relieved from certain financial obligations to the employees, is ‘p -.... ~. . :c --‘ - ‘ . . _ _ J . . A. . . , . ..- \ . . r , I u ‘ \ — . -- .- . .. .. _ a ‘ . _ \ .. . , ., L. -_A I - . ‘ ,._ . .: - . .- w ‘ I . I t _ , _‘ -, ,V_..-b v u . _ . ’ § . ,-- 1 V , . ' n I .k f . .—~ . -‘J n” ‘. - ‘ - - , g 5 v 6 . ._ . . . . . l‘ 4 ' ' ‘ . ‘ .‘u . 7 . .- . . \. . ‘ A \- J p -'_ ~‘ 0 ’ . O s - A \. '- _- ‘ .- - ,. . _ \I ~ . . . 1 . . . ‘ . ‘ . ‘ o .— .. .4. c , ‘ \ 4 . . . . . u - .. —- ‘ - - - ‘ I . L ' \ , .. . . .. , ‘ \- .~. - a . . . , ,_ _ , O ‘ cU .. ».‘_ .. .a. ‘ . ‘9 . t ‘ ~ . - ' A \ u ' 0 ~-\. ~ _ - - . I ‘ I ' p ‘ . .1 _'. . r) , ' . ‘. .. I. __ ' ' - v \1 . \ .. .- v d ‘. . . .. u. . ‘ ' . _ ' \~ - - v v 1 ' ' l ‘ _7 ._« . fl» ‘ , . -.__ ‘p . x _ . _ . , _ . - . ' . o . "'r . ‘ 1 Q . . « , ‘w I ' - Eliseo R. Cupino usually willing to help in the Operation Of the credit union by providing office space, loan of equipment, payroll deduction privileges, etc. 6. A credit union Operation is safeguarded by requiring the organization to set aside a regular percentage of its earn— ings as a reserve fund to take care of contingencies. Hospital credit union is new in the Philippines. The ap- plication of the first two principles will improve management while the last four will bring better financial control. ‘— \,' .AN ANALYSIS OF HOSPITAL CREDIT UNIONS IN THE PHILIPPINES BY Eliseo R. Cupino A THESIS Submitted to the school of Advanced Graduate Studies of Michigan State University of Agriculture and Applied Science in partial fulfillment of the requirements for the degree of MASTER OF ARTS School of Hotel, Restaurant, and Institutional Management 1 9 5 9 CyXarygg ,2 s Q i, TKBLE OF CONTENTS Page ACmemmmET O O O O 0 O O O O O O O O 0 iv LIST OF TABLES . . . . . . . . . . . . . . vi Chapter I II III INTRODUCTION . . . . . . . . . . . . 1 Existing Situations at the Manila Sanitarium & Hospital Author's Qualification for Studying the Problem A Review of Related Literature Statement of the Problem Purpose of the Study Delimitations of the Study Sources of Data and Procedures Definitions of Terms Used in the Study Organization of the Study CREDIT UNIONS, THEIR HISTORY AND DEVELOPMENT . . 14 THE Definition of Credit Union History and DeveIOpment of Credit Union Movement The Credit Union Movement in the Philippines Summary CREDIT UNION LAW IN THE PHILIPPINES . . . 38 The Philippine NOn—Agricultural Co—Opera- tive.Act Organizational Set—up of a Credit Union Managing a Credit Union Summary, ii IV HOSPITAL CREDIT UNIONS IN THE PHILIPPINES . Philippine HOSpital Credit Unions Included V ORGANIZING AN EMPLOYEES' MANILA SANITARIUM & HOSPITAL . VI SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS Summary Conclusions Recommendations mENDIES O O O O 0 O O O A A COPY OF THE QUESTIONNAIRE B MAPS C DIRECTORY OF HOSPITAL CREDIT UNION IN THE Idlfltd G BIQLAWS FOR THE MANILA SANITARIUM & HOSPITAL H .AN INTERNAL CHECK LIST FOR CREDIT UNION :BIBIJOGRAPHY in the Survey The Questionnaire Observations Organization of Hospital Credit Unions Membership Analysis of the Balance Sheets Analysis of Income and.Expenses PrOposed Changes Summary The Manila Sanitarium & Hospital Organization Procedures The Organization Meeting First Meeting of the Board Summary PHILIPPINES SANITARIUM & HOSPITAL ORGANIZATION OF A CREDIT UNION APPLICATION TO ORGANIZE A CREDIT UNION ARTICLES OF INCORPORATION FOR THE MANILA CREDIT UNION AT THE iii 59 83 95 101 150 ACKNOWLEDGMENT I am grateful to the following for their help and encouragement in writing this thesis: Dr. Ralph.Wilson, Associate Professor, School Of Hotel, Restaurant and Institutional Management, Michigan State University, East Lansing, Michigan. Mr. John Davis, Lecturer, SchoOl of Hotel, Restaurant and Institutional Management, Michigan State University, East Lansing, Michigan Dr. Albert T. Cordray, Associate Professor, Communica- tion Skill, Michigan State University, East Lansing Michigan. Mr. Cecilio Montemayor, Chief, Credit Union Division, Co-Operative Administration Office, Department of Commerce and Industry, Manila, Philippines. Mrs. T. J. Lesnieski, Manager, Michigan State University Employees' Credit Union, East Lansing, Michigan. Acknowledgment is also due to the leaders of the credit union movement contacted in the United States and the officers of the Philippine hospital credit unions who supplied helpful materials and valuable suggestions. Finally, I would like to eXpress my deepest appreciation to my wife, Lydia, for her sacrifice; without her encouragement iv o \ I0 this work would not have been possible. 10. 11. LIST OF TABLES Comparative Statistical Information on Credit Unions in the Philippines . . . Organizational Set-up of HOSpital Credit Unions in the Philippines . . . . . Membership of Hospital Credit Unions in the Philippines, 1957 . . . . . . Increase in the Number of Members of Hospital Credit Unions in the Philippines , 19 56-1957 0 o o o o o Assets of Hospital Credit Unions in the Philippines, 1957 0 0 o o o o o o Itemized Assets of Hospital Credit Unions in the Philippines, 1957 . . . . . Deposits of Hospital Credit Unions in the Philippines, 1957 o o o o o o o Liabilities of Hospital Credit Unions in the Philippines, 1957 . . . . . . . Income of Hospital Credit Unions in the Philippines, 1957 . . . . . . . . EIpenses of Hospital Credit Unions in the Philippines, 1957 . . . . . . . . Excess of Income Over EXpenditures of Hospital Credit Unions in the Philippines, 1957 . vi Page 36 65 66 67 68 70 71 72 75 75 75 CHAPTER I INTRODUCTION .A great bulk of wage earners in big cities of the world depend soleLy on money income for their living. In most in- stances, however, their earnings are barely sufficient to take care of the basic needs of their families. Any unusual or un- planned expenditures are likely to strain the finances of this group so that outside help becomes necessary if they are to maintain their level of living. This outside help, however, is not easily accessible un— less the borrower is willing to pay high interest rates. The laws of many countries are designed primarily in terms of cred- it for production and commerce. Financing institutions cannot depend entirely on short term loans and eXpect to stay in busi- ness. Credit of this kind is new and present laws do not ade- quately regulate short term loans. Because very little has been done to improve existing practices a big volume of loans passes into the hands of money lenders who must charge high 1 . . | . ‘ ' I 7 I , . c ‘- I. ‘V . J . v ‘ ‘ , ~ . A .1 ‘ ‘ ‘ ‘. I ‘ I I ‘ ‘ . ~ I“ - l-I ‘ 7 ‘. ‘ I '7 r ' . ‘I _ ‘ n. > 4- . . --. V. . . .. . ’ ‘ . A 7 " \ ‘4. I . . . I ' 3 o .. - " ' .- I. , . ’ ( L‘ ' ulv - . . ‘ \ C I - r ;’ ‘ f , n- u - ' '-. ’ . . ”I .. " ‘.' a. l . ,. l ' ' .. o ‘ ' ‘ ~ . . . ‘ ' y ‘ O I I I v . -. o a- '- ‘ .. I ": a a. . \o ‘ ..' ' I .l . . I . .. . I 'V" A .- ' ‘ ‘- .ACv . ' ' . ‘ . . . ~ ‘V ‘ I 1 . e 9 -.I \ rates of interest to make up for the risks involved.1 Existing Situations g}; the Manila Sanitarium in Hospital At the Manila Sanitarium & Hospital, which serves the largest urban community in the Philippines, very few of the employees could be exPected to build up sizeable savings out of their earnings to take care of unforseen emergencies. If the misfortunes which may arise are light and prOperly spaced, there is no problem. But eXperience has shown that when un- scheduled expenses such as doctor's bills, school tuition, and home repairs after a tropical storm come closely together, they strain the budget of even the wealthier class. The hospital, however, continually strives to further its employees' security through fringe benefits, contributory pen— sions plan and group insurance arrangements. These have their values and are looked forward to with relief but they are not generally helpful in dire emergencies. Thus, the heapital is frequently called upon to make a part of its operating capital available for loans to needy employees. .Author's anlification‘ggg Stugyigg Egg Problem lliorris R, Neifeld, COOperative Consumer Credit (New‘York: Harper & Brothers, 1936), pp. 1-3. .sg- 5 During his incombency as treasurer of the Manila Sanitar- ium & Hospital, the writer attempted to find a plan which would avoid the constant drain upon the institution's cash resources and at the same time make possible the creation of a specific reserve fund to be used solely for loans to needy employees. Interviews with the manager of the Michigan State Univer- sity Employees' Credit Union on the Michigan State University campus at East Lansing, Michigan, in the early part of 1958, and personal observation of the Operation of the Sparrow Hospital jEmployees' Credit Union at Lansing of the same state tend to sup— port the conclusion that a credit union can raise funds and make them available for loan purposes to the employees at minimum cost. In view Of the success of the units investigated, the ‘writer believes that an employees' credit union may profitably be organized at the Manila Sanitarium & Hospital. A Review 2; Related Literature A review of the available literature on hospital credit unions points up the fact that there is very little published :material on the subject. The few articles which have appeared in leading journals were brief and often too local in nature to be of value. During the latter part of 1957, the Credit Union National .3 u \, , u ,--.I.,-.. .. 4 Association made a survey of 275 hospital credit unions in the United States and Canada.2 While this cannot be considered a thorough analysis, nevertheless it provided a beginning and the findings were promising. The significant conclusions from this survey are summa— rized as follows: First, a hospital credit union develops a spirit of team— work among the employees. An administrator of a midwestern hospital was cited as having admitted that the develOpment of a credit union in his institution resulted in better patient care. He said: When an employee who is a little short of funds can actually get a solution right within the hospital premises, he begins to feel that he is a part of the patient care team--a sort of mutual protection system. 5 Second, a hospital credit union's success depends upon the ability to come to the aid of members in emergencies. This was illustrated when the first credit union was organized at the Mayo Clinic in.Rochester, Minnesota. At first the employees were reluctant to join to the organization.’ However, the re- 2WarrenP. Lutzy, "What a Credit Union Does for'Employees," 223 Modern Hospital, Vol. 90, No. 5 (May, 1958), pp. 83-88. ~ 311nm. 4 Association made a survey of 275 hospital credit unions in the United States and Canada.2 While this cannot be considered a thorough analysis, nevertheless it provided a beginning and the findings were promising. The significant conclusions from this survey are summa- rized as follows: First, a hospital credit union develops a spirit of team— work among the employees. An administrator of a midwestern hospital was cited as having admitted that the development of a credit union in his institution resulted in better patient care. He said: When an employee who is a little short of funds can actually get a solution right within the hospital premises, he begins to feel that he is a part Of the patient care team--a sort of mutual protection system. 5 Second, a hospital credit union's success depends upon the ability to come to the aid of members in emergencies. This was illustrated when the first credit union was organized at the Mayo Clinic in Rochester, Minnesota. At first the employees 'were reluctant to join to the organization. However, the re- 2Warren P. Lutzy, "What a Credit Union Does for'Employees," 222 Modern Hospital, Vol. 90, No. 5 (May, 1958), pp. 83—88. ~ 3Ibid. ’l 5 ceptionist, who was one of the chartered members, was suddenly called home one day by the untimely death of her mother. She was in a predicament because she could not draw her salary for the next two weeks in advance. ‘When the manager of the credit union heard about it, he offered her a loan Of 8125 which made it possible for her to be traveling home within a few hours after she received the news of her mother's death. Upon her return to the office, it was not difficult to convince her as- sociates of the advantages of membership. Third, a credit union saves its members from paying high interest rates on loans. The following are quoted from ques- tionnaires made available to the writer: The credit union here at this hospital is a help to the morale of the employees. They are able to get loans and financial care at a lower rate of interest and mo e protection than the local loaning establishment give. The credit union has greatly helped the lower paid employees to tide themselves over in emergencies and between pay days and we feel that we have kept many of the borrowers from going to the loan sharks. 4Reply from.James Baker, Treasurer, St. Lawrence Hbspital Employees Federal Credit Union, Ogdensburg, N. Y., 1957 (in the .fide of CUNA Office, Madison, Wisconsin). TReply from‘W. W. Lawrence, Administrator, Memorial Mission Hospital, Ashville, N. C., 1957 (in the file of CUNA Office, Madison, Wisconsin). . ‘ .A 0 ‘ — ' o ., h . n | - ~ . . . . ' ‘ 5 . ‘ . y . . . . . . r ; L |< O Q ' _ ‘ Y . - . n . , - . . . _ . ., . n . ‘ e 5 ‘ ' ' ‘ . _ ,. , , . .-. I . I . ' . . i \ . | y: . . < . , . . -. . . . , . 5. _._ p . . . ‘ e . , . . . . , . _ . ,. .I . ‘ '. ,, u A , - . . I. ' , us ' - - . I. . , 4 , --. - . . . - ~ I I . ' ‘ ’I F n I. u . v - ~ . "~ . . ' n ' |‘ o- . ° , . . ‘ . g . . . .‘l ,- . - . I h I ' t I , .‘ '- L . - ’ \ . ' - .' -' . . _ . . . - , u 3‘ » . - . . _. \ v ‘ _ n, . ,. . .n. ‘v t \. . x p . u | all l'l I ’ l. w , - . . . . ,__ .— . . ' k _ . . .u l ' I ‘4 ' n J. - . I a . . - I ' I”. '. j . . . _ . I l‘ \‘ ‘ «A . ‘D n . . I ~'- I . . . -J.I 4.4 , A ' ’ c A‘ ,-.- '-"- A-~- on... on. . ..u- -. - . -— -- ~ . w . . s ‘ ' l 1 i . . , v_ n ur. . t J 1 e , O ' .l . ' I . , . . a '., :- ‘7 . I . r ' ., ,9 l . - . ' I o I ' . ' I b n O - u w .. ' - ' — . . . x . I . l‘ ‘ . . " r . . ‘k . uh. I ' an. I, . . ,, 1‘ 3. '. I , . ., x . ‘7 t. e' 1.. .-» ..- ---~ Q ,. h _ z- ‘ \ . .7_ - S Q ~ . The hospital management is happy to trade us space (which is excellent) for the services we render, and we have tried to save our memberg monies that would normal- ly go for excessive interest. Fourth, a credit union reduces garnishments. A hospital personnel director has stated: ‘Employees who come to me with financial problem are referred to the credit union . . . we never have made pay advances . . . they're against our principle. If it weren?t for the credit union, however, we would have to change our system and provide something for employees. Now the credit union does it. We don't have much of a garnishment problem. The credit union helps peOple be- fore they become a problem.7 This belief was reiterated by Walter J. Hatch, a Canadian hospital administrator when he said: Not only does the credit union system help employees . . . but it fosters a stable, secure feeling among the staff members. Free from financial worries, the employee is happier in his job. He can give it his whole attention and so find himself a better interested worker. Fifth, a credit union offers a good training ground for future department heads and supervisors of hospitals. 1 capable 6Reply from.P. B. Richard, Manager, Provincial Mental Hos- pital Credit Union, Essondale, British Columbia, Canada, 1957 (in the file of CUNl office, Madison, Wisconsin). 7Warren P. Lutzy, "What a Credit Union Does for’Employees" 222 Hodern Hospital,'Vol. 90, NO. 5 (May, 1958), p. 85. ‘ 86. T. Jones, uCame the Credit Union,” Canadian Hospital, V01. 35’ NO. 5 (may? 1958), P. 82. “ n.. a 7 president or manager of a hospital credit union has a greater chance of success in other phases of hospital activities than those who come fresh from college without such eXperience. An investigation of federal credit union similar to the one described above was conducted by Dr. John T. Croteau of the University of metro Dame from 1935 to 1955. In classifying the individual credit unions he placed those affiliated with hospi- tals under the occupational group which made up 82.9 per cent of the total number of credit unions included in the study-- the group in which credit unions have been found to work better than in any other group. In his concluding remarks Dr. Croteau points out the new role that credit unions of all types are playing in improving the financial status of employees: The federal credit union has shown its capacity for survival during the depression of the thirties, the neg- lect and the testing of the period of war mobility and prosperity, and even the occasional stress of labor con- flict and disturbance. And while the federal credit union is essentially a special agency of consumer fi— nance, it is gradually evolving and adopting to meet the needs of its members in their personal finance.9 Another article appeared in the July 16, 1958, issue of lHospitals describing how credit unions are working in the 9John T. Croteau, The Federal Credit gnion, Policy, and Practice (New York: Harpers and Brothers Publishers, 1956), p. 26. (I . ' i » - ~ . ‘ I- "u . . . . . u r . - . ‘ . . . . . . . I.‘ “I. J I _ fl . I u u .. - ,, I . o . _' .. .. . \ 8 hospitals in the United States. The Opening remark is signi- ficant in that it Opens the wide possibilities credit union may do in relieving the hosPital of responsibility for assist- ing the employees in their financial problems: Any administrator who has had to honor a garnish— ment or who is beleaguered by a constant stream Of credit notices for some employees should investigate the possibility of a hospital credit union.10 Statement of the Problem There are 292 hospitals in the Philippines but in only eleven are credit unions currently Operating.11 (See Appendix C) This study seeks to determine the status and future prospect of the credit union movement among hospitals in the Philippines. Purpose 23.332 Study The purpose of the study is to establish a set of require- ments essential to the successful organization and Operation of a hospital credit union at the Manila Sanitarium & Hospital, loTom Callahan, "How a Hospital Credit Union Works," Hospitals,‘Vol. 32, No. 14 (July 16, 1958), p. 44. ~ 11Letter Of Mr. Cecilio Montemayor, Chief, Credit Union Division, Manila, Philippines, April 17, 1958. 8 hospitals in the United States. The Opening remark is signi— ficant in that it Opens the wide possibilities credit union may do in relieving the hOSpital of responsibility for assist- ing the employees in their financial problems: Any administrator who has had to honor a garnish— ment or who is beleaguered by a constant stream of credit notices for some employees should investigate the possibility of a hospital credit union.10 Statement 9: the Problem There are 292 hospitals in the Philippines but in only eleven are credit unions currently operating.11 (See Appendix C) This study seeks to determine the status and future prospect Of the credit union movement among hospitals in the Philippines. Purpose 9f the Study The purpose of the study is to establish a set of require— ments essential to the successful organization and Operation of a hospital credit union at the Manila Sanitarium & Hospital, 10Tom Callahan, "How a Hospital Credit Union Works," Hospitals,‘Vol. 32, NO. 14 (July 16, 1958), p. 44. ~ ' 11.Letter of Mr. Cecilio Montemayor, Chief, Credit Union Division, Ianila, Philippines, April 17, 1958. ‘\ 9 based on an analysis of existing legislation and data received from the questionnaire survey. Delimitations g; the study A project of this kind unless limited to a certain field would require more work that the writer is not in a position to undertake because of limitations of time and cost. It is believed that better results can be obtained if hospital credit unions are studied according to the laws pertaining to their organization and Operation. Each country has its own laws authorizing the Operation of credit unions. This study, there- fore, is limited to an analysis of the laws governing credit unions in the Philippines and of the Operation of the eleven existing hospital credit unions. Sources of Data and Procedures —m_-— The data used in this study were obtained by library re- search on credit unions, analysis of Philippine statutes author- izing credit unions, a questionnaire survey Of hospital credit uJ'lions in the Philippines, and personal interviews and corre— SInimdence. The library research consisted of a review Of the litera- ture dealing with the origin and development of credit unions. 10 The review Of periodicals included a detailed analysis Of the ten year period from 1948-1958. The study of the legal aSpects of credit unions is based on the law which authorizes the Operation of co—Operatives in the Philippines, Republic Act No. 2025, known as the NOn—Agri- cultural Co—Operative Act. A cOpy Of this law was obtained from the head Of the Credit Union Division in the Philippines and the sections pertaining to credit unions were analyzed in detail. .A questionnaire was constructed to gather current organi- zational and Operating data on existing hospital credit unions in the Philippines. COpies of the questionnaire (See Appendix,A) were mailed to the presidents of the eleven Operating hospital credit unions. Additional and supporting data were Obtained through per— sonal interviews with leaders of the credit union movement in the United States. The corresponding leaders of credit union thinking in the Philippines were contacted by letter. The in— dividuals to whom the inquiries were directed were very cOOpera- tive and assisted the writer in every way possible. The data thus collected were compiled and tabulated in such a manner as to provide a basis for the conclusions presented 11 in this study. Definitions 2; Terms Used d3 the Study There are certain terms used in this study that are com- monly understood by the personnel of co-Operatives in the Philippines but which need further explanation to the average reader. 1. 2. Some Of these terms are defined as follows: Asset “U any item of value owned by a credit union. Dividend -- portion of earnings of a credit union returned to shareholders. Board -— the board of directors to whom is entrusted the management of the affairs of the credit union. Administrator —- the person designated by law to take charge of the co-Operative activities in the Philippines. ‘ By-laws -- the specific rules and regulations adapted by the credit union to govern its activities. Fixed deposit - an amount equivalent to the stipulated share of a credit union. The minimum amount a person is required to subscribe in order to be entitled to the full privilege of a member. Investment -- the investing of money or capital of a credit union for income or profit. Liability -- an amount which is Owed by a credit union whether payable in money, other prOperty or services. Loan -— a sum Of money lent to member of a credit union at a Specified interest rate. 12 10. Member -- a person who subscribes to the application of registration and who agrees to Join the credit union and is admitted to the membership in ac— cordance with its by—laws. ll. Patronage refund -— the earnings of a credit union allocated to interest on savings deposit. 12. Providential and productive purposes —— the test used in approving of a loan to member by the credit union. The loan should either be one which benefits the borrower or one that will increase his productivity. 13. Reserve fund -- a portion of the earnings authorized by the by-laws of a credit union to be set aside to cover emergencies in Operation. 14. Savings deposit - the amount a member deposits re— gularly in the credit union after he has subs- cribed to the required minimum fixed deposit. Organization 2; Egg Study The major portion of the study covers chapters II through VI. In chapter II the present concepts of the credit unions are introduced. It traces the growth of the credit union move— ment, the philosOphy and organizational adaptations of the initiators in different lands to fit the changing needs for credit by the "small man.” IEmphasis is given to those factors that contributed to the present status of credit unions. Chapter III analyzes the legislative framework upon which credit unions can work in the Philippines. Requirements of the 13 law as to the size of the governing bodies, their duties and privileges are discussed. Procedures regarding the financial control are also noted. Chapter IV presents an interpretation of the questionnaires that were sent to all hospital employees credit unions now Operating in the Philippines. The present practices of these credit unions are analyzed to determine how many of these pro— cedures adhere to the legislative framework and what effect they have upon the success of the organization. Certain pro- posed changes which the writer feels will add strength and stability in the Operation of any hospital credit union are also discussed. Chapter‘V is an application of the findings to the pro- posed organization of the Manila Sanitarium & Hospital Employ- ees'Credit Union. Chapter‘VI, the last chapter, summarizes the study, giving conclusions and recommendations. CHAPTER II CREDIT UNIONS. THEIR HISTORY AND DEVELOPMENT The significance of this study has already been discussed and the next considerations necessary for an understanding Of the subject are a comprehensive definition of a credit union and a review Of the historical background of such organization. Definition 2; Credit Union "A co-Operative venture involving the united action of two Q or more individqals* is a principle long utilized by primitive a peOple in obtaining a better condition of life for their fami— lies and friends who might be in danger of tribal wars or stricken by illness and other misfortunes. The success of the oo-Operative project "varies according to the strength result— a. ing in such a united action and in the accomplishment of a com- mon goal."12 q 2Consumer Co-Operative Leadership (Boston 9, Mass: Edward A. Filene Goodwill Fund, Inc., 1945), Introduction, p. xii. 14 r 15 Credit unions are other way of applying the co-Operative principle to the current economic situation. PeOple in one way or another are often forced to borrow money by circumstances beyond their control. But within a given group not all members need to borrow at the same time. And seldom does any one mem- ber of the group have substantial funds to loan. Would it not be better to pool their resources so that there would be a large amount available at anytime to any member of the group? 'Ihen fully understood and carefully planned, this theory works well.13 Credit unions, as we know them today, are cO-Operative societies engaged in the business of supplying credit to mem— bers who are bound by a common bond of occupation, association or residence. The activities are confined among these well— defined groups to preserve the feeling of cohesiveness and neighborliness which is an incentive to working together toward the solution of any financial problem. The first major task of the society is to furnish the machinery which will enable the accumulation of savings in a 13Maxwell 8. Stewart, Credit Unions--gdg PeOple'g Bank (new'York: Public Affairs Committee Incorporated, 1942), p. 4. ‘V 16 common fund. As soon as this is done the credit union assumes a dual personality. It becomes a loan agency and a savings bank at the same time. iBut unlike a commercial bank the credit union's funds are intended exclusively for the benefit of those who contributed them. The Credit Union national Association offers the following concise and practical definition} Credit unions are groups of people who save together and make low-cost loans to each other for worthwhile pur- poses. Each is a separate organization uniting members with a common bond of interest-~in their work, church, neighborhood, etc. Each is individually chartered and supervised by the government.1 In EuIOpe and in many countries of Asia (See Appendix B-l), credit unions are termed co-operative associations for "savings and loans.” But their real function is best described if the ‘ order is reversed to “loans and savings.” N a Histogy and Development 3; Credit Union Movement gredit union ngEurOpean ordgin. Credit unionism is but one phase of the cO-Operative movement that swept EurOpe in the nineteenth century in an attempt by the pepulace to ease econo- mic disturbances and social unrest. 14The Educational Committee (Madison, Wisconsin: Credit 'Union Rationalessociation, 1950), p. l. 17 Robert Owen (1771-1885).15 Robert Owen, a British in- dustrialist and philanthropist, sparked this pioneering co- Operative effort. The scheme he laid down influenced the peo— ple of his time to experiment seriously with the idea of band— ing together for economic emancipation. At one time he con- verted his Own business into a philanthropic trust for his workers, devoting most of its profit to their social better- ment. The idea of limited return on invested capital, which is now the basic principle of the credit union, was then first con— ceived. The enterprise, although short-lived, contributed much toward the consciousness of the peOple, particularly the work- ing class, to talk and plan the co-Operative way of life. His work was rewarded with the first co-Operative congress that con— vened in 1830 at Manchester, England. The weavers OfRochdale.16 It remained for the weavers of Rochdale, an industrial town in the outskirts of Manchester, to organize the first consumer co-Operative under the leadership of Charles HOwarth in 1844. Faced with a bleak future, without savings and jobs, this group of weavers determined that through 15 Roy F. Bergengren, Credit Union NOrth.America (Rew‘York; Southern Publishers, Inc., 1940), p. 62. 16Ibid. 18 a united effort they could bring some form of relief. They banded themselves together and put what little cash they had in- to a common fund. The society develOped and perfected what was later popularity known as the Rochdalian principle. Its main features of Open membership, democratic control, limited in- terest on capital, and distribution of the savings on the basis of patronage return constitute the foundation of the present credit union movement. Other organizers of credit societies. There were several attempts to organize similar societies in many countries of EurOpe. One or two of the more successful are worth mentioning. 17 In Belgium, Francis Haeck actually called his society "credit union.“ In France, Pierre Joseph Proudhon18 established the first co-Operative bank. He collaborated with Buches,19 who, in Ihis early writings, urged co-Operative societies to set up a surplus fund which could be distributed only in the event of its liquidation. It was a measure intended primarily to protect ‘ 17Roy F. Bergengren, Credit Union North America (New York: Southern Publishers, Inc., 1940), p. 64. 18Ibid. lgIbid. ’I 19 the fund which the members invested. In this formative stage, the co-Operative organizations founded by these early pioneers proved less successful than the principles they enunciated. Their contention was that by vol- untary action a group can satisfy its needs more economically and equitably than by one person alone. More practical to the economic demands of their time was the latter view that considered “co-Operative" to mean self-help and protection against exploitation as well as economic better— ment of the working class. Victor Aime Huber (1819-1865).20 First to be mentioned is ‘Victor Aime Huber, who is described as playing the ”Overture to 4‘ the great drama of the co-Operative movement" in Germany, the country destined to give the world the first credit union that proved successful in Operation. In one of his visits to England he came in contact with these societies and was impressed by what they were accomplishing in improving the lot of the peOple. He ‘went back to Germany convinced that the co-operative way of life 'would improve man's economic status and at the same time build up his character. He worked hard to organize these co-Operative . 29Roy F. Bergengren, credit Union North.America (New'Iork: Southern Publishers, Inc., 1940), p. 65. 20 societies in Germany. As the units increased in number he warned the Officers to keep away from politics and to forego privileges which would weaken their position in advocating mi— nimum supervision by the state. He also saw that organizing them on a national basis would insure their success. William Raiffeisen (1818-1889).21 The chief credit for the first large-scale develOpment of the credit union akin to what we have at present goes to William Raiffeisen, a German with a varied background as a soldier, railway contractor, wine merchant, and later as Burgomaster of a group of Rhineland villages. Political condition in Germany in 1848 were bad. It was the year that the revolutionists met disaster in their attempt to found a republic. Hunger and threats Of uprising stalked the cities. Raiffeisen, a devoted Catholic, became concerned with the welfare of the peOple under his care. He tried various charitable expediencies but these brought no lasting benefit to the peeple who were sinking back into their old habit of depend- ing on borrowed funds. Reflecting on the situation, Raiffeisen came to the conclu- 2¥Roy F. Bergengren, Credit Union NOrth America (new‘fork: Southern Publishers, Inc., 1940), p. 66. , a ' . . . . ' pd . \ .' ,_ n. a . - . . _.e. . ' 4 . . _ , I O u v ’ ’ ' I“ ‘ I . . . . I " n .. -.I. .- ‘ O , I V} . .-- ' ; 0‘ “ w ‘I ’ ' _ . .4 -’-' Um , - . d‘ A . . w “ v I ~ I I .. .. . LA I t . I . V 6 .5 v .-.I . .- \ j. . ‘1 o l I I ,|-_ a \ - V a e I . l .. . 0 U. l ' ~ 0 c 4‘ ' -.I l . . u.. '_ o. - K p O U ' l' . .I . u e . u h A " .I _ I a . = . ha a-_I.'- . ,'-‘v o.’ I ' . . I u " | ..‘. __ .4 _ . 0' \l u ' . l I . . .. . . o . n . . . ..'. . .,‘.,. .‘- I" n -- \‘ " ~ ' u ‘I.’ y, g l v .‘ . ‘< .\ . 'l I I , A - " .. o. .' x. l . . u « a u <- -..~wp- v—«H . . y _. . . .-' .1 ‘ ' o .. . I a. -.. ...K I u .u p n '- n _ l u n I ‘ .o- \ .1. 0 II n ‘- , --o-. 21 sion that the only hOpeful course Of action was for the peasant to help themselves. Nothing would be accomplished until all debts were paid. Then with new capital of their own, the peOple could work toward self-sufficiency. But when he opened his co- Operative society he found that the farmers had little cash to offer. Raiffeisen, therefore, accepted property as the basis of credit which led to the adaption of the principles of unlimited liability and small value Of shares. The society was tailored to the needs of the farmers in ru- ral areas. Membership was based on character, religious affilia— tion, and general reputation in the community. This rigid screen— ing of the members reduced the risks of having to deal with ir- responsible individuals. The head Of the society, in many cases, was the priest or pastor. Membership was confined to a single parish to reduce the cost of investigation and collection. A cashier employed to maintain the continuity of Operation was the only one paid for the services rendered the organization. Because the capital raised through the sale of shares was small, it was 'necessary to accept additional deposits from members as well as non-members,.and.interest on deposits was Offered as an induce- ment. Loans were made to members after the endorsement of two board n . . . . . . a . 1‘ . . u o u a .. . . . i . . . I. . D‘ . I . t \ . dl . I . V DH 1 4 I. . l . . u . x \ D g . . . . . a . u . . .‘h 'J 22 members. Unsecured and collateral loans were rarely issued because most borrowers were required to specify the purpose of the loan. Loans were extended from five to ten years with in- terest at four to five per cent. The profit from the earnings of the shares was not distri- buted to the individual members but was allocated to the reserve fund to cover bad debts and to be used for projects of community welfare. The movement rapidiy gained adherents among the peasants. Raiffeisen traveled all over the country spreading the credit union idea. His efforts were rewarded with the organization of 423 credit societies before his death. Currentiy this is the largest credit union movement in Germany with a membership of 892.000. In India, Japan, and China. the Raiffeisen credit unions are flourishing. Wrfierman Schulze-Delitzsch (1808-1895).22 At about the same time another man arrived independently at the idea of a co-Opera— tive society. His interest was the small industrialists and in— dependent tradesmen who were and still are more important in the German economy than in England. In 1848, Herman Schulze-Delitzsch, a judge and a member of the prussian.Parliament, was appointed 221b1d. 23 chairman of a commission to look into the condition of the _ laborers. is evidence accumulated before the commission he be- came convinced that debt was at the root of most of the poverty and insecurity among the people whom he was trying to serve. He approached some of his influential and well—to-do friends and persuaded them to contribute a sum of money which was placed at the disposal of a society of needy artisans. He promised the the contributors at least the return of their investments. This -fund was loaned primariiy for the purchase of tools and materials in an effort to relieve unemployment. The loans were paid back in.full plus interest. ‘Encouraged with the results, Schulze- JDelitzsch decided that henceforth.whatever profit the society may earn would be retained for further loans to the members. Two years later, in 1852, he re-organized the society as a self-supporting and self-governing credit co-operative. Three full-time employees were elected by the members and were made responsible to a supervisory committee. They were paid for their services while acting in their designated offices. Hembership was confined to small industrialists and trades— :men. The society was less interested in the moral welfare of the members and more in providing them with some financial tassistance for their business activities. 23 chairman of a commission to look into the condition of the . laborers. is evidence accumulated before the commission he be- 'came convinced that debt was at the root of most of the poverty and insecurity among the people whom he was trying to serve. He approached some of his influential and well-to-do friends and persuaded them to contribute a sum of money which was placed at the disposal of a society of needy artisans. He promised the the contributors at least the return of their investments. This ”fund was loaned primarily for the purchase of tools and materials in an effort to relieve unemployment. The loans were paid back in full plus interest. ‘Encouraged with the results, Schulze- Delitzsch decided that henceforth.whatever profit the society may earn would be retained for further loans to the members. Two years later, in 1852, he re-organized the society as a self-supporting and self-governing credit co-Operative. Three full—time employees were elected by the members and were made responsible to a supervisory committee. They were paid for their services while acting in their designated offices. Membership was confined to small industrialists and trades- men. The society was less interested in the moral welfare of the members and more in providing them with some financial assistance for their business activities. '- 1) v w ,i. 24 The capital was re—enfcrced by further subscription of shares that were higher in value, ranging from.$75 to 8250. Those who could not subscribe to the full value of a share could make arrangements to have this paid by weekly install- ments. The entrance fee was high and was set aside as a reserve until the organization was dissolved. The activities of the co-operative were confined for the most part to the single purpose of granting loans for the com— mercial needs of the members. There was apposition to the society from both the middle class and the government, especialiy the latter, because of the independent attitude of the officers toward any effort of as- sistance on the part of the government. However, this situa- tion changed and the two agencies worked admirably in the pas- sage of the first enabling act for co-operatives in Prussia in 1867, followed two years later by a co-Operative law for the German Empire . After five years, Schulze-Delitzsch was able to organize 183 associations with a total membership of 18,787. The organization which began with a few membership restric- tions, grew into an integrated banking system with thousands of full-time employees and imposing edifices, to all outward ap- pearance taking the form of modern private banks. 25 23 Luigi Luzzatti. The idea of urban credit or the "peo- ple's bank“ spread to other European countries with a new vigor. We find them in Belgium, France, Finland, and.Russia~ But it was develcped with outstanding success in northern Italy by Luigi Luzzatti in the city of Milan in 1866. In an effort to help the men of small means, Luzzatti, a liberal who held various offices including that of prime minis- ter, evolved a structure of credit society which was closer but more democratic than that one established by Herman Schulze- Delitzsch whom he knew in earlier years. Officers of the society were elected by the members. Shareholdings were limited to $1,000 with reduced value of the shares payable in installments. Loans without security were made possible because of the care in the selection of members. 71nd character, rather than ability to pay back these loans were emphasized. Today the PeOple's Bank of Milan is one of the largest moneyed institutions in Italy, and has served as a model for many of other people's banks. Iith this develOpment the credit union movement was ready zalbid. y < a . . , . n . . ' . .-. n , . i - . ’ ‘ v . < . , a 4‘, o. i v . . u ' .| . \ ‘ x - . .. ‘ i . v . , 'x \ . w x ' ' > . ., n . . - . I v ' 1 .- ’ - o - —o . . , s ‘ . v . ) . _ u e u . . . . . I , .7 ‘. .“ . 1 -, I t ' . . ' o v ' I ~ a ‘ ~ . ¢ A , . . .— ._ o. . . 26 to cross the seas to the new world. Credit unions spread ig America. The first modern credit union in the North.1merican continent, the Ea Caisse gopulaire, was organised in 1900 at Lewis, Quebec, Canada. 24 As a Montreal journalist, Alfonse Alfonse DesJardins. DesJardins became interested in credit societies as a result of the exposure in Parliament of the practices of money lend— ers who were enslaving the peeple with exorbitant rates of in- terest. .lfter spending some fifteen years studying the works of Schulze-Delitzsch, Raiffeisen, and Luzzatti, he set up an organization that became a prototype of American institution. The amount of the shares in this credit society was fur- ther reduced from that of Schulze—Delitzsch, Raiffeisen or Luzzatti. Liabilities were limited to protect the subscribers from having to answer for the obligations of the organization beyond the amount of their investments. Credit unions $2 the United §§§§g§. The success of the L3 Caisse gopulaire let to the introduction of credit unions in the United states. In 1908, DesJardins was invited to Boston to aid in the preparation of a bill that proved to be the first g4fioy F. Bergengren, Credit Union Nerth.America (New‘York: Southern Publishers, Inc., 1940), p.76. 27 working model for future legislation having to do with co-opera- tive thinking. The following year this bill was introduced by Senator Calvin Coolidge and was passed by the Massachusetts le- gislature. Three persons were prominent in the early days of the movement: Filene, a successful Boston merchant, DesJardins from Canada, and Jay, a Massachusetts bank commissioner. Filene, who had seen the success of credit unions in India, China, and Japan, supplied the greatly needed funds as well as the respect— ability associated with his name. DesJardin's contribution was his previous experience in establishing credit unions in Canada and New Hampshire. Jay, with his banking experience, contributed technical skill. Credit unions gained favorable reactions among the state legislatures when, in 1912, President Howard Taft, after sending two Federal commissions abroad to examine the workings of credit unions, sent letters to all governors urging them to enact credit union laws. The letter reads as follows: A very good law has been enacted by the State of Massachusetts allowing the incorporation of credit unions which should furnish an example to other states. Their establishment is generally a matter of state legislation and encouragement, their organization and management wonderfully simple, as the Eur0pean eXperience shows, and their success is practically inevitable when the environment is congenial and where proper laws are passed ’v 28 for their conduct.25 The Credit Union National Extention Bureau. By 1921 the movement had to its credit four workable laws and 199 credit unions. Filene and Bergengren, the latter as attorney and early associate of Filene, organized the Credit Union Excention Bureau in Boston with the object of securing the enactment of credit union laws in the states that were without them. This was a period of preliminary research and publicity. Credit unions started to assume a workable form. Unlimited liability was totally abandoned and the regular payment of loans in installment was adepted. Capital was obtained solely from the savings of the members and their additional deposits. State after state acted favorably upon the proposed le— gislation so that by 1930 there were forty-two of these credit union laws. Another president of the United States identified himself with.the credit union movement. In 1932 President Herbert IHoover signed a bill authorizing the organization of credit unions in Washington, D. C., the capital of the nation._ 25 Roy F. Bergengren, Credit Union Herth.America (New York: Southern Publishers, Inc., 1940), p. 96. . \ ! .- .. ~ _.. . n L! _ -~-- 0 -. IA 0 . 29 The Credit Union National Association. In 1934, fifty—two credit union leaders initiated an organization campaign which brought into being the Credit Union National.Lssociation. CUNA, as it is known today, is a federation of state credit union leagues with headquarters at Raiffeisen House, Madison, Wisconsin. is an educational and promotional organization, CUNA directed its attention against usury, which in those days took the form of credit trading, a means of inducing peeple of small means to equip their homes with commodities essential to the American way of life through pressure selling. There was no question that this helped raised the standard of living and the possibilities of leisure for the average person but its financial basis was not sound. The problem was approached in a unique way. Instead of establishing consumer's stores, CUNL stimulated thrift among 'the people and provided them with loans at reasonable and clear- ly understood rates of interest within their reach. [is the mem- ‘bers were for the most part employees, it was natural that they should be organized, in most cases, at their places of work than in their neighborhoods. Many employees favored the movement and encouraged the or- ganizers to.expound its merits. They also further consented to deduct deposits from their pay. is a result, credit unions spread rapidly among the employees of the post office, the rail- 30 ways, the telephone companies and the large department stores. The Federal Credit Union. Adding great impetus to the credit union movement was the passage of Congress, in the same year that CUNA was organized, of the Federal Credit Union Law known as the Sheppard.Act. President Franklin D. Roosevelt signed the bill. This law sanctions the organization of credit unions in the states and territories of the United States. The administration of the law is carried out by the Bureau of Federal Credit Union, Social Security Administration, U. S. Department of Health, Education and Welfare. The CUNA Insurance Society. The depression of 1929-30 shattered part of the American banking system and shook the rest. Failure of the credit unions came about as a result of the loss of the surpluses deposited in the banks. This gave rise to the creation of the CUNL Insurance Society in 1935, organized under the Insurance Law of Wisconsin. It also offers loan protection whereby the credit union is guaranteed against loss incident to the death or total permanent disability of borrowing members. status of credit unions in the United States. The credit unions in the United States are unique in the world, although their procedures have been adapted largely from.the‘European system. The rapid rise of credit unions can be attributed to the demand for consumer loans and to the organizational struc— I. 31 ture which has succeeded in attracting the required capital. Technological advances and the development of consumer cred- it in the United States go hand in hand. Consumer credit has stimulated the distribution of high unit cost products in rela— tion to the average consumer budget. Few becomes satisfied withp out the latest facilities for comfort and enjoyment of life. The agencies selling consumer goods became reluctant to extend the necessary credit thus causing consumer financing institutions to take an active part. But a drawback in the issuance of con— sumer loans is the cost of credit investigation. Credit unions were able to reduce this cost because of the nature of their organization. Costs were further reduced by such factors as tax exemptions, low advertising costs, the donation of labor, low cost physical facilities and other efficiencies. Thus, the movement is filling the needs of consumers rather than the small producers. At the close of 1957, there were 18,433 credit unions in the United States and territories with membership of 10,081,113. (See Appendix:B-2) The outstanding loans ran to 32,968,882,730. The total assets were $4.093,710,089.26 26 The Credit Union Yearbook (Madison, Wisconsin: Credit Union National.Lssociation, 1958), p. 13. 32 The Credit Union Movement in the Philippines The develOpment of credit unions in the Philippines is also associated with the co-cperative movement. Long before the for- mal organization of any co-operative in the Philippines, laws were enacted to protect and encourage agricultural co-Opera- tives. The first of these laws was passed in 1915 and was known as the Agricultural Credit Co-Operative Act. This was followed by the Co-Operative Marketing Law in 1927. Introduction 2; credit unions ip the Philippines. When the Philippine Commonwealth.government was established in 1935, jPresident M. L. Quezon secured the services of Dr. Frederic C. Howe as technical adviser in the area of co-Operatives. Dr. Howe noticed that there was much talk on the theory of co-operatives while little was done in the way of actual organ- ization. He set out to show the people how co-Operatives can be organized and supervised. Lllen.H. Huber.27 One of the men Dr. Hews encouraged was willen R. Huber, who organized the first credit union in the Philippines. is a missionary, he came to the island to work 2 7Hugo and Manongdo, Credit Union Handbook (Manila, Philip- pines: Bureau of Printing, 1950), p. 35. 33 for the welfare of the members of the church he represented. He had observed that the people of the poorer class had no privileges, but were usually in debt and in bondage to land— lords who in many cases owned a whole community. After his first term as a missionary, Huber returned to the United States and was assigned to work with the First Christian Church at Frankfort, Indiana, where he served until 1937. One day while going over the membership list prior to launching a church project, he found that 400 of the 1,000 members were under chattel mortgage to a personal finance company in the city. The company was charging three and one half per cent a month, which is equivalent to forty-two per cent per annum. The leademsof'the church were called to a meet- ing and the subject of organizing a credit union was presented. They were interested and a study committee was established. ‘After the whole subject on co-operative was presented to the church and the congregation had pledged their support, an ap- plication was made, in spite of the opposition of the church elder. Through the help of Mr. C. R. Orchard of the Federal Government, the approval was facilitated and Federal Charter No. 34 was granted; thus the church gained the reputation of being the first among the Protestant Church Federal Credit 34 Unions in the United States. Huber was largely instrumental in this and thus gained the needed experience for organizing a similar society in the Philippines. When he settled in'Vigan, Ilocos Sur, in his second term, Huber called a meeting of the officers of the Church of Christ and cpened the first class to study the workings of credit unions. The series of prOposed studies were not completed be- cause the members insisted on organizing a credit union right away. This was in 1938. But when the application was filed for a charter, the Securities and.Exchange Commission in Manila did not know what to do. The existing laws could not protect and encourage the credit union. The organizers were advised to run it as a corporation and a corporate charter was granted. How- ever, the leaders insisted on running the society as a real cred- it union. ghg growth 2; credit unions in the Philippines. The success of the first credit union in the Philippines quickly caught the imagination of the socially minded peOple of the Nerthern prov- inces who felt that they needed this to improve their economic status. By 1941 there were 30 credit unions organized, with 2,000 members and assets valued at Pl43,000. The outstanding loans amounted to P68,000. The law-making body in the Philippines felt the need of A. 35 meeting this new situation. In 1945 the Philippine Common- wealth enacted.Act 656 which gave recognition for the first time to non—agricultural co-Operatives on an equal basis with agri- cultural co-operatives. At the close of World.War II there was a wave of interest in the credit union movement. By 1952 credit unions far exceed— ed all other types of co-operative organizations put together. Because there was clearly a need for specific legislation ap- plicable to non-agricultural co-Operatives alone, in order to eliminate many overlapping of provisions still existing, the Philippine Republic Act 2023 was passed in 1957. The record of progress of the credit union movement at the end of 1957 was at its peak. (See Table I) There were 45 credit unions formed throughout the country that year. 'When the reports were summarized the number of credit unions in Operation went up to 242, an increase of 35 over that of the previous year, 1956. The membership jumped from 22,260 in 1955, to 19,785 in 1956, and then to 29,665 in 1957. The loaned issued to members totaled to P5,489,l73. The savings were more than the low rate of interest of one per cent ‘per month on the unpaid balance. The availability of this amount to meet emergencies of the members has helped them in many ways, such as raising the productivity of some individuals, financing 36 the college education of many children of wage earners, assist- ing others in starting small business, and making possible not only the purchase of lots and houses but their improvement as well. TABLE I COMPARATIVE STATISTICAL INFORMATION ON CREDIT UNIONS IN THE PHILIPPINE828 1955 1956 1921 No. Operating 180 207 242 Membership 22,260 19,785 29,665 Loans Issued 29,786 26,381 36,178 No. of Employees 174 183 203 Fixed D6p081t8 P 113859245 P 195639108 P 290659974 Savings Deposits P 252,751 P 300,251 P 444,370 Loans Issued P 396449234 P 4,326,460 P 5,489,174 Loans Outstanding P 1,430,124 P 1,826,818 P 2,512,245 Int. Rec. on Loans P 189,400 P 69,231 P 96,014 Operating EXpense P 95,383 P 116,073 P 153,185 jReserves P 50,875 P 79,477 P 108.595 IPatronage Refund P 25,319 P 29,477 P 36,391 LBBBtS P 1:778:442 - P 2,176,739 P 3:333:162 Liabilities P 1,270,678 P 353.952 P 817,088 §EEE§£I In this brief history of the credit union movement the ef— 28Antonio C. Mejia: Eleventh A________nnual R—L ort L___Sixth _____Under -—)-CA° ‘giscal‘Iear 1956—1957 (Manila, Philippines: Co—Operative Admin- istration office, Department of Commerce and Industry), p. 36. 37 fort of the laboring class to eliminate profit and put in its stead the service motive can be seen to have had far reaching results. As long as this motive is perpetuated credit unions will be playing a major role in the economic develOpment of any country . CHAPTER III THE CREDIT UNION LAW IN THE PHILIPPINES In tracing the history of the credit union movement in Chapter II it is significant to note that one of the factors that fostered the growth of the credit union was the enactment of appropriate legislation to protect its many interests. The dual personality of the credit union may place it at variance with the law of the country where it is found Operating. In the Philippines, the organization of the first credit union caused confusion among the different agencies of the government. The credit union was denied the power to accept deposits under the banking laws and was prohibited from making loans under the usury limitation. Recognition of these deficiencies in the existing statute led to the passage of Act 2023 by the Philip— pine Congress in 1957. ghg'ghilippine Non-Agricultural Co-Operative Act The act is known as the "Philippine NoneAgricultural Co— Operative Act," and is described as: A An act to provide the general basic co-Operative law and to consolidate and amend existing laws on non- 38 - . u . - I I o 1 ¢ , ; .' ‘ ‘ . ‘ -- C ‘ ‘ .4 a . . ' ‘ - A ‘1 H v . v . V t u l , v u'- ’ “ ““ . v ‘ > I I ' " J . 1 .I . . - , n - ./ ‘ . \A . ' . o ' k - I. h V ' v ‘ , . . o . \ . - .4 '\,.- l . ‘V - t ’.I-. . ‘ N '- ... " ‘ ‘ h I .. r . c. . I l - .- . I I . i . . u v V, ’,V . l ' I. .. . ‘ ‘..I. N I.) 1 u.‘ . . I ' ' I‘ ‘I- . - A.- V I ‘ . . \. 1. I . ‘. . -. . ' ~ I ~ . . a . ~ . . . , ... . ,. .L .. .7.’ h h " l . v . . I. ‘ ' . c ‘ . . I _ . -.. .a .- . ..v '-4 I” J I in . I b . 0 I a . - '. - I. V .. v I h. t'. K ' r $ ’ I ' I u‘ n 3‘! _‘ 1,. VI .. A, '..- A . _ O I t I . .. -. -! . . s- . 4 ,' ,5 p \. . . a v \ i I' n: P ‘ y ‘ . . I- I I . . I ‘ - . _ . . , . . , me a ...-.. o o > . . w- A .. ”I ‘ . I ,. , l I 7 y: .0 . 'k" ‘ ‘ ‘ ‘ O . . . , G ' ,’ ‘ . . ‘ ‘ - . c ." \l t J 39 agricultural co-operative in the Philippines.29 The Congress, in eXpressing a desire to help the Filipinos develop their enterprises on a co-Operative basis and to stabi- lize the economic independence of the country, has made ample provisions in this act to encourage the growth of co-Operatives. Tax exemption. One such provision is the exemption from taxes. A credit union whose assets do not exceed P500,000 is exempted from all taxes and government fees, such as: 1. Income tax -— at the full rate as provided under existing laws. 2. All other taxes -- unless otherwise provided. 3. The payment of the documentary stamp tax, residence taxes, tax on loans and insurance companies and municipal or city taxes.50 Administration. Credit unions, as one form of co-Opera- tives, are administered by the Administrator of the Co—Opera- tive Administration Office of the Department of Commerce and Industry, Republic of the Philippines. Their activities are directly supervised by the Office of the Credit Union Division. 29nRepublic Act No. 2023," Official Gazette, Republic 0;; the PhilippinesJ Vol. 53, No.~23 (December, 1957), p. 8426. v 30Ibid. ~- . L .L ' . \' z] u ’ ‘1 . | . , u.- k ‘ I‘- .. .I ..,-- J ' _ . . ~ - o- , I l ‘ - ‘d . , 4 x ‘ ‘ -_ .7, .. -. 4O Organizational Set-up gfpa Credit £3393 Legally, any group of Filipinos consisting of at least fifteen or more may organize a co-Operative. But actual organ— ization of a credit union is allowed by the Administrator only after evidence has been given that a minimum potential member- ship of fifty is assured and that the members have a common bond of interest. A letter of application is to be signed by the incorporators and sent to the Administrator together with a c0py of an economic survey of the area where it is proposed that the credit union be organized (See Appendisz); four cOpies of the articles of in— corporation (See Appendix F); and four copies of the proposed by-laws (See Appendix G). Articles 2: Incorporation. The articles of incorporation are the business rules laid down for running the credit union; it is required that the following be set forth: 1. The name of the co-Operative which shall include the word “co-Operative"; the co-Operative registered un- der this Act with unlimited liabilities shall include at the end ofzts name the world ”unlimited"; 2. The purpose or purposes for which the co-Operatives is to be registered; 3. The term of existence of the co-Operative, which may be perpetual; 41 4. The area of operation and the postal address of its principal office; 5. The name, nationality and the postal address of the subscribers; 6. The field of membership; 7. The names and postal address of the directors who shall manage the co-Operative for the first term; 8. A statement of whether the co-operative is to be re- gistered with or without capital stock and the number of shares of stock or membership subscribed for; 9. If the capital stock, a statement of the amount of authorized capital, the number and types of shares and the par value thereof which may be placed at any figure, and the right, preferences and restrictions of each type of shares; and the number and amount of capital stock subscribed for and the amount paid thereon by each member, indicating their names and postal address; 10. If without capital stock, a statement of whether the property rights of members shall be equal or unequal, and, if unequal, the general rule or rules by which the rights and interest of each member shall be determined and fixed; 11. The articles of incorporation may also contain any other provisions not inconsistent with this Act or any other law, for the conduct of the business affairs of the co-0perative.31 The Credit Union By-law . The by-laws are laws adapted by 'the credit union for the management of the business. These by- laws outline basic principles, such as: 31Ibid. 'b 10. ll. 12. 13. 42 The qualifications for admission to membership and the payment to be made or interest to be acquired as a condition to the exercise of the rights of member— ship; The rights and liabilities of membership; The circumstances under which the withdrawal and expulsion of members shall be permitted; The procedure to be followed in cases of withdrawal, ineligibility and/or death of members; The conditions under which the transfer of a share or interest of the member shall be permitted; The time, place, and manner of calling and conduct- ing assemblies and meetings and the right of voting; The general conduct of the business of the co-opera- tive, including the powers and duties of directors, officers, and committee members; The manner in which the capital may be raised and the purpose for which it can be utilized; The mode of custody and investment of surplus funds; The manner of keeping accounts; The method of distribution of net savings; The manner of adopting, amending, repealing and abro- gating by-laws; In case of co-operatives loaning funds; a) the conditions governing the granting of loans, the determination of the maximum and normal credit of members and the maximum loan which may be granted to a member, b) the rate of interest on the loans, c) the securityibr payment of loans, 43 d) the security for payment of loans, e) the period of repayment of loans, and f) the extension of the period of payment and renewal of loans, and 14. Other matters incident to the purpose and activities of the co-operatives. chgr papers required. Other papers required to complete the application are: 1. .A sworn statement of the treasurer showing the number of members and the amount of their capital distribution either paid to him in cash or indicating that there has been transferred to him in trust and received by him prOperty the fair valuation of which is equal to the capital contribution of the members. 2. .An original copy of the treasurer's and / or other ac- countable officers' bond. 3. A cepy of the certificate of the co-operative officer or Municipal Treasurer of the place where the co-Operative is to operate as to the actual physical count of the paid-up capital (cash) of the memoership contribution. 4. ,A certificate to be signed by a co-Operative officer or a duly authorized representative of the Co—Operative Administra- 32min. -., - 44 tion Office stating that a thorough and sufficient indoctrina— tion has been conducted among the incorporators and sizeable number of prospective members. 5. Minutes of the organization meeting. 6. A certificate of the board signifying that a competent bookkeeper is available. If the.Administrator is satisfied that the requirements of the law have been meet, he may register the credit union. The articles of incorporation and the by—laws will be effective only after registration and the issuance of an order to that effect. The authorization is signed by the Administrator under his ef- ficial seal and constitutes conclusive evidence that the group can go ahead with the organization prior to opening the credit union to the members. The incorporators can then proceed with the formal organization. Election of the board of directors, committees, gag offi- cers. The original subscribers convene and elect from among themselves: 1. The board of directors as specified in the by-laws. 2. The credit committee as specified in the by-laws. 3. The supervisory committee of three members. The chosen board of directors then elects from its number the following officers: a president, a vice-president, a 45 secretary, and a treasurer. The credit committee and the supervisory committee meet separately to choose frOm among themselves a chairman and a secretary. The individual elected to the various offices at this organizational meeting serve until the annual general member- ship meeting at which time a new election of officers is held. This organization of a credit union is presented in a chart form in Appendix D. ‘Membership and capital. The first responsibility of the board of directors is to secure the capital which will make it possible for the credit union to make loans. This is accom~ plished principally through share subscriptions of the members known as the fixed deposit and the savings deposit. In most literature the credit union has been publicized as a co-operative association organized to promote thrift among its members. The term‘ggggit 22122 is often overlooked and its real purpose does not receive prOper emphasis. Actually a credit union solicits savings to accumulate capital for loans. The saving as- pect is merely a by—product which makes possible the accumulation of assets that otherwise could not be achieved if the credit unions were not in existence. 46 Applications for membership are screened by the board of directors. An applicant should give evidence the he is a mem- ber of the group. Only written applications are considered by . the board of directors and a majority vote is required to pass upon all applications. I Full privileges of membership are granted upon the payment of an entrance fee and subscription to the fixed deposit, either in lump sum or in installments as prescribed by the by-laws. The installment provision of subscribing to the shares enables anyone to become a member of the credit union regardless of his income. It is through this process that thrift is encouraged. The lowest amount required by the credit union for a mem— ber to invest is called the fixed deposit and cannot be with- drawn as long as active membership is maintained. Savings depos- it may be opened only after the fixed deposit is fully subscribed. The total amount of investment a member can have in the credit union is determined by the board of directors to prevent the organization from depending financially on a small group of members, whose views may carry more influence than their votes. If the holdings of the members are fixed at a low figure, the incentive to save is weakened because the members are not re— quired to set aside a portion of their income as regular deposit 47 toward the capital of the credit union. On the other hand, a higher limit brings more capital and reduces the per share re- turn of the members. It is the responsibility of the board to watch the trends and to act accordingly. A member may withdraw from the credit union at any time after giving written notice. The amount of his deposit plus whatever interest is due him is payable after at least a thirty- dayis notice has been given, unless he is specifically exempted by the board and if funds are available. Lgang. The great portion of the income of a credit union comes from interest on loans. The success of the society is dependent upon the loans that accomplished their purposes and are paid back on time. Loans are given for 'providential and ‘ productive purposes." This can mean education, paying medical bills, buying househOld appliances, or paying off old debts, making home improvement and repairs, or taxes, or the like. Character loans are made up to P50 on the borrower's pro- missory note, subject to the uniform conditions as the board of directors or the credit committee may impose and provided it is repaid within sixty-days. Maximum loans are not to exceed P500, or twenty percent of the total fixed deposits and the reserve fund, whichever is greater. The security, in most cases, is the 48 assignment of deposits and the endorsement of a note. The term, conditions of payment, and the security of the loan are determined by the credit committee. No loans can exceed the time limit of one year. The officers and committee members are not allowed to borrow more than their total deposits. Interest gn'lgagg. One attractive point of the credit union is the relatively low rate of interest charged on loans. Loans bear interest computed at one per cent a month on the unpaid bal- ance exclusive of all costs incident to making such loans. One may scrutinize the rate and notice it to be higher than the rates usually charged on loans by commercial banks which usually range from.five to six per cent a year. If any member can obtain a loan at a lower cost than what he can get from his credit union, he ,should be encouraged to do so. The main function of the credit union is to be of service to its members who cannot borrow from 'the banks and are forced to patronize pawnbrokers or small-loan agencies charging from eighteen to forty—two per cent interest a a year. Investments. Any idle credit union funds, not in demand for for loans, can be made to earn by investing them in Philippine government bonds or other readily marketable securities, subject 49 to the approval of the governing board and the Administrator. Another alternative is the loan of funds to other credit unions. It is the moral obligation of one credit union to help other credit unions in every way possible. This kind of loan involves negligible risks and bring much higher yield than that obtainable from government bonds. For the borrowing credit union, interest rates are lower than those available in the com— mercial market. Dividends. Profits earned by a credit union are returned to the subscribers whether borrowers or non—borrowers. After expenses are deducted and the authorized reserves are set aside the remaining portion is distributed to the members in the form of interest on fixed deposits and a patronage refund, the in- terest on savings deposits. The distribution ranges from thirty to thirty-five per cent on each item or sixty to seventy per cent of the net earning. . Reserves. Reserves are authorized by the by-laws as fol- lows: Reserve fund 20% of net earning Educational fund 10% n a e Other funds (Optional) 10% N 'N N « A N Reserve fund cannot be used as working capital or for any investment unless authorized by the Administrator. This fund 49 to the apprOval of the governing board and the Administrator. Another alternative is the loan of funds to other credit unions. It is the moral obligation of one credit union to help other credit unions in every way possible. This kind of loan involves negligible risks and bring much higher yield than that obtainable from.government bonds. For the borrowing credit union, interest rates are lower than those available in the com~ mercial market. Dividends. Profits earned by a credit union are returned to the subscribers whether borrowers or non-borrowers. After expenses are deducted and the authorized reserves are set aside the remaining portion is distributed to the members in the form of interest on fixed deposits and a patronage refund, the in- terest on savings deposits. The distribution ranges from thirty to thirty-five per cent on each item or sixty to seventy per cent of the net earning. Reserves. Reserves are authorized by the by-laws as fol- lows: , ~ Reserve fund 20% of net earning Educational fund 10% a n O Other funds (optional) 10¢ ; 'u e s - A Reserve fund cannot be used as working capital or for any investment unless authorized by the Administrator. This fund 50 is intended to take care of other contingencies in Operation and uncollectible loans. The educational fund is divided into two parts. The first part stays in the credit union to be used for educational and other co-Operative purposes to strengthen the position of the credit union among its members and the community. The other half is credited to a central co-Operative fund. Managing 3 Credit Union There are two factors that stand foremost in managing a credit union. First is the legal requirement of a ”common bond" ‘between members. The second is the harnessing of services of the members for management. The credit union business is vested in the members. It is Operated for their benefit. The law has seen to it that this is safeguarded. And it is expected of members to keep the EIEIEE ‘gg_. Therefore, the members of a credit union should know their duties and privileges well. Th3 gnpggl meeting. It is impossible, however, for the mem- bers to perform the function necessary for the day to day manage- ment of the credit union. Certain authority and responsibility should be delegated to others. This process is accomplished through the annual meeting which is held in the early part of the 51 fiscal year of a credit union, the time and place of which is designated and announced to members. The annual meeting ista significant event in a credit union. Attendance is a duty each member owes to the organization. At this meeting members assert their sovereignty and take actions necessary to the Operation of the credit union which cannot be taken by the management staff. Some of the major concerns are: the declaration of dividends, election of the board of directors, and members of the credit committee and supervising committee. If any officer in the discharge of his duties fails to carry out the wishes of the constituency with respect to management of the credit union, he may be replaced by the members. It is paramount importance, on the other hand, that members elected to the dif- ferent posts have the full confidence of the constituency. Th2 PE§£9,2£ directors. The board of directors acts for the membership between the annual meetings. It manages the affairs, funds, and records of the credit union. ' To accomplish the duties mentioned above the board must have certain responsibilities and authority. At the same time it is responsible for the use or the lack of use it makes of these res- ponsibilities. The credit union by-laws are the expression of the objectives 52 that should be carried out. These objectives are to be ac- complished within the business rules laid down by the articles of incorporation. Within these broad provisions the board of directors is free to decide on those policies which it believes to be most effective in the successful management of the affairs of the organization. It must, however, give complete account of the policies and actions to the membership at regular intervals. These duties are broad and cover the following: Approval of minutes of previous meetings of the body. Election of Officers. Designation of depository for credit union funds. Iaximum shareholdings for members. Election of new members. Purchase of supplies and equipment. Saving regulations for borrowers. Limit of loans. Interest rate to be charged on loans. Terms of loans. Surety bond coverage for persons handling credit union fhxnds. Credit union business days. Policies on fines. 53 Filling vacancies on board of directors and credit commit— tees. Fixing salaries of the manager and other employees working - under him. Investment of excess funds. Borrowing on behalf of the credit union. Collection action on delinquent loans. Disposition of uncollectible loans. Membership on organization of credit union. Review of internal controls. Kind of securities for loans. Educational program. Amendments of the by—laws. The establishment of the policies required by the by-laws is only the first step in management. To be effective the poli— cies must be carried out. This constitutes the control function of the board of directors. Therefore, an internal check list should be adOpted and made use of periodically. (See Appendix H) Each individual director has also the responsibility and Op- portunity to contribute in a very telling manner to the management of the credit union. He helps select the Officers who have spe- cial duties of leadership. This selection, develOpment, and prOp- 54 or utilization of sound leadership, which is the key to success, depends heavily on the interest and sense of responsibility Of each directors. The credit committee. The credit committee is most prom— inent in a credit union. The minimum number Of members is three. The main duty of the credit committee is to supervise loans and withdrawals of desposits. Loans approved by this committee are made on forms which set forth the purpose for which the loan is desired, the security, if any, and such other data required. These are acted upon as soon as feasible. Loans are not made un- less approved by a majority of the committee and unanimously by 'the members of the committee present at the meeting when the application is discussed. Applications of members of this committee to borrow from the credit union are referred to the board of directors. Besides rendering reports as required by the board of direc- tors, the credit committee is given the duty of inquiring care- fully into the personal habits and financial condition of every 'borrower and the sureties or co—makers and the security offered, in order to ascertain whether they will be able to discharge the obligation assumed and whether such loan promises to be of bene- fit to the borrowing members. 55 The supervisory committee. The supervisory committee is made up of three members who are known as the "elder statesmen." Their main duties are to watch for any deviatiOn from sound ‘ management and procedures. Affairs of the credit union are examined quarterly, semi—an- ually, and anually. Written reports of these examinations are made to the board of directors, the Administrator and at the an- nual meeting of the constituency. The by-laws invest this body with considerable power. It has, for example, the power, by unanimous vote, to suspend any Officer, director or committee member who is negligent of his res— ponsibility. The action should, however, be approved by the mem- bers called for this purpose. The president. The duties of the president are numerous. .As a recognized leader he is always alert on the opportunities for effectively and diligently discharging the responsibilities of his Office. He is to constantly devise ways and means to further the best interest of the organization. His aim is to in- crease the membership and to expand the services of the credit union to the members. Ingenuity in working out such plans re— quires diligence. He presides at meetings of the members and of the board of directors. 56 He also signs all documents and checks. In short he is expected to perform all duties connected with his office. The vicefpresident. The vice—president acts in the ab— i sence of the president. In many cases he is the chairman of theeducational committee. The manager. The manager is a combination of two offices: the secretary and the treasurer. He becomes the most important factor in the credit union. To him falls the reaponsibility of supervising or personally attending to most of the details of ‘the organization's business. Being a contact man, he cO-Operates with the ruling bodies. '38 manages to keep up with credit union practices and is contin— ually searching for new services to render. He is charged with receiving, recording, depositing, and dis- bursing funds. In this connection he is expected to submit an annual budget. He and those who help him keep the union funds should be bonded. As a secretary he also keeps adequate records of the member- ship and prepares statistical reports. Government supervision. In the Philippines the head of the 57 co-Operative activities, the Administrator, is given more power in the administration of the credit unions than is the case in the United States. This is probably because of the relative in- fancy of the movement in this place. The Administrator protects the credit union fron mismanage— ment. Annual reports are promptly sent to his Office. He, in turn, sends out agents to audit the credit union books at least once a.year. This close supervision has proved of great value in the early stages of co-Operative ventures of the Filipino peOple. It is of utmost importance in those credit unions where the of- ficers entrusted withrthe responsibility of running the affairs of”the organization are not professional bankers. By standard- izing reports, methods, procedures, and forms, the training pe- riod of the officers, eSpecially the managers are shortened con- siderably. The.Administrator, in many instances, advises the 'board on their problems and warns them if an Operation appears abnormal. SEEM The special legislation authorizing credit unions in the IPhilippines has carefully outlined its organizational procedures and Operation. In so doing it also pointed out the essential re— 58 quirements for its success. Such factors as size of membership, regular savings of members, effective loan program, sufficient reserve to take care of emergencies, judicious investment of excess capital, carefully budgeted eXpenses, and a good and intelligent audit of books are set forth clearly. CHAPTER IV HOSPITAL CREDIT UNIONS IN THE PHILIPPINES In the preceding chapters an effort was made to trace the beginning and growth of credit unions and to give the reader some familiarity with the existing laws governing credit unions in the Philippines. The subject under consideration in this chapter is an analysis of the activities of Philippine hospital credit unions now in Operation. The purpose is to test the ef- fectiveness of the law and recommend whatever changes are neces- sary in the present procedures to improve future Operations. Philippine Hoopital Credit Unions Included.ip the Survey The study is based on replies to questionnaires sent to the following hospital credit unions:' Department of Health Credit Union, Inc., San Lazaro HOSpital Compount, Manila Iloilo Mission Hospital Workers' Credit Union, Inc., Iloilo City. Mary Johnstonlflospital and School Of Nursing Credit Union, Inc., Manila Maternity and Children's Hospital Credit Union, Inc., Manila. 59 60 Medical Savings and Loans CO-Operative Credit Union, Inc., Manila. Rational Mental Hospital Employees' Credit Union, Inc., Mandaluyong , Rizal . national OrthOpedic Hospital Credit Union, Inc., Mandalu- yong, Rizal. NOrth General Hospital Credit Union, Inc., Manila. Rizal Provincial Hospital Employees' Credit Union, Inc., Pasig, Rizal. Surigao Provincial Hospital Employees' Credit Union, Inc., Surigao , Surigao . For the sake of brevity coded letters are used to represent these hospital credit unions whenever data are displayed in table form. _ Location. Nine Of the eleven hospital credit unions are located in and around the city of Manila. The other two are .found in the southern part of the Philippines. Length 2; Operation. NO hospital credit union has failed ;yet. Of those that are in current Operation, one is seven years old; three have Operated for four years; and four, for two years. {The largest hospital in the Philippines, the Veterans Memorial IHespital, is in the process of organizing a credit union. Thepguestionnaire The means used in gathering the data concerning the activi— 61 ties of the above hospital credit unions.mas a questionnaire devised under the guidance of Dr. S. E. Thompson, the former Assistant Director of the School of Hotel, Restaurant and Ins- titutional Management, Michigan State University, East Lansing, Michigan. 'The questionnaire as finally approved consists of three sections. The first deals with statistics covering years of Operation, location, membership, sizes of the governing bodies, amount of entrance fee, fixed and savings deposits, minimum and maximum loans, interest on loans and deposits, allocation of savings, etc. The second takes into consideration the financial statements, the balance sheets and the statements of income and expenses as Of December 31, 1957. The third asks for the Opins ions of the credit unions Officers on what should be emphasized in a hospital credit union to insure its success. COpies of the questionnaires were mailed to the presidents of the eleven hospital credit unions under survey, with stamped erNeIOpes to facilitate their replies. After waiting for four .menths, nine of the eleven questionnaires were received with lilanks filled out. Because the financial information lacked con- 'tinuity, an appeal was made to the Office of the Credit Union 2Division, who supplied the missing data as well as available in- ' I p . I C .. . . . . . I I‘ , I\ < u . . o o . .. t 1 . . n O n . I .i Ir ( . e . . . . . I N I I v. I . . . u z s . ,. . . . . . - o 1 . . D ‘ . . . . o u u n\ it . U s v I v I\ 1 . . t . . . I y I _ . . . i . . A . . u ‘I u‘- e 62 formation regarding the other two hospital credit unions which failed to return the questionnaires. Observations From these materials it is observed that the following are what we may call the ”accepted practices“ among the majority of hospital credit unions surveyed and described in this study: 1. Organization is kept simple. 2. Membership is confined to hospital employees only. 3. Two kinds of deposits, the fixed deposits and savings deposits, are received. 4. Loans are active and have a short time limit. 5. Operating expenses are exceptionally low. 6. Reserves are set aside to build up funds for emergencies in Operations. In addition to the above, it is also established that: l. .A majority of these hospital credit unions have the full co—Operation of the hospital administration. 2. The managers are allowed to devote some free time, at hospital expense, to do their credit union work. 3. The hospitals take care of deducting credit union obliga- tions from the employees' payroll. 63 These findings assume added significance in the light of the results of the survey made among hOSpital credit unions in the United States and Canada in 1957 by the National Credit Union Association, which showed that the success of the credit union among hospitals is to a great degree dependent upon the support of the heapital administration. There is also a need for a strong educational program. Organization 2f HOSpital Credit Union Hospital credit union Operation is entrusted to the board of directors, the credit committee and the supervisory comittee. Governing bodies. The governing bodies are elected every year» It is not unusual that a complete change of their mem— ‘bers are made. The abrupt changes in the policies and procedures ‘which are attributed to the lack of continuity in the background Of'the new members, hamper the efficiency of the credit union. In the United States this weakness is overcome by adOpting the "staggered system“ of electing the boards and committees. This Idefect does not appear as an acute problem at present since the hospital credit unions under survey are comparatively young and small in size . The board of directors. The board of directors range from five to seven members. Eight have five members and three are 64 composed of seven members. No conclusion can be drawn as to why one chooses five and another seven. The three which have seven members on the board are of different sizes, namely, 1,079, 59, and 350 members. The credit committee. The credit committee has a minimum of three members. All the hospital credit unions surveyed have three on this committee. Large hOSpital credit unions should have more members than the minimum requirements to insure that each employee is fairly represented. When loans are processed, the needed information about the borrowers can thus be readily obtained. The supervisory committee. The supervisory committee is :fixed to three members. An intelligent audit of the credit union books is accomplished when the members have adequate know— ledge of bookkeeping. The least that could be expected of a supervisory committee is that one of them is a bookkeeper. The Ihospital credit unions surveyed measure well with this standard. Thus the organization of the hospital credit unions in the jPhilippines is streamlined and kept as simple as can be. (See {Table II and.Appendix D). This arrangement has worked well. With ‘the size of the governing bodies ranging from three to seven it .is easier to call a meeting whenever an emergency measure is to ‘be taken. 65 TABIE II ORGANIZATIONAL SET—UP OF HOSPITAL CREDIT UNIONS IN THE PHILIPPINES Years of Board Of Credit Supervisory Hospital Existence Directors Committee Committee {A 3 7 3 3 R i 7 7 3 3 c 2 5 3 3 D 2 5 3 3 E 3 5 3 3 F 4 5 3 3 G 2 5 3 3 H 4 5 3 3 I 4 5 3 3 J 2 5 3 3 K 1 7 3 3 Membership Size of membership is a significant factor in the operation of a credit union. The,Administrator, in implementing the law, has set a potential membership of 50 as a requirement before any credit union can be organized. In the Philippines a credit union ‘with a membership Of 50 can be Operated on a break-even basis. 'Ihile this can be considered a good beginning it is not adequate on a long-range program, The Federal Credit Union in the United states is perhaps more realistic in its approach. No credit union is organized unless an actual membership of 100 is reached. In this survey the potential membership of these hospital credit unions ranges from 103 to 3,000. Only three of the eleven 66 enrolled more than eighty per cent of their potential members. (See Table III) Most of the others have to double their member- ship in order to reach the 100 per cent mark. Hospital B is noted to have Operated for seven years with only fifty-nine per cent of the potential members enrolled so far. TABLE III MEMBERSHIP OF HOSPITAL CREDIT UNIONS IN THE PHILIPPINES 1 9 5 7 Hospital Years of Potential Current Existence Membership Membership gercentagg A 3 3,000 1,076 56 B 7 100 59 59 C 2 145 145 100 D 2 115 112 97 E 3 500 237 46 F 4 300 170 57 G 2 300 168 56 H 4 500 319 64 I 4 103 93 81 J 2 105 34 32 K 1 700 350 50 Gain in membership for the year is a good index of the effectiveness of the educational program. To be effective an educational program should aim at selling the credit union idea 'to the employees and at making them desire to become members. {The summary below shows the over-all gain in membership from 3 to 170. One credit union showed loss in membership during the year under survey. 67 TABLE IV INCREASE IN THE NUMBER OF MEMBERS OF HOSPITAL CREDIT UNIONS IN THE PHILIPPINES 1956-1957 1956 1957 Hospital Membership Membership Increase A 918 1,076 150 B 34 59 5 C 82 145 63 D 109 112 3 B, 75 237 162 F - - _ G 160 168 8 H 297 319 22 I 90 93 3 J 39 34 ~4 (loss) K 180 350 170 There should be a strong program to induce employees to become members of the credit union affiliated with their ins- titution. Analysis gf the Balance Sheets The figures used in this section are based on the financial statements of the hospital credit unions under survey. AsSets. The assets of the hospital credit unions are stable. {They are built up according to a definite phase from.year to year. {The assets consist of Cash, Loans Receivable, Investments, Other Assets, and Fixed Assets. Size and not age seems to have a definite correlation with 68 the amount of the assets of these hospital credit unions. Hospital A, which is not the oldest but which has the most mem- bers, tapsthe list (See Table V). Hospital B, which is the old— est but which has a membership of 59, has the smallest amount of assets. TABLE V ASSETS 0F HOSPITAL CREDIT UNIONS IN THE PHILIPPDIES l 9 5 7 Hospital Age Membership Amount .1 3 1,076 P 142,913 H 4 319 188,426 F 3 237 - E 4 170 51,509 G 2 168 47,274 K 1 350 29.119 C 2 145 20,152 D 2 112 10,435 J 2 34 8,967 B 7 59 7,099 Cash. Only one hospital credit union keeps a petty cash .fund, Two have checking accounts with banks in the vicinity. {the cash of others is kept in the custody of the managers. For 'better protection cash should be deposited in the bank and only .za small petty cash fund for minor empenses should be kept in the office. 9 Loans Receivable._ Loans receivable constitute the largest single type of asset. The amount indicates the extent to which 69 the members are utilizing the services of their credit unions. A typical breakdown of the amount and nature of loans of Hos- pital H is shown below: Total Amount Purpose pf Loans N9. pf Loans Loans Made Medical 23 P 13,800 Educational 96 36,180 Small business 27 16,250 Repair of houses 107' 60,650 Repayment of old debts 12 7,250 Purchase of lots 6 4,280 Miscellaneous 145 87,000 Totals 416 P225,410 The average loan made for 1957 as indicated is P500. If the loan is payable within one year this amount is too large for the average employee to pay back. Loans should be confined to small amounts in order for the credit union to be of real service to the working class. Investments. The investments of these hOSpital credit unions are safe. They are all in Philippine government bonds. Other Assets. Other assets are supplies, the amount of which are not high. Fixed.Assets. Only older and larger hospital credit unions report fixed assets of some kind. Below is an itemized assets of the hospital credit unions included in the survey. 70 TABLE VI ITEMIZED ASSETS OF HOSPITAL CREDIT UNIONS IN THE PHILIPPINES l 9 5 7 Loans Invest. ~Other Fixed HOSpital Cash Receivable ments Assets Assets Total A P 15,957 P 125,866 P 200 P 900 P 142,913 B . C 2.972 17,180 20,152 D 347 10 , 877 10 ,4 34 E F 2.937 48,425 47 51,509 G 814 46 ,010 p 4 50 47 , 274 H 2 , 217 106 , 64 2 8 , 000 1 , 286 281 118,426 I 4,296 12,241 16,537 J 565 8,402 8,967 X 1,057 28,062 29,119 Liabilities. Liabilities of the hOSpital credit unions under survey are mostly equity funds-—that is, funds belonging to the members. They consist of Fixed and Savings Deposits, Reserves, Amount due Members, and Undeclared Dividends. Fixed deposits. Fixed deposits represent the minimum subs- criptions of members to credit union capital. These deposits remain in the organization as long as the membership is active. The size of shares, according to this survey, ranges from P20 to P100 and can be subscribed to either in a lump sum or in installments. The installment payments range from P20 to P10 a month (See Table VI). 71 TABLE VII DEPOSITS OF HOSPITAL CREDIT UNIONS IN THE PHILIPPINES 1957 ’ Monthly Membership Share Payment Fixed Dep. §avings Dep. 1,076 P 100 P 10 ‘P 118,268 P 2,300 59 50 1 5,630 60 145 100 10 15,226 3,220 112 50 10 8,375 312 ‘ 237 50 2 7,208 1,203 170 50 2 49,851 680 I68 100 5 40,373 319 50 10 89,503 22,129 93 100 10 9,726 6,036 34 100 5 7,697 389 350 20 10 18,720 7,882 Savings Deposits. Savings deposits are cpened after the fixed deposits are fully subscribed. Members may withdraw them .any time, although generally they are encouraged to borrow than to withdraw their deposits. The provision for regular monthly deposits either in the .fixed or savings deposits encourages members to save and this is the admirable aSpect of the credit union function. Reserves. Reserve funds are regularly set aside to build up the maximum percentage required by the by-laws in order to take care of emergencies in Operation. This is a "must" of young hospital credit unions. Miscellaneous Item. Miscellaneous items are made of educa- 72 tional fund and supervisor or CAO fund. Below is a summary of the liabilities of the hospital credit unions under survey: TABLE VIII LIABILITIES OF HOSPITAL CREDIT UNIONS IN THE PHILIPPINES l 9 5 7 Due to ' Due to Hospital Members Members Reserves Misc; Total A P 5,925 P 120,568 P 11,328 P 5,182 P 142,913 B C 931 18,455 536 230 20,152 D 830 8,687 361 557 10,435 ‘E F 50,530 879 51,509 G 4,476 40,373 2,422 4 47,275 H 4.037 111.632 2.757 118,426 I 15,762 407 359 15,537 J 8,085 365 517 8,967 K 26,602 2,517 29,119 These hoSpital credit unions have few accounts with the outside. Analysis 2; Inggmg and EXpenses The majority of the hOSpital credit unions in this survey showed some margins of income over that of expenses for 1957. Income. The sources of income of these hospital credit tinions are few. They include: Interest Received on Loans, lantrance Fees, Fines and Service Charges, and Miscellaneous Income. 73 Interest Received on Loans. The main source of income is the interest received from the use of loans. This is computed at the rate of one per cent per month on the unpaid balance. Entrance Fees. A uniform entrance fee of one peso is charged by the hospital credit unions in this study. One peso may appear large compared with the 25 cents which is the prevail- ing amount in the United States. It takes two pesos to make a dollar. The amount is fair enough. A comparative report of income is listed below (See Table 1:). TABLE II INCOME OF HOSPITAL CREDIT UNIONS IN THE PHILIPPINES l 9 5 7 Int. on, 'Entrance “ Fines & IHospital Loans Fees §ervice Chgs. Misc. Total A P10,547 P150 P4.885 P 59 p15,642 B 7. C 1,673 81 103 8 1,865 'D 1,054 21 224 1,299 '3 F 5,285 77 1,047 6,409 G 5,249 37 963 5,149 H 11,838 49 1,283 13,260 I 1,487 43 2 1,532 J 441 2 77 520 X 2,662 341 3 3,066 Expenses. The operating expenses of the hospital credit 74 unions under survey are comparatively small. The reason for this is that donated and voluntary eXpenses are not reflected on the books. Salaries. Salaries reported in this survey include part— time salaries of the managers, per diem remuneration of the board members, and the commissions of the collectors. Not one of the heapital credit unions included in the survey pays the salary of its managers in full. If in this report the unreflected expenses were included, salaries alone might reach as much as half Of the total Operating expense. Several of these hospital credit unions will have to face the problem of paying their managers.fu11 salaries sooner or later because of the volume of work they do . Supplies. The same low trend is noticed in the office supplies item because part of it is also borne by the affiliated hospitals. Interest Expense. Interests paid on deposits come from :net earnings but are reflected as eXpenses in the report. The table below (Table X) summarizes the Operating expenses (If the hospital credit unions included in the study. 75 TABLE I EXPENSES OF HOSPITAL CREDIT UNION IN THE PHILIPPINES 1 9 5 7 Hpspital Salaries Supplies Int. Exp. Misc. Total A. P 4,579 P 5,331 P 550 p 10,460 B C 110 p 83 931 75 1,199 D 380 24 716 11 1,132 E F 1,796 116 3.917 324 6,154 G 1:597 32 2,939 108 4,576 H 3,812 688 7,671 798 11,971 I 49 1,099 15 1,163 J K 217 238 752 787 1:995 Earnigg . The earnings reported by the hospital credit unions (See Table II) represent the undeclared dividends which will be returned to members when the annual meeting comes. Such dividends represent return over and above the services extended 'to employees, who, because of circumstances beyond their control, *were forced to borrow and were saved from the high cost of in— terest outside the credit unions. TABLE XI EXCESS OF INCOME OVER EXPENSES OF HOSPITAL CREDIT UNIONS IN THE PHILIPPINES 1 9 5 7 76 Hospital Income EXpens_e_s_ Net Earnings A P15,642 P10,46O P 5,182 B 0 1,765 1,199 665 D 1,299 1,132 167 E F 6,408 6,154 254 H 13,261 11,971 1,290 I 1,532 1,163 369 J 517 517 K 3.006 1.995 1,011 It is safe to say that financially hospital credit unions are being Operated with some degree of success in the Philip- pines. Although there is a wide disparity in gains realized, considering the short time they have been in operation, they can be considered to have made a good start. Proposed Changes As already hinted some changes in the present procedures are necessary to improve future Operations. These changes were corroborated by the officers in their replies to the question- naire; fifty percent of the respondents indicated the need of a strong, continuous educational program for members and officers; twenty percent believed that emphasis should be given to savings through regular payroll deductions; twenty percent proposed that steps be taken to insure that borrowers can pay their loans re- igrularly and on time; and ten percent urged the utilization of the 77 services of the Credit Union Division and the affiliated hospi- tale. The changes proposed here touched on the size of the mem. bership, creation of an educational committee, adoption of the Estaggered system'. of electing the governing bodies, restrictions On right to vote Of new members, limiting the amount of loan to P300, extension of loan period to two years, encouragement of savings, closer examination of credit union books, and co-Opera- tion with the affiliated hospitals. A brief discussion of each is necessary. 1. 'gipigpp membership_ppppld be set pp‘lgg. The size of ‘the membership has a direct relation to the amount of capital Of'the credit unions under study. The larger the membership the ‘bigger the capital that can be raised within a short time. Three caf the hospital credit unions started with a very small member— ship raising deposits insufficient to warrant an income com- lnensurate with their major expenses. A membership of 100 subs- crdbing to the shares at the regular rate of‘P5 a month will be table to raise a total deposit of P6,000 a year. In three years, 'the deposits will amount to P18,000. It is estimated that this amount can earn at least P1,800 a year, which would be sufficient 'to cover major expenses of the credit union for that entire period. The sooner a credit union can stand on its feet, the v , . v I I I o . _. w .OA‘ u - I . "u- 78 greater is its chance of success. 2. greation pf pp educational committee. The absence of a continuous educational program is very evident among the hos- pital credit unions in the Philippines. To improve the situa- tion the task of develcping an educational program should be definitely assigned to an educational committee. This committee should have a status equal to that of the governing bodies, the ‘board of directors, the credit committee and the supervisory committee. The election should be held during the annual meet- ing. With an educational committee in existenceofficially, the responsibility of drawing a long—range program can no longer be shifted. The educational committee could be made an effective instrument if the vice-president could be made the chairman and if it is given an ample budget within which to work. The ex- penses of the educational program at the early stages of the credit union's existence may legitimately be considered as Operat- ing expense.' This is preferable working a percentage basis as usually provided for in the by-laws. 3. Adoption pf the "staggered system” ip_the election .23 govermdng bodies. The merit of this system has been already Pointed out. If the member of the board of directors consist of five members, the by—laws should provide that three directors are tO'be elected for a term of one year and two for a term of two 79 years. Thereafter all directors (except those who are to fill vacancies only to the end of unexpired term) will be elected for two-year terms. 4. Restriction pp rights pf new members 32 vote. Well- qualified members who know the technique of the credit union are assets to the organization. The lack of voluntary leader- ship observed in the activities of the credit unions in the Philippines can be attributed to the poor incentives along this 33 New members should be given ample time to absorb the line. workings of the credit unions, at least for three months, before they should be allowed to participate in voting. This restric- tion will provide a good foundation for an intelligent member- ship out of which can develop good leadership. 5. Maximum amount of loan should not exceed P300. A ma— jority of hospital emplqyees do not receive as much as employees of’industrial concerns. Their income can only take care of the necessities of the family with.very small margins for savings. ILarge loans are apt to work hardships on the average employee. It would be difficult for him to maintain his obligation to his 33Letter of Mr. Olaf H. Spetland, Director, CUNA‘Uorld Ex- tention Department, April 1, 1958. 80 family and at the same time pay his loan. Hospital credit union should confine their loans to small amounts and these should not be in excess of P300. 6. Loans should.p§.gxtended.§p two years. This length of time is realistic with a loan of P300. A member receiving the average income of a hospital employee can easily set aside P20 a month from his salary, the P5 to go to his obligation to— ward the subscription of the fixed deposit or savings deposit and the P15 in repaying the loan. With this program, loan can be effectively collected without trouble and delay. 7. ‘Encourage regular savipgs. There is a tendency for members to come to the credit union as borrowers. They subs- cribe for a time to the deposit then stop there and start borrow— ing. To be an active member, with full privileges and benefits, one should continue saving even when he is settling his loan. {To give this the force needed, the following should be inserted :in the by-laws: Any member failing to pay his regular deposit *when it become due, shall be warned. Persistent shortcomings shall, unless excused by the board of directors, cause the member “to forfeit his rights, and all his investment, plus the interest ‘will be returned to him. 8. Supervisory committee should audit credit pnion‘pooks (often. This is very important. Regular audit of the books will 81 disclose irregularities before they create any damage which may end the life of the credit union. At the same time periodic audits keep those concerned always on their toes. 9. Closer co-Operation from the hospital administration. It is recognized that hospital credit union success is very much influenced by the degree of support from the administration. A credit union is not a business enterprise which can hOpe to be completely independent. It must get some support from the out- side. Some hospitals are already extending such assistance be- cause of the benefits they receive. In some cases the assistance is on a temporary basis and in others it is permanent in nature. Subsidies that are presently extended are: Providing office space in the hospital. Incidental eXpenses in maintaining the office. The credit union may assume these expenses as its funds make it possible to do so. Donation or loans of office equipment, such as tables, chairs, typewriters, adding machines, etc. Payroll deduction privileges. Summagy The analysis made of the activities of the hospital credit unions in the Philippines and the prOposed changes brought into 82 prominence what have already been noted as factors contributing to successful credit union operation. But there are some con- siderations that should be strongly emphasized in a hospital credit union. Among these are the launching of a strong educa- tional program to acquaint officers, employees and the communi— ty of the services of the credit union; active and streamlined governing bodies; and good support from the hospital. CHAPTER V ORGANIZING AN EMPLOYEES' HOSPITAL CREDIT UNION AT THE MANILA SANITARIUM 8c HOSPITAL Having in mind the essential requirements of a successful hospital credit union, the writer in this chapter prOposes to apply them to the organization of an employees' credit union at the Manila Sanitarium & Hospital. 11122 W Sanitarium 539 Hospital This hospital is located in the suburbs of Manila, Philip- pines, and has a total staff of 250 made up of sixteen doctors and interns, ninety nurses, fortyafour aides and part-time helpers, twenty skilled workers in the different department and ‘the business office, and eighty non-skilled laborers. There are several factors that favor the organization of a credit union for this institutions: 1. The employees need to develcpe the habit of thrift. 2. Bank facilities are not available to a majority of the workers and there is no financing agency serving the community. 3. The potential membership of 250 more than meets the rainimum requirement needed to run the credit union successfully. 83 84 4. The group, besides being bound with a ”common bond", offers also varied talents for the different offices in the credit union. Organization Procedures The main task is to introduce the subject of co-Operatives and the workings of a credit union among the employees of the hospital. This can be best accomplished by presenting a series of lectures at the morning convocation where workers gather at the auditorium before proceeding to their work for the day. If the presentation has been effective and the audience is encouraged to ask questions it will not be hard to get sup- port of at least one hundred employees. A questionnaire will not be out of place here to help determine to what extent the prospective members are willing to make the credit union a success. From this interested group will be selected at least fifteen «of the most influential employees from the different departments (of the hospital to form the nucleus of the credit union as in— ccorporators. The-burden of making the application to the GAO 'to organize a credit union and to prepare the necessary papers :referred in Chapter II falls upon this group. To do this smooth- Zly'a.temporary chairman and a secretary should be appointed who 85 can guide the different phases of activities until the permanent officers are elected. Although an election cannot be held until approval of the articles of incorporation (See Appendix F) and the by-laws (See Appendix G), it is desirable to give careful consideration to the plans for the organization before the actual meeting is held. The acting chairman should make advance arrangements with the GAO for a representative to be present in this first meet— ing to assist the incorporators. Every effort should be made to make this organizational meeting a success. Committees can be appointed to take charge of the different activities. A committee may see that the place of meeting is adequate and comfortable. Another may lay out a 'well-planned publicity program designed to build up to a climax Ion the date of the meeting. Such procedures will result in a large attendance of prOSpective members. The Organization Meetipg To facilitate matters the incorporators may act as organ— izing committee. In this first election it is most important 'to elect to the ruling bodies peOple who are not only competent laut willing to carry out the duties and responsibilities that will be placed upon them. Technically, in this organizational meeting, voting is limited to those persons who have signed the applications. To emphasize the co-Operative nature of the credit union the in- corporators should make an official action extending to all potential members present the right to vote so that they can participate in the election. Anyone eligible for membership may be nominated and elected to the board of directors or to the committees regardless of whe- ther or not he is a subscriber. But it should be made understood that all persons elected must join the credit union within thirty- days after the election, otherwise the position will be declared vacant and will be filled in the manner provided in the by-laws. The order of the business is as follows: 1. The meeting is called to order by the acting chairman. 2. Roll call of the incorporators. 3. Counting the number of persons in attendance. 4. Approval of the action to extend the right to vote to all potential members present. 5. A speech of the GAO representative touching on the vital subjects pertaining to the hospital credit union: a) The purpose of the credit union among hospital employees. b) d) 87 The importance of keeping control of the credit union within the rank and file of the employees of the hospital. The co-Operative principles involved in the proper Operation of the credit union. The Opportunities and reSponsibilities of the members. 6. An Open question period, giving Opportunity to every one in the audience to ask questions on all phases of credit union activities. 7. A discussion regarding the board of directors: a) b) C) d) e) The qualifications of good directors. Duties of the board Of directors. Limitations on borrowing and endorsing. Consideration of the necessity of electing as directors individuals capable of being compe— tent and qualified officers. Desirability of electing at least one person capable of being a good treasurer. 8. NOmination for the board of directors. 9. Election of five directors to the board. 10. A discussion regarding the credit committee: ll. 12. 13. 14. 15. 16. 17. 18. 19. 88 a) The qualifications of good credit committee mem- bers. b) Duties of the credit committee. NOminations for the credit committee. Election of three members to the credit committee. A discussion regarding the supervisory committee: a) The qualifications of good supervisory committee members. b) Duties of the supervisory committee. 0) Limitations on borrowing and endorsing. Nominations for supervisory committee. Election of three members to the supervisory committee. A discussion regarding the educational committee: a) The qualifications of good educational committee members. 6) Duties of the educational committee. c) General outline for prOpagating the credit union idea among the hOSpital employees and the communi~ ty. Nominations for the educational committee. Election of six members to the educational committee. Action to make the vice—president chairman of the educational committee. ll. 12. 13. 14. 15. 16. 17. l8. 19. 88 a) The qualifications of good credit committee mem- bers. b) Duties of the credit committee. NOminations for the credit committee. Election of three members to the credit committee. A discussion regarding the supervisory committee: a) The qualifications of good supervisory committee members. b) Duties of the supervisory committee. c) Limitations on borrowing and endorsing. Nominations for supervisory committee. Election of three members to the supervisory committee. A discussion regarding the educational committee: a) The qualifications of good educational committee members. b) Duties of the educational committee. c) General outline for prOpagating the credit union idea among the hOSpital employees and the communi- ty. Nominations for the educational committee. Election of six members to the educational committee. Action to make the vice—president chairman of the educational committee. 89 20. Adjournment of the meeting with invitation for those present to remain for the first meeting of the board of direc- ors. The complete minutes of the organizational meeting are signed by the temporary clerk and chairman and turned in to the clerk of the hOSpital credit union to become part of its permanent records. First Meeting pf the Board Immediately following the organization meeting, the newly elected board of directors should hold its first meeting. A1- though.voting is limited to the directors, every one who chooses to remain should be invited to witness the proceedings. It is especially important that the members of the different committees elected be present too. The order of business is as follows: 1. Appointment of temporary chairman and clerk. 2. Roll call of directors. 3. Election of officers: a) Treasurer. An explanation should be made of the purpose of electing the treasurer first due to the importance of the position and the necessity for him to have the following qualifications: 4. b) d) 90 1. anesty 2. Knowledge of bookkeeping. 3. Respect of his associates and ability to get along with them. 4. Genuine interest and belief in the credit union. 5. Willingness and Opportunity to devote suf- ficient time to his office. 6. Contact with the rank and file of the group. President. As soon as the president is elected he takes over the function of the temporary chair- man. ViceéPresident. Only a person who will be able to take over the functions of the president should be chosen. At the same time he is to serve as chairman of the educational committee. Clerk. This office is often combined with that of the treasurer. As soon as he is elected he takes over the functions of the temporary clerk. Agenda that need immediate attention: a) Acting on the applications for membership. Only written applications from prospective members b) d) 91 should be considered. When approved the names should appear in the minutes. Subsequent applica- tions must be considered in the same manner. Fixing the amount of shareholdings which any member may be permitted to have. Determining whether borrower shall be requested to save as loans are repaid. Every member should be encouraged to save regularly an amount conven- ient to him whether he is paying his loan or not. With this resolution the board will be able to keep foremost in the minds of all members the thrift objective of credit union. It is the thrift principle that is important and not the amount. It does not generally matter how much a member saves so long as he saves regularly, and the more contacts the credit union has with its members the greater the savings will be. Fixing maximum amount of unsecured loans. Character loans should not exceed.P50. It is better to start with a lower loan limit until such time as experience indicates that it may prOperly be increased to the maximum amount permitted by the by-laws. Fixing the maximum amount for any loan. It is f) a) h) 92 not good practice to invest a substantial portion of the capital in large loans. The maximum limit may be set at P100 at the beginning and later in- creased to P300 by the board at a regular or Special meeting as soon as funds are available and the credit committee has gained some eXperience in approving loans. Fixing the dates on which payments on shares or loans shall be due. In a hospital, the credit union should be Open for business on pay days and on as many other days as the board may by resolu- tion deem convenient. Fixing the rate of interest to be charged on loans. The law does not permit a charge in excess of one. per cent a month on the unpaid balance, including all charges for making the loan. There is no mi— nimum charge for a very small loan. It would be better to start charging at the maximum rate of one per cent on the unpaid balance. This may be reduced by the board at its discretion. Determining whether fines shall be assessed against members who are delinquent on loans. The board has 93 the right to excuse any member from payment of fines if it sees fit to do so but an official action covering this should appear in the minutes. i) Selecting the bank in which funds of the credit 7 union shall be deposited. j) Authorizing the treasurer to establish a petty I cash fund in an amount determined by the particular circumstances. k) Approval Of the purchase of supplies by the treasurer. The order should be approved even though payment may not be made until a later date. Large eXpenses should be avoided at the beginning. It is far better to order regularly in moderate amounts. 1) Requirement of a surety bond for the treasurer. A The size of the bond should be increased by the board as the amount of funds handled by the treas- urer increases. The premium on the bond is paid by the credit union. 6. Minutes. Complete minutes of this meeting are to be signed by the clerk and countersigned by the president and made a part of the permanent records of the credit union. 94 7. Election report. The election report should be pre- pared immediately and the required number of c0pies furnished to the Administrator. 8. A question period for the new directors and committee members. 9. Adjournment.. The credit committee, supervisory committee and educational committee also meet to elect from.their number a chairman and a secretary, except in the case of the educational committee, where the chairman is the vice—president as previously acted upon. The Manila Sanitarium & HOSpital Employees' Credit Union, IInc. is now ready to Open for business. seam This chapter is a detailed description of the organizational 3procedures to be taken in the establishment of an employees' credit tinion at the Manila Sanitarium & Hospital. The findings of the jprevious chapters that would cOntribute to the success of a hOSpi- 'tal credit union have been considered and.ad0pted in order to :focus the attention of those concerned in making a correct start can what may be a long and successful adventure in co—Operative self—help and mutual service. CHAPTER VI SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS Summagy As an introduction to the subject of this thesis, Chapter I discusses the need for extending financial assistance to hos- pital employees in the Philippines. The best solution offered is the organization of an employees' credit union. This led to an investigation of the credit union movement aimed at deter- Inining what constitutes a successful hospital credit union and how those findings can best be applied in establishing a similar organization at the Manila Sanitarium & Hospital. From the summary of Chapter II, the credit union is defined ‘as a.self-help enterprise, chartered by law in the country where it is located and managed by the members themselves. The credit union came into existence to meet a definite need.. The pioneers of the movement ably demonstrated that co-Op- erative management, which is the very foundation of the credit trnion, prevents eXploitation and at the same time improves the 95 96 economic status of the individual. This principle was develcped in varying degrees in the leading countries of EurOpe. The in— troduction of the credit union in America was an immediate suc— cess. In the United States, it is now filling the needs of the consumers for easily accessible credit at low cost, making it possible for the average working men to enjoy the many convenience of life. .Although the credit union movement is new in the Philippines, 'the many benefits already realized by the members among the labor— ing class gave impetus to the law-making body in the land to enact special legislations to encourage and protect the co-Op- erative ventures of the people. This law, known as the NanAgricultural Co-Operative Act, ‘was covered in Chapter III. It describes the organizational structure of the credit union. Operation is entrusted to the ‘board of directors, the credit committee, the supervisory commit- tee, the president, and the manager. ‘With the exception of the latter, the rest render service without remuneration. Members of the credit union save parts of their income 'through regular subscriptions to the capital of the credit union. {This capital is loaned to members at a low rate of interest for "providential and productive" purposes. Any profit earned is a a :returned back to the subscribers after expenses of Operation are gilt-1 .1... 97 deducted. To determine how effectively credit union principles work among employees of hospitals, an analysis of their activities was treated in Chapter IV. It has been found that credit unions are being Operated with success in the Philippines. Members are sufficient in number to make Operation of the credit union on an break—even basis possible. Capital is being raised by regular subscription of the members to credit union deposits. Loans, the source of income, are active. Expenses are low and adequate re— serves are set aside to take care of emergencies in Operation. 'With.some changes to improve present practices, credit unions among hospitals are here to stay. The findings have been taken into consideration in the proposed organization of an employees' credit union at the IManila Sanitarium & Hospital as described in Chapter'V. Conclusions The credit union offers valuable services in the hospital. It serves as a convenient place for employees to save. The credit union office is often located next to the payroll window in the hospital. Its presence serves as a constant reminder to enmfloyees to lay aside a portion of their earnings by subscrib- :ing to credit union shares. Employees do not have to go outside 98 the hospital or walk any distance in order to do this. The process of continuous saving develcps habits of thrift. At the same time the credit union provides an economical and safe place from which to borrow money. The members borrow- ing know that they pay no charges other than the interest, which never exceeds one per cent per month on the unpaid balance of their loans. This low interest is made possible by the volun- tary labor of members and the assistance of the affiliating hos- pitals. With a savings and credit source made available by the credit union, which is run by their fellow workers, the members are more inclined to manage their money wisely. The officers are ever 'willing to help their fellow workers solve their financial prob- Zlems, plan ahead much better and meet fewer entanglements. Thus, employees get their money's worth. The distinct contribution to the hospital is the develcp- Inent of the latent managerial ability of some employees, which (could be utilized in the hospital staff. Managing a credit lrnion involves the same principles as the management of any h usiness enterprise . Recommendations In the light of the findings in this study, the writer, 99 in recommending an employees' credit union to the hospital, wishes to point out some fundamental principles to be borne in mind. A well-run hospital credit union can be an important management—employee relation tool, and as such, should not fail in its objectives. 1. Start the credit union with sizeable qualified member- ship. Membership has a direct relation to the capital of a credit union. A large .capital is an advantage in itself. 2. Encourage every member to subscribe to the credit union share regularly through his savings. The amount of the share is not a barrier since installment payments bring the share within the income of any one. The more contacts a member has with his credit union the greater will be his savings. 3. Maintain the lowest rate of interest possible. This attracts members to borrow from their credit union rather than patronize loan agencies. 4. Keep the credit union fund circulating. This fund should be made available to needy members. Any unused portion can be made to earn by judicious investment in marketable secu— rities. 5. Insist on drawing a budget for the ensuing year. This ‘will help control credit union business considerably and enable 100 wise planning for the future. 6. It is important to build up the required reserve fund early. Any emergency in Operation can then be taken care of properly. 7. Conscientious, sympathetic, and active ruling bodies and officers tend to establish confidence among the members. APPENDIX A - A COPY OF THE QUESTIONNAIRE MICHIGAN STATE UNIVERSITY School of Hotel, Restaurant and Institutional Management Kellogg Center August 31, 1958 May I solicit your help? The inclosed form is being sent to all the hospital credit unions in the Philippines in an endeavor to find out what should constitute a successful credit union. This material will be used in writing a thesis entitled, .AN EMPLOYEES' CREDIT UNION FOR THE MANILA SANITARIUM & HOSPITAL, in partial fulfillment of the requirements for the degree of IMaeter of.Arts in the School of Hotel, Restaurant and Institu- tional Management. A summary of the material collected will be supplied to you upon request. I would appreciate receiving your reply as soon as possible. For your convenience, a self-addressed envelope is also enclosed. Thank you for your help. Very sincerelly yours, (Signed) E. R. Cupino .101 INFORMATION CONCERNING CREDIT UNION OPERATION NAME OF ORGANIZATION 102 ADDRESS Statistical Date Date of Organization Chartered Members Size of: Board of Directors Number Credit Committee Number Supervisory Committee Number Entrance Fee Amount of Fixed Deposit (Share) If to be paid by installment, how much? Weekly ' Monthly .Deposit, Savings, Minimum Maximum .Amount of Loans, Unsecured Secured Interest rates: On Loans Percentage On Fixed Deposits Percentage On Savings Deposits Percentage ,Allocation of Net Savings: Reserve Fund Percentage Educational Fund Percentage Other Funds Percentage Interest on Capital Percentage Patronage Refund Percentage Financial Data Membership as of December 31, 1957 103 Statement 9f Financial Condition §§ pf Dec. 31, 1251: Assets: Cash on Hand p Cash in Bank Petty Cash Loans Receivable Supplies I Investments Others Fixed assets Total Liabilities: ‘ Due to Members P Deposits of Members Reserves Miscellaneous Total Income: Int. on Loans P Entrance Fees Fines & Service Chgs. Miscellaneous Total EXpenses: Salaries P Supplies 104 Interest EXpense p Miscellaneous Total Excess of Income over Expenses P Personal Observations In your experience with the credit union, what do you think should be emphasized to insure its successful operation? Name and title of person completing form APPENDIX.B - M A P S 1. Credit Unions Around the World. 2. Concentration of Credit Union Members in North America. , 105 106 .332 2; . Q nuz.tt— t ‘z . 5 £033.35 :toefloun otcwomv 05).... state.- 059 3:. 3:0...) .605 E 30.0. .c. ozccov 0 DE .203... 31:58 LACOmCD :uCAU £3», :0. anco 3:075 .503 of. 2.13950; Ozsono «0:030, :30: Q: on fl] 1—nu2002. 138.5210 0.5.03 mrho230m< mzo_z: tommu 0.. H I m NHszmm< wd—IU 1 r .aIOU 3.00 .3505}: 121’: O. .o a ‘ 3322; \ (3:33 «:32: ' 1> 1b ‘ 4- 111.30 32:.- n1130202 2:21- 1u1tu~130 .525; 00.3.0» 1 0.2:...0 .. . .8535. 252. .33 .o . <30 l fianwou be :25.- Oznadma / .l..t;ocr2 ... Z‘U-z~t°° c 3....1\‘ '\ 00.... 02.5.. 3.2.... I m a 32.3». 2.0:; :3: r. Eta. Ont-Q c «Zor h1u¢O C r? 107 Entoa n .6030; o ' teases o .88... «— oelle; «— .06 ,é..: 4: {0.9.3 It . ,1 ....:._)O~Q .3 .v ...D.r it cat? .0 82c33d 3 (RU—”EW-IA‘ Tabfiunv7_ 7.. _ mangoes COED 5090 “o monommmoomod r! N I m NHszmm4 I'- a \. '- ...C :9". {0:0. .6 .2 Can-Q Atsogbk N— .Orov .Ud .33....503 I 1333! 2:200 :. 5030‘ ’02 39:02:00 12i?¢!=z,.\ £32.33! 9.“ 233...... .z OCEC’ I, It: wokv ups—ab- SOHO / ~ . 318.300 ,1 APPENDIX C - DIRECTORY OF HOSPITAL CREDIT UNIONS IN THE PHILIPPINES Department pf Commerce and Indust Republic pf the Philippines secretary Hon. Oscar Ledesma undersecretary Hon. Perfecto E. Laguio Co-Operative Administration Office .Administrator Mr. Antonio C. Mejia Chief, Administration Office Mr. Isidro T. LOpez (Acting) Credit Union Division Chief} Credit Union Division Mr. Cecilio Montemayor ,Assistant Chief and Supervisory—at-large Mr. Severo P. Paraz Hospital Credit Epigpp Mr. Antonio Ejercito, President Department of Health Credit Union, Inc. San Lazaro Hospital Compound, Manila Organized: March 9, 1954 Mr. Federico Ramales, President Iloilo Mission Hospital'Workers' Credit Union, Inc. P. O. Box 340, Iloilo City Organized: May 10, 1950 108 109 Mr. Juvencio Ocampo, President Mary Johnston Hospital & School of Nursing Credit Union, Inc. 1221 Quesada, Tondo, Manila Organized: April 23, 1955 Dr. Florentino Carlos, President Maternity & Children's HOSpital Credit Union, Inc. Oroquieta, Manila Organized: March 25, 1955 Dr. Agerico B. M. Sison, President Medical Savings & Loans Co-Operative Credit Union, Inc. 547 Herran, Manila Organized: December 26, 1954 Mr. Emilio de Guzman, President National Mental Hospital Credit Union, Inc. Mandaluyong, Rizal, Philippines Organized: December 4, 1953 Dr. M. ESpiritu, President National Orthopedic Hospital Credit Union, Inc. Mandaluyong, Rizal, Philippines Organized: April 28, 1958 Mr. Hector Santos, President NORGEN Credit Union, Inc. NOrth General Hospital Manila, Philippines Organized: August 13, 1953 Dr. Romulo Lapitan, President Rizal Provincial Hospital Employees' Credit Union, Inc. Pasig, Rizal, Philippines Organized: December 14, 1953 IOIIIJ‘QIIYI it ‘ )AH‘I}. lull] 110 Dr. Honesim Ruiz, President Surigao Provincial Hospital Employees' Credit Union, Inc. Surigao, Surigao, Philippines Organized: December 21, 1955 Dr. Joaquin A. Sanches, President Veterans Memorial Hospital Employees Credit Union, Inc. Veteran Memorial Hospital Quezon City, Philippines Organized: April 4, 1957 APPENDIX D - ORGANIZATION OF A CREDIT UNION m3 Membership in e credit union is limited to persons elected by the Board of Directors from e-ong epplicente who ere included in the field of membership defined in the cherter of the credit union. Eech member present at annual or speciel meetings hes one vote. Only members ‘0 borrow from the credit union. timbers elect directors and comitteemen; exercise democrstic control over the credit union's activities; end receive reports eech you from Board of Directors, Conittees, end edninietrstive officers. SUPERVISOR! some 01" DIRECMS CREDIT'OUOIITEI TEE Directs activities of Peeeee on ”'1’". Examines affairs credit union eccording epplicetione {0" 01’ th. credit to law. Elects sdmin- 1°93“ Outlines union and and!“ istrative officers. the 91‘” f” 1" its books. payment of lcene. EDUCATIONAL comm Develops and presents program to extend membere' knowledge of credit, thrift, and related sub- jects. (Mae be appointed by board.) 1 1 I 1 _.. VICE PRESIDENT TREASURER CIERK m PRESIDENT SECRETARY Acts in the Presides st As general president's meetings of manager of Keeps minutes absence or Board and credit union, of meetings of disability. of members. has charge of Board and of Presents assets, keeps members.(1'h1e annual report books, and office they be of Board prepares the combined with to members. financial and that of statistical Treasurer. ) "wt“.(mi may be e sel- L cried office.) I 1 Number and duties depend upon needs of credit union. WILKES 111. APPENDIX E - APPLICATION TO ORGANIZE A CREDIT UNION Pasay City, Philippines September 30, 1959 The Administrator CoLoperative Administration Office Manila, Philippines SUBJECT: Application tg_grganize a Credit Uniog S i r: We have the honor to file this application to organize a credit union, without capital stock, in accordance with the provision of the Republic Act 2025. In this connection, we are furnishing the following information for the consideration of the Office in determining the economic advisability of its organization ECONOMIC SURVEY l. PrOposed name of the credit union: MANILA SANITARIUM_& HOSPITALIEMPLOYEES' CREDIT UNION, Inc. 2. Person with whom the Co-Operative Administration should communicate: E. R. Cupino Manila Sanitarium & Hospital Pasay City, Philippines 3. Definition of the proposed field of membership: OCCUPATIONAL — Employees and laborers of the Manila Sanitarium & Hospital 112” 4. 5. 113 Brief description of the qualifications and back- ground of eleven of the prospective incorporators who will be relied upon to guide the credit union to successful Operation if organized: Name_ Position 1. Dr. C. Fernando Physician 2. E. R. Cupino Accountant 3. R. Montalban Accountant 4. G. D. Brion Accountant 5. Mrs. I. Talangbayan Supervisor 6. A. Quisido XERay Technician 7. S. Rosales Maintenance 8. Ligaya Reyes Supervisor 9. Mrs. I. Kintanar Housekeeper 10. Dr. A. Roda Physician ll. Mrs. L. L. Quirante Credit & Collection Names of prospective incorporators who could post faithfull performance position bond if chosen as accountable officers: Dr. C. Fernando, Pasay City, Philippines E. R. Cupino, Pasay City, Philippines Names of prospective incorporators who can handle bookkeeping work of the credit union: H. Montalban, Pasay City, Philippines G. D. Brion, Pasay City, Philippines Is satisfactory credit union service now available to members of the group? There is no other credit union available or functioning at present to serve the re— sidence of the locality. Have the prospective members been properly indoctri— nated in the theory, principles and practice of credit union? 114 The subject of credit union has been presented in a series of lectures to employees of the hospital. A questionnaire was supplied each employee to determine the extend of support eXpected. 9. Was a co-Operative organizer of the Co-Operative Administration Office or any person with extensive credit union eXperience consulted regarding the economic advisability of the preposed credit union? There are two: 1. An organizer from the Co-Operative Adminis- tration Office. 2. E. R. Cupino who initiated the organization of the credit union in this hospital. He has made an extensive study of this subject as a thesis for the Master oanrts degree at Michigan State University, East Lansing, Michigan, U. S. A. Very respectfully yours, (Signed) Dr. C. Fernando E. R. Cupino R. Montalban G. D. Brion Mrs. I. Talangbayan ‘L. Quisido S. Rosales E. de Leon Ligaya.Reyes Mrs. I. Kintanar A. Roda, M. D. Mrs. L. L; Quirante D. de Asis ’ E. Ordanez Mrs. P. H. Romulo APPENDIX F - ARTICLES OF INCORPORATION FOR THE MANILA SANITARIUM & HOSPITAL EMPLOYEES' CREDIT UNION, Inc. KNOW ALI. MEN BY THESE PRESENTS: ‘That we, the undersigned all of whom are of legal age, citizens and residents of the Philippines, on this 30th day of September, 1959, have voluntarily associated ourselves together for the purpose of forming the Manila Sanitarium & Hospital Employees' Credit Union, Inc., as a non-stock co—Operative as- sociation under the laws of the Philippines, more particularly under the provisions of the Republic Act 2023. AND WE HEREBY CERTIFY: FIRST — That the name of this association shall be MANILA SANI- TARIUM & HOSPITAL EMPLOYEES' CREDIT UNION, Inc. SECOND - That this credit union is formed primarily to serve the needs of its members in the following activities: 1. To encourage and promote thrift and the habit of saving among its members; 2. To.make credit available to the members of at a reason- able rate of interest; 3. To educate the members in the wise use of money and to emphasize the importance of punctuality in meeting obligations; 4. To advance the co-Operative movement as a technique for improving the economic status of the peOple, having service for its motive; 5. To co-Operate with the government of the Philippines, together with all its instrumentalities in the execution of the government policies which will redound to the benefit of the general public. 115 116 In furtherance of and not in limitation of the general powers conferred by the laws of the Philippines and the object and purposes there set forth, the credit union shall have the follow— ing powers: a. To issue bond, debentures and other obligations of the credit union, to contract indebtedness and to secure the same with a mortgage or deed of trust, or pledge or lien on any or all of the real and personal prOperties of the credit union; b. To purchase, own, lease, occupy, use or hold such real and personal prOperties as may be convenient and prOper to fur- ther the purpose for which this credit union is formed; c; To conduct publicity or reseaICh work for the promotion of the co-operative movement and for this purpose, may issue from time to time suitable publications or literature on co-Operatives; d. To associate with other credit unions for purpose of mutual help and protec- tion. For the purpose of attaining or furthering any of the objects hereinbefore stated, to do any other acts and things and to exercise any other powers, which a natural person could do and exercise and which now or thereinafter may be authorized by law. {THIRD - That the principal office of this Credit Union shall be established as the main Building, Manila Sanitarium & Hospital, Pasay City, Philippines. ZFOURTH — That the term for which said Credit Union is to exist is for fifty years from and after the date of incorporation. ZFIFTH - That this Credit Union shall be without capital stock. It shall admit applicants to membership upon such uniform 117 conditions as may be prescribed in its by—laws. This Credit Union shall be non-profit and shall be Operated on a co-Operative basis for the primary and mutual bene— fit of its members and membership in the Credit Union shall be restricted to employees and laborers of the Manila Sanitarium & HOSpital. Its earnings less Operat- ing eXpenses shall be distributed wholly among its de- positors on the basis of their deposits and patronage (paid-up loans). The voting rights of the members shall be equal and no member shall have more than one vote regardless of the extent of their deposits and member- ship interest. The prOperty rights and interest of each member shall be unequal and proportional to his deposit in the Credit Union and shall be determined and fixed in the proportion that the deposits of each member shall bear to the total deposits of all members with the Credit Union. SIXTH - That the names, citizenship and post office address of the incorporators are as follows: NAMES CITIZENSHIP ADDRESS 1. Dr. C. Fernando Filipino Pasay City, Phil. 2. E. R. Cupino " R 3. R. Montalban 4. G. D. Brion 5. Mrs. I. Talangbayan 6. A. Quisido 7. S. Rosales 8. Ligaya Reyes 9. Mrs. I. Kintanar 10. Dr. A. Roda 11. D. de Asis 12. Mrs. L. L. Quirante 13. E. Ordanez 14. Mrs. P. H5 Romulo 15. E. de Leon « « SEVENTH - That the number of directors shall be five (5) and the names, citizenship and address of the incorporating directors who are to serve until their successors are elected and qualified as provided in the by-laws are as follows: . A , . I . _ . . I . I a . . . I . 1 , e I . , s , . K . ... , . . V . J . . C u . . .. _ . e O . . . . . . . . p\ , . ' . . . . . . . . , . s . . . u p . . . . . \. . \ . . O . _ . . . . . _ . . _ . \I 2 , . . .2 l. 2. 5. .4. 5. NAMES CITIZENSHIP Dr. C. Fernando Filipino E. R. Cupino " Mrs. I. Talangbayan ” Ligaya Reyes ” E. de Leon " § 118 ADDRESS Pasay City, Philippines It I! I! ll \ In witness whereof, we have hereunto set our hands on this 50th 1. 2. 5. 4. 5. 6. 7. Dr. C. Fernando 8. E. R. Cupino 9. R. Montalban 10. G. D. Brion 11. Mrs. I. Talangbayan 12. A. Quisido 13. S. Rosales 14. 15. E. de Leon SIGNED IN THE PRESENCE OF: .Atty. M. Mendiola Atty. S. T. Mascardo REPUBLIC OF THE PHILIPPINES ) Province of Rizal ) City of Pasay ) day of September, 1959, in Pasay City, Philippines Ligaya Reyes MES. I. Kintanar Dr. A. Roda Mrs. L. L. Quirante D. de Asis E. Ordanez Mrs. P. H. Romulo Before me, a Notary Public, in and for the Province of Rizal, personally appeared on this 30th day of September, 1959, at Pasay City, the fbllowing persons with their respective Residence Certificate, as follows: NAMES Res. Cert. N2; 1. Dr. C. Fernando A 5740001 2. E. R. Cupino A 2696597 3. R. Montalban A 5574002 4. G. D. Brion A, 2123367 5. Mrs. I. Talangbayan .A 2675222 6. A. Quisido A 2674511 7. S. Rosales A 2674200 ‘8; Ligaya Reyes A 2641112 Date g Place Issued Feb. Jan. Feb. Jan. Jan. Jan. Jan. Jan. 1959 9 Pasay City “ 2. l 2 1 1 l l 1 119 9. Mrs. I. Kintanar A 2464000 Jan. 1, 1959, Pasay City 10. Dr. A. Roda A 2675555 Jan. 1 " ' 11. Mrs. L. L. Quirante A 2672111 Jan. 1 R 12. D. de Asis A 2672209 Jan. 1 ' " 13. E. Ordanez A 2672210 Jan. 1 R " 14. Mrs. P. H. Romulo A 2155547 Jan. 1 " " 15. E. de Leon A 3475009 Jan. 1 ' ' N All known to me and me known to be the same persons who executed the foregoing articles of incorporation and whozack— nowledged to me that the same is their free and voluntary act and deed. IN WITNESS WHEREOF, I have hereunto set my hand and seal on the date and place first above written. (Signed) R. Batongbakal NOTARY PUBLIC Dated, September 30, 1959 Doc. No. Page No. Book No. Series of 19 APPENDIX G - BY-LAWS FOR THE MANILA SANITARIUM & HOSPITAL Section 1. Section 1. Section 2. section 3. IEMPLOYEES' CREDIT UNION, Inc. ARTICLE ; NAME - LOCATION - PURPOSE NAME AND LOCATION. The name of this credit union shall be the MANILA SANITARIUM & HOSPITAL EMPLOYEES' CREDIT UNION, Inc., located at Pasay City, Philip- pines. ARTICLE _; MEMBERSHQ MEMBERSHIP. Membership shall consist of and be limited to bona—fide employees and laborers of the Manila Sanitarium & Hospital who can make use of its services, who are in agreement with its purposes and who agrees to abide by its by- laws. APPLICATION FOR MEMBERSHIP must be in writing, and upon approval of majority of the board of directors, such applicant shall be admitted to membership. An applicant rejected by the Board shall have the right to appeal within 30 days from the date he is notified of the denial of his admission to become a member to a meeting of the general membership or to the GAO, whose decision on the matter shall be final. A PERSON ADMITTED TO MEMBERSHIP by the board of directors shall not become a member or be entitled to any of the rights and privileges 120 Section 4. Section 5. Section 6. 121 Of a member until he has qualified by paying the entrance fee of Pl.00 and his fixed de— posits of P100 or the first installment there— on. MEMBERS WHO LEAVES the sphere Of Operation of the credit union shall continue his membership in the credit union unless termination of mem— bership is ordered by the board of directors. He can not borrow herefrom in excess of the sum of his fixed and savings deposits and shall not be permitted to withdraw for such balance below his total indebtedness to his credit union. RIGHTS AND DUTIES AND PRIVILEGES OF MEMBERS. Every member in good standing and who shall have paid the entrance fee and his fixed de- posits or the first installment thereon, if paid on terms, shall have the right to par- ticipate in the deliberations of the member- ship meetings and to vote on all matters brought before such meetings, to receive in— terests on his deposits, subject to the limi- tations provided in these by-laws, to be eligi- ble to any elective post, to be granted a loan in accordance with his/her borrowing capacity and to exercise the rights and privileges of membership. Every member must agree to Obey the rules and regulations of the credit union as set down in the by-laws and the decision cf the general membership meeting or of the board of directors. He must agree to abide by the regulations promulgated by the CAO and help promote the aims and purposes of the credit union, the success of its business, the wel- fare Of its members and the cO-Operative move— ment as a whole. ' LIABILITY OF MEMBERS. Members shall not be lia- ble for any indebtedness of the credit union, except to the extent of the unpaid amount of their fixed deposits as required in these by-laws. Section 7. 122 However, they may eXpressly agree in writing to bind themselves jointly and severally lia- ble for such debts incurred in any particular transaction entered into by and between the credit union and third parties. Only such members as have so agreed to be bound shall be held so liable. WITHDRAWAL. A member wishing to terminate his membership shall make written application to the board of directors for prOper considera— tion. All amounts paid in as deposits of an outgoing member together with any interest credited to the said deposits up to date of withdrawal shall be paid to such member after at least 30 days' notice by the withdrawing member to his credit union, unless such notice is waived by the board Of directors and the credit committee, but only as funds become available therefor, and after deducting the amount due from such member to the crdit union. NO member shall be permitted to resign when he has pending obligations with the credit union, either as a borrower, co-maker or guarantor of a loan. A member who withdraws all his deposits in the credit union thereby ceases to be member. A member may be dismissed or eXpelled from the credit union by unanimous vote Of the board of directors for cause, but only after a hearing. The entrance fee should not be returned to any member who resigns or is expelled. Any member who resigns or is separated in any manner from the credit union shall have his pro- perty rights determined by the board of direc- tors. The decision of the board regarding his prOperty rights or their value may be appealed to the CAO whose decision on the matter shall be final. Approval Of the resignation or se- paration of any member by the board of directors Section 8. section 1. section 2. Section 3. 125 and the payment of all that is due to him terminates his obligation and liability to the credit union. DECEASED MEMBERS. The death of a member shall considered a withdrawal from membership. The deposits Of a deceased member may be held and contrOlled by his legal representative (adminis— trator or executor) and his legal representative may withdraw the same and receive the full amount of deposits made and all dividends less the charges; but the board of directors may reserve the right to withhold settlement for 60 days after notification shall have been received of intention to withdraw. ARTICIE _1_:_;_I_ gramme pg _MEMBERS ANNUAL MEETING. The annual meeting of the mem- bers shall be held on the third Tuesday of each year on any time and place designated by the board of directors. At least 10 days before the date of the annual meeting of the members, the secretary shall cause written notice thereof to be sent to each member in person or mailed to each member at his address as the same appear on the records of the credit union. SPECIAL MEETINGS. Special meetings of the mem- bers may be called at any convenient time and date upon the call of the president Of’the majority of the board of directors. Special meetings may be called by the secretary at the instruction of the supervisory committee or the request of ten percent of the members of the credit union stating the time, place, date and Object thereof in meeting, or by the CAO Administrator or his duly authorized representa— tive . QUORUM. Majority of the members in good stand— ing shall constitute a quorum for the transac- Section 4. Section 5. 124 tion of business at any regular or special meeting except in cases wherein the law specifically re- quires, a different quorum. But if a quorum is not present on the date fixed in the call, the members present therein may proceed with the transaction of the business of the credit union, provided the same has been duly certified and approved by the CAO Administrator, to whom a cepy of the minutes signed by all the members who were present in, and certified to by the secretary of membership general assembly, had been submitted within 10 days from the date of the said general meeting was held. VOTING. Each member shall have but one vote regardless of the amount of his deposit in the credit union and no member shall vote by proxy. Election of directors and committees shall be by secret ballot. Action on all other matter shall be by ballot, by “eye" or "no“ vote, or by a rising vote, as the majority of the mem- ber present may decide. In the appreciation of balots, cumulative voting shall be disregarded and a vote cast for each director or committee member shall be counted as one vote. Such other formalities and machinery for the conduct of voting not provided in these by-laws shall be determined by the general membership meetings. ORDER OF BUSINESS. The order of business at the annual meeting shall be as follows: a) Roll call. b): Proof Of due notice of meeting. c) Reading of minutes of last meeting and ap- proval thereof. d) Report Of directors and committee members. e) Election Of directors and committee members. f) Unfinished business. 3) New business. h) Adjournment. «J‘l e . . -‘» .s . I .- \ \ \ I \ Section 6. Section 7. Section 1. Section 2. Section 3. 125 REFERENDUM. Upon demand of not less than two- fifths of the entire board of directors, any matter that has been approved by the board of directors must be referred to the members entitled to vote for decision at the next re— gular meeting or the special meeting called for the purpose; and a vote of the majority of all members entitled tO vote shall settle the matter. THE FISCAL YEAR Of the credit union shall end on the 31st day of December. ARTICLE ___Ig_ BOARD qr; DIRECTORS BOARD OF DIRECTORS, ELECTION AND NUMBER. The government and administration of the credit union shall be entrusted to and administered by the board of directors consisting of five (5) members, each of whom must be a member in good standing and shall be elected by the mem- bers at the annual and special meeting called for the purpose. They shall serve for a term Of one year or until their successors shall have been elected and qualified. NO member of the board of directors shall serve in the credit or supervisory committee. MEETING OF THE BOARD. A meeting of the board Of directors shall be held within 10 days after the annual meeting at which they were elected and thereafter said board shall meet at least once a month: Provided, That special meetings of the board may be called by the president or at least a majority of the directors who may sign the call for the special meeting. Notice of regular and special meetings of the board shall be served by the secretary upon each director in the same manner as provided in Section 1 of Article III. QUORUM OF THE BOARD. A majority Of the director Section 4. Section 5. 126 constitute a quorum for the transaction of the co-Operative business Of the credit union and every resolution of the majority of the quorum duly assembled in a meeting shall be considered a corporate act. REMOVAL OF BOARD MEMBERS AND COMMITTEE MEMBERS. Any director or member of the credit and super— visory committee of the credit union may be re- moved from Office for cause by the members of the credit union based upon a written complaint signed by at least three members and filed with the Secretary and by a vote of two-thirds of all the members present constituting a quorum (one half plus one) at a regular or special meeting called for the purpose upon notification in the latter case to the members of their intention to propose such removal at such meeting. In such case, the director or committee member concerned must be furnished by the Secretary of a OOpy of the charges against him at least 5 days before the date of the meeting. POWERS AND DUTIES OF THE BOARD. The board shall have general management of the affairs, funds and records of the credit union. It shall be its special duty to: a) Act upon all applications for membership and a resignation, withdrawal or eXplusion Of member. b) Fix the amount of surety bond Of the treas- urerand any other who handles money or are authorized to draw check in the name Of the credit union. 0) Fill vacancies in the board of directors and the credit committee until successors elected at the annual or special meeting have qualified. d) Determine from time to time the maximum deposits that may be held by any member. Section 6. section 1. 127 e) subject to limitation of these by-laws, determine the interest rate on deposits and fix the maximum amount which may be loaned to any member with or without security. f) Declare dividends in the way and manner provided in the by-laws. g) To fix the compensation Of the treasurer and minor employees and prescribe the duties Of the latter. h) To designate the despository or depositories for the funds Of the credit union. i) Recommend amendments to these by-laws. j) Perform such other duties as the members may from time to time authorize. COMPENSATION. NO Officer, director or member of either credit or supervisory committee, except the treasurer and other minor employees shall receive compensation for his services. Directors and committee members may be given per diem allowances while in actual attendance at board or committee meetings or while performing comit— tee work as determined by the board, subject to the approval of the members. amen! OFFICERS AND THEIR DUTIES ELECTION OF OFFICERS. A meeting of the newly elected board of directors shall be held within 10 days after the annual meeting Of the members and the board shall elect from ther number a president, one or more vice-presidents, a treas- urer and a secretary for the ensuing year who shall serve until successors are elected and qualified. Whenever any vacancy shall occur in any such office, the board of directors shall, as soon as possible fill such vacancy from the membership. Section 2. Section 5. Section 4. 128 PRESIDENT. The duties of the President shall be to preside at meetings of the members and of the board of directors, countersign all checks, drafts and notes drawn by the credit union, sign all documents requiring his signature and perform all the other usual duties connected with that office. VICE-PRESIDENT. The Vice-President shall, in the absence or disability of the president or a vacancy in the Office Of the president, perform the duties of the president and such other duties as the board of directors may from time to time prescribe. TREASURER. The treasurer shall be the general manager and he shall be the custodian of the corporate funds, securities, books of accounts and all other valuable prOperties and documents Of the Credit Union. He shall pay out no money except upon prOper authority. He shall sign all checks, drafts and notes and other negotiable paper drawn by the Credit Union or required in the process of its business. He shall be required to maintain his records and accounts in such a manner that the true and correct condition of the Credit Union may be ascertained therefrom at anytime. He shall within seven days after the close Of each month render a written monthly report to the board and the credit and supervisory committees consisting of the trial balance of the accounts of the credit union, the schedule of members' accounts and the cash position of the credit union. He shall also render quarterly, semi—annual and annual financial statements in the form and manner prescribed by the board Of directors. He shall carefully preserve all the books, documents, records and correSpondence Of whatever kind pertaining to the business which may come in his possession. He shall give bond with good and sufficient surety in an amount and character to be determined from time to time by the board of directors, conditioned upon the faith— ful performance of his trust. Upon the election Section 5. Section 1. Section 2. 129 Of his successor, the treasurer shall turn over to him all money, securities, valuable documents, books, records and other prOperty Of the Credit Union that he may have in his possession. SECRETARY. The secretary shall keep a complete list of all the members and a correct record of all meetings of the board of directors and the members. He shall give notices of all meetings called. It shall be his duty to furnish the CAO Administrator with OOpies of all resolutions passed by the board of directors and the members including the quarterly, semi—annual and annual financial and statistical reports required by the CA0, and he shall perform all other duties incident to his office. In the absence of the treasurer, the secretary shall perform his duties or vice-verse. Upon the election or appointment of his successor, the secretary shall turn over to him all books and property belonging to the Credit Union that he may have in his possession. ARTICLE 2; CREDIT COMMITTEE COMPOSITION. The credit committee shall consist of three members who shall be elected annually by the members of the credit union. A meeting of the duly elected committee members shall be held within 10 days after the annual meeting and they shall elect from their number chairman and a secretary. ' DUTIES OF THE CREDIT COMMITTEE. All applications for loans and withdrawals of deposits shall be referred for disposition to the Credit Committee, unless the applicant for loan or withdrawer Of deposit is a member of the Credit Committee, in which case the application shall be referred to the board of directors. Said committee shall hold such meetings as the business of the credit union may require to consider applications for loans and withdrawal Of members. No loan shall 150 be made unless the committee is satisfied that it promises to be of benefit to the borrowers and unless approved by a majority of the entire committee. Application for loan shall be made on forms approved by such committee, which shall set forth the purpose for which the loan is desired, the security, if any, and such other data as may be required. The committee shall keep a full and correct record Of all action taken by the committee in a book provided for the purpose showing among other things (a) loan applications received (listed in the order Of receipt), the names of the borrowers, the amounts and terms of the loan applied for, the co—makers and/or security offered, (b) loan applications approved or re— jected and the reason for disapproval, as the case may be, (c) withdrawals authorized, the names of the withdrawers, the amounts of the withdrawals and the free deposits not pledged which is being withdrawn. The credit committee shall notify the CO—Opera- tive Administration Office Of all loans the _ amount of which exceeds the maximum amount pro- vided in Section 5, Article X of these by-laws stating the amount Of the loan, the security of— fered, the terms of the loan and the Office of the borrower, if a director, officer or committee member. The credit committee shall have general super- vision Over all loans to members and withdrawal of deposits. It shall render monthly report and such other reports as the board or the supervisory committee may require and it shall report to the annual meeting of the members. It shall inquire carefully into the personal habits and financial condition of every borrower and the sureties or co-makers and the security offered, if any, by such borrower to ascertain their ability to repay fully and promptly the Obligation assumed by them and whether the loan promised to be Of benefit to the borrower. section 1. Section 2. 131 ARTICLE 'VII SUPERVISORY COMMITTEE COMPOSITION. The Supervisory Committee shall consist Of three members who shall be elected annually by the members Of the credit union. A meeting of the newly elected committee mem- bers shall be held within 10 days after the annual meeting and shall elect from their num- ber a chairman and a secretary. The Supervisory Commitee shall fill vacancies in its own membership until successor to be elected at the next membership meeting have qualified. DUTIES OF THE SUPERVISORY COMMITTEE. The super- visory Committee shall, at least quarterly, examine the affairs of the credit union and shall submit quarterly, semi-annual and annual examina- tion reports to the board, the CAO Administrator and to the annual meeting of the credit union; shall supervise the acts of the credit committee and the Officers; and may, by a majority vote, call a special meeting Of the members to consider any important matter submitted to it or any violation of its charter or of these by-laws, or any practice of the credit union deemed by the committee t6 be? unsafe or unauthorized or to submit the results of its examination. The examination of the supervisory committee shall include a verification of the cash on hand and in bank, the securities and other prOperties of the credit union from time to time as they deem ne— cessary. It shall also cause the member's pass- book to be verified with the records of the treasurer from time to time and shall examine application for loans, loan notes and other cor- porate records covering transactions during their term of Office and shall satisfy themselves that every transaction is prOperly authorized and in order. section 1. =Section 2. Section 3. 132 (ARTICLE VIII DEPOSITS KINDS OF DEPOSITS. The Credit Union shall re- ceive two kinds of deposits. a) Fixed deposits of P100 which may be paid in full or in monthly installments Of P5 b) Savings deposit in such amounts and at such regular intervals as the member may elect and as the board may determine. However, no member may Open a savings deposit account unless the P100 minimum fixed deposit is first fully paid. Special deposits made in amounts larger than the regular savings deposits Of the members may be credited to the savings account of the member and the same shall be entitled to the same interest privileges provided that said Special deposits are deposited for a period of at least three months. FIXED DEPOSITS. Fixed deposits shall not be withdrawn during a depositor's membership. It shall earn interest not exceeding eight per centum (8%) per annum, such interest to be com- puted on the basis of deposit-months. The in- terest shall not be paid in cash but credited to the fixed deposit account of the member until minimum fixed deposit of P100 is fully paid. SAVINGS DEPOSITS. Savings deposits may be with- drawn during the depositor's membership at any time that the office of the Credit Union is Opened for business, but no member shall be allowed to withdraw therefrom mofe than two times a month, except on meritorious cases upon approval Of the credit committee and the board of directors when— ever in their judgment conditions warrant it. A service charge of twenty centavos will be im- posed On every withdrawal in excess Of two with- drawals in any one month. The board or the credit Section 4. Section 1. 133 committee may require at least 30 days notice in writing of the depositor‘s intention to make with- drawal, if such withdrawal shall be more than fifty per cent of his deposits. Withdrawals of members who are co-makers or who have outstanding loans shall be acted upon by the Credit Committee. Savings deposits shall be allowed interest at such rate as mayybe authorized at the beginning of each fiscal year by the board of directors upon recommendation of the Supervisory Committee which in no case should exceed four per cent (4%) per annum on an amount not falling below 220 during any calendar month up to Pl0,000 only; to be computed every three months on the lowest monthly balance outstanding to the depositor's credit during the quarter, and such interest will be credited to the member's account. ’Interest credited to a depositor's account will from the date of credit draw interest at the same rate as that allowed on savings deposits. No . interest will be paid on savings account closed prior to the interest date herein before mentioned nor on a balance of less than 220. COMPUTATION OF INTEREST. Fixed and savings de— posits shall earn interest if deposited within the first five days of the month beginning that month, but if deposited after the fifth day of the month, the same will draw interest beginning the next month. ARTICLE g gisseooxs PASSBOOK. Each member shall receive a serially numbered passbook in which shall be entered all money paid by him to the credit union on account of deposit and loans, interest and fines, and all money received by him from the credit union. Each entry in the passbook shall be initialed by the treasurer or other persons authorized“ to received or pay out money. If a passbook is lost Section 1. section 2. 134 or stolen, the owner shall notify the treasurer at once and the latter shall issue a duplicate passbook upon proof of its loss by the affidavit of the owner and the payment of a fee of fifty centavos. ARTICLE _x_ LQAES. WHO MAY BORROW. Loans may be made to any member in good standing, subject to rules and regula— tions contained in these by-laws and those that may be promulgated by the board of directors or the Co-Operative Administration Office. However, no loans may be made to a member already indebted to the Credit Union unless he shall, at the time of taking out the second loan, pay the balance of the previous loan and provided further that the ,second loan is within the borrower's borrowing capacity. RESTRICTIONS ON OFFICERS, DIRECTORS AND COMMITTEE MEMBERS. No officer, director or committee mem— ber shall vote on a loan requested by a member of his family, natural or by affinity, to the third degree, nor a loan requested by a person who owes a debt to him or to any member of his family; nor shall he become a bondsman, surety or indorser on any loan contracted with the Credit Union. The application for a loan of any member of the Credit Committee shall be subject to the approval of the board of directors.. Any director, officer, or committee member who defaults in the payment of his loan without valid reason and sufficient cause or reason shall automatically forfeit his right to his office. No director, officer, or committee member may borrow from the Credit Union in an amount in excess of his deposits and interest due thereon and his interest in the equity reserve fund unless approved by the vooe of two-thirds of all the other members of the board of directors and credit and supervisory committees sitting together. Section 2. Section 4. Section 5. 135 APPLICATION FOR LOANk- Loan application shall state specifically the purpose for which the money is to be used. In case the facts as stated in the application are found not true as presented the loan may not be granted; or if the money borrowed has been used for purposes other than those for which it was granted, the loan shall at once become due and payable. In the event that the board of directors shall deem any loan unsafe for any reason whatsoever or as may be found by the supervisory committee, addifional security or immediate payment of the loan may be demanded. No loan shall be granted except for provident or for productive purposes and a borrower may repay his loan in whole or in part before the maturity of the loan on any business day. LOAN NOTE. All loans shall be secured by a promissory note duly signed by the borrower and an assignment or pledge of his deposits. How— ever, one or more member co-makers, who will be jointly and severally liable for the loan, shall be required to endorse the borrower's note when the amount of the loan applied for is more than the borrower's deposits. The Credit Committee may demand such additional security as it deems prOper in each case to insure full repayment of the loan. The credit union shall have an absolute lien on the deposits and interest due thereon of any member to the extent of any loan made to and/or secured by him and any dues, fees or fines paya- ble by him. AMOUNT AND TERMS OF THE LOAN. Loans not exceed— ing P50 may be granted to any member in good standing on his promissory note, subject to such uniform conditions as the board of directors or the credit committee may impose and provided it is paid within sixty days. The amount of the loan which a member can borrow Section 6. Section 7. 136 shall be in accordance with his earning capacity. his credit in the community plus his savings with the credit union and the solvency of which his co- makers or guarantors but in no case should the amount of the loan to one individual member exceed P500 or twenty per centun (20%) of the total fixed deposits and the reserve fund of the credit union, whichever is greater, or in excess of P50 unless such excess over P50 is adequately secured, provided: That in exceptiOnal and meritorious cases, the board of directors with the concurrence of the Supervisory Committee nay, whenever in their sound judgment and conditions warrant it, elect by una- nimous vote to increase the maximum amount which an individual member can borrow, and provided further, that adequate security be required. For this purpose, an assignment of deposits and the endorsement of a note shall be deemed security. The term and conditions of payment and the security for the loan shall be determined by the Credit Committee, but in no case shall the term of the loan exceed one year, unless excused in accordance with Section 7. The Credit Committee pay upon such terms as it may determine authorize the Treasurer to make loan in amount not exceeding P50 for periods not exceeding one month without obtaining the approval of the Committee. INTEREST RATE ON LOANS A loan shall bear in- terest computed at one per cent (1%) per month on the unpaid balance of the loan. FINES. A member failing to make payment upon a loan when due, unless excused therefrom for cause by the board of directors, shall pay a fine at the rate of two per cent (2%) a month on amount in default, provided that in no case shall each monthly fine be less than ten centavos and such fine to be in addition to the interest due. If the default in payment continues for three months such member may be suspended or his membership Section 6. Section 7. 136 shall be in accordance with his earning capacity. his credit in the community plus his savings with the credit union and the solvency of which his co— makers or guarantors but in no case should the amount of the loan to one individual member exceed P500 or twenty per centun (20%) of the total fixed deposits and the reserve fund of the credit union, whichever is greater, or in excess of P50 unless such excess over P50 is adequately secured, provided: That in exceptiOnal and meritorious cases, the board of directors with the concurrence of the Supervisory Committee may, whenever in their sound judgment and conditions warrant it, elect by una- nimous vote to increase the maximum amount which an individual member can borrow, and provided further, that adequate security be required. For this purpose, an assignment of deposits and the endorsement of a note shall be deemed security. The term and conditions of payment and the security for the loan shall be determined by the Credit Committee, but in no case shall the term of the loan exceed one year, unless excused in accordance with Section 7. ’ The Credit Committee pay upon such terms as it may determine authorize the Treasurer to make loan in amount not exceeding P50 for periods not exceeding one month without obtaining the approval of the Committee. INTEREST RATE ON LOANS. A loan shall bear in- terest computed at one per cent (1%) per month on the unpaid balance of the loan. FINES. A member failing to make payment upon a loan when due, unless excused therefrom for cause by the board of directors, shall pay a fine at the rate of two per cent (2%) a month on amount in default, provided that in no case shall each monthly fine be less than ten centavos and such fine to be in addition to the interest due. If the default in payment continues for three months such member may be suspended or his membership 137 terminated at the discretion of the board of directors and his loan becomes due and paya- ble on demand at the discretion of the board of directors. Section 8. APPEALS. .Appeals from the decision of the credit committee may be taken to the joint meet— ing of the board of directors and the supervisory committees, whose decision on the matter shall be final. ARTICLE 3; POWER gg_ BORROW section 1. POWER TO BORROW. The Credit Union, by a majority of the total membership, may borrow money from any source at the best terms and conditions avail— able in such an amount as the members may decide, provided, however, that the proposed loan shall have been first approved by the board of direc- ’ tors. - ARTICLE III INVESTMENT QR ggqps Section 1. ALL FUNDS of the credit union shall be devoted primarily to the making of loans to its members. Any fund not required for such purpose may be deposited in the name of the credit union in any savings bank or any banking institutio selected by the board, or may be invested in the Philippine Government Bonds and such other readily marketable securities, subject to the approval of the board and approval of the CA0. ARTICLE XIII ALLOCATION AND DISTRIBUTION’QF §AVINGS -Section 1. ALLOCATION OF SAVINGS. At the end of each fis- cal year the board of directors shall allocate and distribute the net savings of the credit section 2. section 3. Section 4. 138 union as shown in the annual report of the Supervisory Committee. NET SAVINGS. Net Savings is the excess payment made by the member for the necessary Operating expenses of the credit union before deducting interest on fixed deposit. ALLOCATION OF NET SAVINGS. The net savings shall be allowed as follows: Reserve Fund ~ 20 per cent Educational Fund - 10 per cent Other Funds (Optional) - 10 per cent Interest on Capital - 30 or 35 per cent Patronage‘Refund 30 or 35 per cent DISPOSITION OF SAVINGS. (1) Reserve Fund. This fund shall not be utilized as working capital or for invest- ment unless specifically authorized by the Administrator under conditions prescribed in the regulations. Such sums of the re— serve fund in excess of the amount equal to the fixed deposit may, with the written approval of the Administrator, be appro- priated at any time by resolution of the members for the following purposes: 1. To contribute the reserve fund to any federation Operating in the area. ii. To donate, contribute or otherwise dispose of the amount for any purpose which will improve the economic and special condition of the community in the area of the credit union. If the members do not meet or cannot de— ciie upon the disposal of the reserve fund, the AdminiStrator shall dispose it in accordance with the above mentioned purposes. section 1. Section 2. section 1. 139 (2) Educational Fund. Half of the amounts transferred to the educational fund, annual- ly may be spent by the credit union for ed- ucational and other co-Operative purposes while the other half shall be credited to a central co-Operative educational fund. (3) Patronagg Refund. The sums allocated for patronage refunds shall be distributed at the same rate to all members in proportion to the actual interest on loans paid by the member. ARTICLE XIV BOOKS 92 ACCOUNTS AND REPORTS BOOKS OF ACCOUNTS. The books, accounts, docu- ments and other corporate records of the Credit Union shall be kept in accordance with accepted accounting and business practices and existing circumstances. They shall be Open for inspec- tion and examination by any member or by the Administrator of the Co-Operative Administration Office or his duly authorized representatives, on any working day during reasonable hours. REPORTS. The Credit Union shall within sixty days of the close of its Operation semi-annual- ly and annually make a report of its activities, its financial condition and the results of its Operation for the period covered in the report to the CA0 Administrator, on a form provided for the purpose, pursuant to paragraph 4 of the Executive Order No. 322, promulgated by His Excellency the President of the Philippines. ARTICLE x1 RULES AND REGULATIONS RULES AND REGULATIONS. All rules and regulations promulgated by the Administrator of the Co—op- section 1. section 1. 140 tive Administration Office are hereby made a part of this code of by-laws. All measures to provide for the management of the credit union, not provided in these by—laws, shall be taken up by the general membership meeting and shall be subject to the approval of the Co-operative Administration Office before it goes into effect. ARTICLE XVI DISSOLUTION AND LIQUIDATION DISSOLUTION AND LIQUIDATION. The dissolution of the Credit Union shall be effected in the manner provided by rules and regulations pro- mulgated in accordance with the Republic Act 2023, and only upon the previous approval of the Co-Operative Administration Office. Upon approval of the dissolution, any assets remaining after the payment of all debts, savings deposits and expenses accrued and un— paid, in so far as they are sufficient for that purpose, shall be made in the following order and manner: 1. Payment of fixed deposits including accrued interest to the members. 2. The remaining assets shallt>e distributed to the patrons of the Credit Union on as equitable as patronage basis as the board of directors finds practicable. ARTICLE XVII AMMENDMENTS These by-laws may be amended, repealed, or al- tered in whole or in part at any regular or Special meeting ca.led for the purpose by a vote or written assent of the majority of all the members entitled to vote provided that the proposed amendment shall first have been approved 141 by the CA0 ADMINISTRATOR before it goes into effect. Voted and adOpted this 30th day of Spptember, 1959, in Pasay City, Philippines. 1. Dr. C. Fernando 8. Ligaya Reyes 2. E. R. Cupino 9. Mrs. I. Kintanar 3. R, Montalban 10. Dr. A. Roda 4. G. D. Brion 11. Mrs. L. L. Quirante 5. Mrs. I. Talangbayan 12. D. de Asis 6. A. Quisido 13. E. Ordanez 7. S. Rosales 14. Mrs. P. H. Romulo 15. E. de Leon SIGNED IN THE PRESENCE OF: J. O. Bautista F. D. Martin We, the undersigned, constituting a majority of the board of directors, of the Manila Sanitarium & Hospital Emplqyees' Credit Union, Inc., do hereby certify that the foregoing instrument is a true cOpy of the by-laws of the said credit union. September 30, 1959 Dr. C. Fernando (President) G. D. Brion R. Montalban (ViceAPresident) (Treasurer) E. de Leon Mrs. I. Talangbayan (Director) (Director) R. Montalban (Secretary) ~~ ~ I v C i l -_l‘ \ O . 5. -. . t I ‘ . . . , . -- . ~e,. ,-_.‘- .- d " . - _ . V I . . I - O . ... - . .. .. .- n . O . . - ..-- o \J- --.-— APPENDIX H - AN INTERNAL CHECK LIST FOR CREDIT UNION (AdOpted from the Federal Credit Union) Keeping members informed concerning their credit union is an obligation of all elected officials. An informed membership constitutes a basic safeguard against abuse of authority and violation of trust. - 1. Are adequate and appropriate efforts made on a con- tinuing basis to keep members informed concerning the following: A. Purpose of credit union? B. Progress of the credit union? C. Purpose and importance of account verifications by the supervisory committee? D. Duties of Officers, director, and committee men? E. Up-to-date addresses and telephone number of all elected officials? F. All important changes in policies,procedures, and office hours? Are adequate reports made by officers and committee chairman at membership meetings? Are complete financial statistical reports posted each month where they may be read by the members? Do members retain their own passbooks, present them for each transaction, inspect entries, and count changes? Are all complaints made by members promptly inves- tigated by some elected officials other than those involved in the complaint?. Is a report made to the board of directors on members' complaints and on the action taken to resolve them? 142 .‘ 143 Adequately trained, conscientious officials are essential to the successful Operation of the credit union. When they fulfill their responsibilities as prescribed in the existing laws and by-laws, important controls are provided. 1. 2. Are qualified persons encouraged to accept nomina- tion and election to officials positions? Are continuing efforts made to train officials in their duties and in general credit union principles? Are the manuals and instructional materials furnished by the CA0 made accessible to the officials for re- ference and study? Are understudies trained for each official position that is concerned with handling or custody of funds, investment securities, and valuable collateral pledged with the credit union, and with the maintenance of its records? ' Are officials who handle or have access to funds and securities and who maintain records required to take vacations during which time their duties are carried on by trained understudies? I Are officers, directors, and committee men who cannot or will not function promptly replaced in the manner prescribed by the by—laws? Cash receipts and cash pp hand: 1. Are members encouraged to prepare their own cash vouchers when making payments to the credit union? Are cash receipts balanced and entered in the journal and cash record at the close of each day on which they are received? Are deposits, cash collections and all the checks re- ceived, made intact within the time prescribed in the by—laws? Are change funds established and replenished in the manner prescribed by the accounting procedure? ~r 0' l. 2. 144 Are change funds maintained in amounts approved by the board of directors? Are adequate safekeeping facilities provided for cash received and on hand? Is an apprOpriate entry made in the passbook of each member who makes a payment, and each entry initialed by the official or employee receiving the payment? Are all paid notes marked ”paid” and promptly re- turned to members? ~ ~ Is an adequate record of cash over and short items maintained and are such items reviewed monthly by the board of directors? ‘ Disbursements: Are all disbursements by check or cash in accordance with a disbursements procedure. Is a current, adequate record of disbursements main- tained? Are loans disbursed only after completed and signed applications have been approved by the credit com— mittee and prOperly signed notes are on hand? Are withdrawals by borrowers and oo-makers approved in advance by the credit committee at a meeting when so required? ‘ Are invoices and bills for credit union expenses marked ”paid" with the date of payment in ink or by stamp to prevent their being used more than once to support a disbursement? Do the official minutes of the board of directors contain an up-to-date record of the names of all officials and employees authorized to sign credit union checks? Is the rule that checks shall notch; signed in blank strictly enforced? k .. nl- 0‘ 8. 145 Are spoiled or voided checks retained for audit purposes? Maintenance 9f records: 1. Are all financial records of the credit union main- tained in inck or by machine? Are all corrections in financial records made in such manner that the change can later be verified? Is the general ledger posted and balanced monthly? Are members' shares and loan accounts balanced with control accounts monthly? Are bank reconcilements prepared monthly? , Are bank reconcilements approved by some officials who do not receive or disburse funds or maintain financial records, e.g. by a member of the super- visory committee? Minutes of members and directors' meetings: A. Are they prepared promptly in permanent form such as typewriter or in ink? B. Are they signed by the presiding officer and ‘ clerk? Minutes of the credit committee meetings: A. Are they prepared promptly in permanent form such as by typewriter or in ink? B. Are they signed by the chairman and secretary? C. Are they totaled and ruled in such a manner that additions or alterations of amounts are made difficult? Are mailing addresses of members maintained up—to- date? 146 10. Membership lists and signature cards: A. Is the file of members' signature cards (applica- tions for membership) maintained up-to-date? Are signature cards for closed accounts removed from the active file and retained in an inactive file. Is the members' signature on each application card authenticated by a director or duly ap- pointed collector or employee? Is approval of membership applications by the board of directors recorded in the official minutes in such a manner as to be identifiable? Is a list of new members and a list of withdrawn members furnished to the board of directors and to the supervisory committee each month in order that an up-to-date and independent list of active accounts may be maintained? _ Control pf delinquency: 1. Is a complete report of delinquent loans prepared each month and reviewed by the board of directors or by a special committee thereof? 2. Do the minutes of meetings of the board of directors contain a record of action authorized and delinquent loans in sufficient detail so that the individual accounts can be identified? 3. Does each monthly financial and statisticalrepOrt con- tain analccurate and complete classification of de- linquent loans? Chargeroff loans and inactive share accounts: 1. Does approval for the charge-off of each loans de- termined to be uncollectible by the board of direc- tors appear in the official minutes? .1 ‘ , ‘ ‘ n I O . A . A . . 1 \ I x . . ‘ . . v . - “ ‘ n _ A. 77 ' . ‘ U - . ‘ \ . ~ .- . , \ . . I .. n ‘ A ' ‘ . . l . ’1 ’ ~ I I , . a , I Q .' I . “A H“ ‘ . . u . - r I r ‘ - . ‘ - ' a I . : . n . , . . . I v ‘ A ~ w ’ I‘ '. D. . _ . .. _ . 'v ’ t - > _ I U . . ‘ ,l .. .1 . -. __‘- . -‘ .-'— . ' I I . ‘ I ‘ ' I I ‘ . I ‘ O a. . ‘ t ' . v? ,_ ‘ . . I I . , .1 £ \ . ’ ‘- .. Q ‘ . ‘ ‘ ... F U . ‘ I I | , - .I 1’ K _ _ .‘ I ~ I ‘I - - n r' . '.- _A H ‘ ‘ \ . . .. ,. .' . u u. 7 v . ‘l \‘t _ ’ .’ n . n . s .. \ . I u . V’ ‘ I I .- \ . A I ~ ’ - “‘7 . -. . -< .. - -. -. ‘ . C... . .. -« ..- _ _- ‘ . I . I V . . I- ~ ¢ \ - ‘ v, . . .- ' ‘ ' . | 147 2. Are charge—off loans reviewed by the board of direc- tors or by a special committee thereof at least semi-annually? 3. Are share accounts in which there has been no activity for a year or more segregatsifrom the ledger of active accounts? 4. Are withdrawals from inactive share accounts approved by an official other than the official or employee making the disbursement? Investment: 1. Do the minutes of the board of directors contain prior approval for changes in credit union invest- ments? 2. Are two officials jointly responsible for the custody of investment securities owned by the credit union? lfi £23 gaggit‘gnion has hired personnel: 1. Are employee carefully selected on the basis of in- terviews, detailed application questionnaires, and references? Is the office manager or principal financial officer required to complete an application for surety bond coverage which is submitted to the surety company before or immediately upon his reporting for duty? Is each employee carefully trained and adequately supervised? Is the salary scale approved by the board of directors with approval recorded in the official minutes? Are salaries reviewed from time to time to determine whether they are in line with comparable salary schedules in the local area? Does the treasurer or office manager check on the performance of all hired personnel, including living , . I . . . - , y . . V .r I “ . . .t ‘ -‘ I b “ . . . .AJ . ‘ _ _ . - , r ' k u ‘ I I ' R IV 1 ~ A . ~‘ . ' . § .‘ ’1 x V 7' ' ‘ ' ‘ . . I V7 . ‘ I , . . .1, .4 . I " h . \- ~ g s d l ‘ ’- «‘ nu- . "' ‘ ‘ .AI‘I“ ... . f h n .s’ ‘ I ‘ J ’ I ~ " , , «. , , ‘ “(I .. . n ‘ t ' I 8. ' .- .. . I \ ‘ V ' A l “ ’ . L .__ _'- s \ c " ‘ ‘ A . ‘l J _. < v' ~ ' v . ' I - " 4 I 1 ' “ A. \ I ' I ‘ I ‘ _ v .- _ L O! t) - n- V‘. -- 148 habits and activities outside the credit union? Is each employee required to take an anual vacation? Are periodic rotation of duties made by un-announced switches of personnel? Are trial balances of members' share and loan ledgers prepared by someone other than the employee who posted the accounts? Surety bond coverage and insurance: 1. Does the board of directors review coverage at least semi—annually to determine adequacy to meet needs of the credit unions as well as minimum standards pres- cribed by the CAO. Is each principal officer who handles funds and/or maintains financial records required to complete and file the surety company application form? Miscellaneous: 1. 5. Are quarterly reports of the supervisory committee reviewed and discussed at a joint meeting of the directors and committees promptly? Is a record of the action taken by the board of direc— tors on recommendations made by the supervisory com, mittee recorded in the official minutes? Are reports of the examination by the CAO reviewed at a joint meeting of the directors and two-committees? Is a record of action taken by the board of directors on recommendations made by the CA0 examiner recorded in the official minutes? Is the clerical accuracy of the dividend computations, as well as refunds of interest if made, independently verified? If an official or employee who has access to or custody . . '§ . . K . I b ', _ . t, I V U . 4 ' I I I . | I . ., . I A - - Ul ,' . A n I '- Q ~ ‘ I - \ I ' ‘ . ‘ u- i I ‘. I . . . ‘ . , K v . ‘ I . ’ ' . Q . 3 I. . O _ .A . . J ' (I . :1 I I I ‘ ‘ .. " - ,‘ "I .I '3 . I. ~ ' , . ‘. . x | ' ) . I . ’ , I A .I . .° I" " ‘ L , k ‘ .1 J . I1 ' . z , I . A .I ‘ ‘ t - . ’ ' Y .s ‘ .‘ «‘ IA. '1 l ‘ I‘ x . 5' ' . . , _,. II ' . . h ' ' I . \ I' . Q ' . ‘ I . . ‘I . . . I g ‘ 4_ \I 1 x \. \ l4 9 of funds and investment securities also serves as a treasurer of any other organization, are adequate safeguards employed to prevent "switching" at time of audits and examinations. ~ B IBLIO GRAPHY rm Bergengren, Roy F. Co-operative Banking, A Credit Union Book. New York: The Macmillan Company, 1923. Bergengren, Roy F. Credit Union, A co-Operative Banking Book. New York: The Bookman Hill Press, 1931. Bergengren, Roy F. Credit Union N0rth.1merica. New York: Southern Publishers, Inc., 1940. Bergengren, Roy F. Crusade, Fight for'Economic Democragy. New York: iEXposition Press, 1952. Bergengren, Roy F. CUNA.Emerges. Madison 1, Wisconsin: Credit Union National Association, 1936. Bergengren, Roy F. ; §peak'§g§ Joe Doakes. New York: Harper & Brothers Publishers, 1945. Boyle, George. The Poor Man's gr er, The §tory 9: Credit Union Beginning. New'York: Harper & Brothers, 1951. Beifeld, Morris N. Co—operative Consumer Credit (with Special Reference tg_gredit gnion). New York: Harper & Brothers, 1936.' Croteau, J. T., Ph. D. 'Thglgederal Credit Union--Policy and Practice. New York: Harper &.Brothers, 1956. Giles, Richard.V. Credit for the Millions. New York: Harper &'Brothers,‘l951. Hugo and Manongdo. Credit Union Handbook; Manila, Philippines: Bureau of Printing, 1950. 150 . a Q ,. . - - _ u \ ' — . n - J . , ‘ .. .._ -- ‘- -.... . ..., n U . L, . 7.1..., Q \ ~.. -. - \. '- . , . ._ . ~- a . ‘ I 0' \ q g... ‘ -. ‘ I '- N a .- -§-o w. ... -. a I . O - .u. u..- v . . l .7 . n. ~- . .' .,, - . . .... .-.. . - . -. - - -. . I ~ . _ a l , \ _ . .. . . A 0] . ‘ O {4 \I . _ v- I . ' _‘ a -v v A. Orr- 0. o 'A‘ L ._. - N .-f I ' _ . J. t l q. 1 ‘ “‘ I.- ~ .. . ' a ‘ v .. . . . ‘n A . A.--._1...._..- .. ..-. . - -. .- -‘. , . t .e ., § _ r . . - ”W . - . _ . .9.» O o ...1. u , 0-: 1* nt- u ‘. '1. u , , l u , l - o ‘- . \ a. \ . . . o c , ' i .. --o . --..... - A .. 151 Richardson, Gerald. {A B C gfi Co-operatives. New York: Longman's Green & Company, 1940. Schniedeher, Edgar, OSB, Ph. D. Co-Operation, A Christian Mode 2; Industry. Ozone Park, New York: Catholic Literary Guild, 1945. Warbasse, James Peter. The Co—Operative Way, A Method.g£ World Reconstruction. New York: Barnes &-Noble, Inc., 1956. B. Publications Annual Meeting, What it Makes. Madison 1, Wiscon- sin: CUNA Supply Co-Operative, Form Ed. 56. Auditing Pointers for Supervisory Committee. Madison 1, Wisconsin: CUNA Supply Co-Operative, Form B. 64. Consumer Co-Operative Leadership. Boston, Mass: Edward A. Filene Good Will Fund, Inc., 1942. The Credit Committee, The Heart 2: the Credit Union. Madison 1, Wisconsin: Credit Union National Association, Credit Union Audits: A Handbook for Supervisory g Examinating Committee. Madison 1, Wisconsin: CUNA Supply & Co-Operative, 1954. The Credit Union Yearbook. Madison 1, Wisconsin: Credit Union National Association, 1956, 1957, and 1958. Department 9: Rules and Regulations for Federal Credit Unions. Washington, D. C: United States, Health Educational and Welfare, 1951. How 39 Multiply the Success gg'Your Credit Union Through Good Public Relations. Madison 1, Wisconsin: CUNA Supply Co-Operative, 1952, Form Ed. 68. *- . C I ' "a. I , D O \ so I \ arr: __ a v.1 .- — . . " a . ; . aur- 5 J. 9 4 Co | 1., ) - ~ -- g. | - ‘H ‘ . '- a. ‘w.— - —— 152 Mejia, Antonio C. Eleventh.Annua1 Repprt, Fiscal Year 1956— 1957. Manila, Philippines: Co-0perative Administration Office, Department of Commerce and Industry, Republic of the Philippines, 1957. Stewart, Maxwell S. Credit Union-The Peoples' Bank, ‘Public Affairs Pamphlets NO. 5 CRevisedl. New York: Public Affairs Committee, Inc., 1952. Q. Periodicals Callahan, Tom. ”How a Hospital Credit Union‘Works,“ Hospitals, 32:44, Ju1y~16, 1958 - Lutzy, Warren P. "What a Credit Union Does for‘Employees,* [The Modern Hospital, 90:85, May, 1958. ~ Jones, C. T. ”Game the Credit Union," Canadian Hospital, 55:62, may, 1958? “ "Republic Act No. 2025,“ Official Gazette, Republic 2; the Philippines, 53:25, December, 1957. 2- 93.23.2222 Spetland, Olaf H., Director, CUNA World Extension Department, Madison 1, Wisconsin, April 1, 1958. McGrath, Mary Jean (Mrs.), Assistant Director, Public Relation Department, Madison 1, Wisconsin, April 8, 1958; December 16, 1958; January 20, 1959; February 11, 1959. Gardner, Donald M., Chief, Statistics and Report Branch, Bureau of Federal Credit Unions, Department of Health, Education, and'Welfare, Social Security Administration, Washington, D. 0., May 26, 1959. Montemayor, Cecilio, Chief, Credit Union Division, Office-in- Charge, Co-Operative Administration Office, Department of Commerce and Industry, Republic of the Philippines, Manila, Philippines, April 17, 1958; September 15, 1958; Nbvember “0" ,.-" . . . O -. A- O A C a , - .~-‘ .- 153 25, 1958; June 5. 1959. Elliot, Grace W. (Mrs.), Assistant Treasurer, Veterans Ad- ministration Federal Credit Union, c/o V. A. Hospital, Iron Mountain, Michigan, September 15, 1958. Bahnfleth, Pearl M., Treasurer, Veterans Facility Federal Credit Union, Battle Creek, Michigan, September 17, 195B. Bromen, Alice M., Assistant Treasurer, Saginaw VA Hospital Federal Credit Union, 1500 Weiss Street, Saginaw, Michigan, September 20, 1958. Schreder, Evelyn L, Treasurer, Alpena General Hospital Federal Credit Union, Chisholm Street, Alpena, Michigan, Septem- ber 21, 1958. Rowe, Pauline (Mrs.), Treasurer, Sparrow HOSpital Employees' Credit Union, 1215 E. Michigan Avenue, Lansing, Michigan, September 30, 1958. Bailey, T. L, Assistant Treasurer-Manager, University Hospital Employees' Credit Union, c.o University Hospital, Ann Arbor, Michigan, September 25, 1958. Kinney, Arthur, Treasurer, St. Joseph Mercy Hospital Pontiac Federal Credit Union, 880 Woodward Street, Pontiac, Michi— gan, September 29, 1958. I9 I. Raw USE crux Urban