How Panama Credit Unions Work

How Panama Credit Unions Work

Similar to U.S. cooperatives, Panama’s credit unions are savings and credit co-ops for employees of different industries and governmental agencies.  Known as “Cooperativas”, Panama credit unions are licensed and government registered financial co-op institutions.  They are regulated under Law 17 of 1997 which granted them non-profit tax free standing along with other unique benefits.

The IPACOOP “Instituto Panameno Autonomo Cooperativo regulates all of Panama’s credit unions.  IPACOOP’s website is:

More than 200 credit unions are operating in Panama.  The bigger Panama credit
unions have more than 100,000 members.  Every member pays monthly dues of $5 to $10 USD.  For the larger Panama credit unions that amounts up to $1 Million a month.

As non-profit, tax free organizations they can make larger profits who can afford to pay higher interest rates for their depositors than most banks around the world can provide.

Panama credit unions are considered by some industry professionals to be safer and less riskier than banks.  One way is that Panama credit unions are limited by law in the types of loans they can offer.  Panama credit unions can only offer loans within the boundaries of their intended purposes.  The majority of Panama credit union loans are under $10,000 USD.  Another way is that Panama law limits their borrowing abilities to only 4 times their capital while banks could borrow up to ten times their capital.  This results in Panama credit unions having less exposure to higher debt obligations and lower economic cycles than banks.  The majority of Panama credit union loans require direct debits paid from their member borrower’s wages along with 3rd party guarantees and multiple co-signers to the loan.

Banks have more exposure because they make larger high risk commercial loans, are more exposed to economic cycles and international currency fluctuations, and worldwide interest rates changing.  Because of these types of exposures, many banks around the world were bankrupted during the recent world economic crisis.

No Panama credit union has ever failed.  Some Panama banks have failed, but not in recent years.

Just like the banks, Panama credit unions have strict bank secrecy laws making it a crime for any Panama credit union employee to divulge any information about a depositor’s account.

The earned interest from Panama credit union accounts and certificate of deposits (CD’s) are tax free.  Panama credit union depositors do not have to report their interest income to the Panama government.

Membership in most Panama credit unions is restricted to employees of specific industries like educational institution employees, shipping companies employees, or medical professionals.  This prevents foreigners from becoming members.

However, there are a few Panama credit unions which accept outsiders including foreigners who are allowed to open accounts.

In Conclusion, Panama credit unions are an attractive option to Panama banks.  Retirees seeking a secure fixed sum return will find that Panama credit unions offer higher interest rates than most banks.


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