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Cooperative to

Credit Union

Over the past 12 months the Board of Directors and Management of the Muslim Community Cooperative (Australia) Ltd. (MCCA) have been working on an application to the relevant government authorities to become a Credit Union.

MCCA is now on the verge of lodging a draft application with the government authorities for informal comment. Once the process of meeting any additional requirements is met, a formal application by MCCA to become a Credit Union will be lodged.

If a positive outcome results, then MCCA will be granted a license to become a Credit Union which then needs to be ratified by its members. Once voted on by the members, the major task of planning and coordinating the logistical requirements for becoming a Credit Union is to be taken in hand.

The Board and Management Team of MCCA will have the expert technical support of CUSCAL (Credit Union Services Corporation Australia Ltd), a service provider who is funded by the Credit Union industry.

CUSCAL is one of two industry funded support service providers and one of their major briefs is to offer cost free consultation to new applicants to the Credit Union industry such as MCCA. A conservative estimation of the commercial value of the free service MCCA has enjoyed to date is well in excess of A$10,000. CUSCAL will also be very active in supporting MCCA during the transition process to a Credit Union - training staff, guiding its IT initiatives, providing marketing and bureau service facilities, all on a commercial basis.

Given the enthusiasm with which MCCA's application has been received by the Credit Union industry, there is apparently a broad base of support for MCCA becoming a Credit Union within the industry itself. Obviously, much of this stems from the fact that MCCA presently is the only viable Islamic financial service provider in Australia and has been operating on a continually profitable basis despite experiencing excess growth.

Cooperative not Enough

MCCA will not be viable as a Cooperative if it continues to grow as it has been over the past few years.

The main reason is that, as a Cooperative it has already reached its maximum growth capacity as a financial service provider. To operate successfully as a financial service provider, a stable source of capital (funds) is required which is sufficient to meet current and future demand. The only source of capital (funds) as a Cooperative are the investments of members.

Despite MCCA's strong performance in returning very competitive dividends to its investors, most investors of MCCA are Muslims seeking a Halal alternative to property purchase - and as such, this type of capital is not enduring. MCCA is still seen as a 'Housing Coop' and is not considered as an alternative by major investors.


As a Credit Union, MCCA will offer the potential investor a Halal opportunity that is backed by a Statutory Reserve, which is a mandatory requirement of the industry. The Reserve is controlled by the authorities and is a safety net for the Credit Union industry, individual Credit Unions and their members. The proposed start-up capital will be non-redeemable for 5 years, a distinct advantage from the 30 day withdrawal policy that governs all shares redemption at present. Furthermore, being a Credit Union would require MCCA to maintain minimum prudential standards in all areas of its operations: liquidity, market risk and operational. These standards are amongst the highest in the world and are strictly monitored by the authorities to ensure compliance. Additionally, as a Credit Union MCCA can offer current/cheque accounts which would also serve to boost its funds under management.

All of this means that MCCA will represent a substantially more attractive investment prospect as a Credit Union than as a Cooperative, and it is only by attracting larger investors that MCCA would be able to maintain both its level of growth and profitability.

Credit Union is Islamic

The change to a Credit Union is a transition of organisational structure, which must happen, but not at the expense of Islamic values.

MCCA will continue to offer the same Islamically permissable products of Murabaha, Musharaka (Shared Equity Rental) and Mudaraba (Business Partnership) and will only reward investors and depositors by way of profit share (similar to the current practice).

The commitment towards operating and entrenching Islamic values into both the day-to-day and formal policies will remain unchanged. MCCA as a Credit Union is still to remain in the control of Muslims, for the benefit of the Muslim community. If anything, the transition will result in changes that will be a further move towards the implicit Islamic values of efficiency, productivity and overall professionalism. The commitment to the Halal also includes the Statutory Reserve Deposit that MCCA will need to hold with the authorities. It has already been negotiated that all such reserves/deposits held on MCCA's behalf are to be on a strictly interest-free basis.

Benefits to a normal member

As a Credit Union, MCCA will be able to offer a whole new range of services that are conducted Islamically:-

MCCA intends to operate these additional products as a supplementary to its traditional activities, and hence they will be priced at the lowest possible level to encourage membership and participation. Additional benefits would flow through the increased productivity and efficiency that will be required to operate a Credit Union. The alternative IT solutions are being examined and indications are that these would eliminate many of the service shortcomings that members presently face. Reduced application processing time, greater data processing accuracy, improved member communication, focused marketing and promotion and ongoing product refinement are but a few.

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