Brian Moore, president, Co-operative Credit Union League, believes credit unions remain a source of financial stability for ordinary working people in T&T, but it will continue to express its concerns to the Government and Central Bank about the Draft Credit Union Bill. He said the asset base of the credit union movement is $9 billion.
“If it is in the interest of the Government and Central Bank to see credit unions grow and ensure that there is an environment of stability, then we would have no difficulty in our talks with them over the next few weeks and months. However, if all the Government and Central Bank want to do is have a law passed, then we would great difficulty with that and there would be problems.” Moore spoke to the Business Guardian last Tuesday. The Central Bank and credit unions are expected to continue stakeholder meetings later this month over the Draft Credit Union Bill that seeks to regulate how credit unions conduct their business.
Moore raised a number of concerns that he said the credit union movement has with the proposed legislation.
“We have some concerns with what credit union will and will not be able to do under the new legislation. One thing is that all credit unions will be confined to do is to collect members’ money and give loans. That will be a result of the legislation as it stands. One or two other provisions will be a burden on the smaller credit unions.” He’s also concerned about the term limits for credit union boards and committees. “The draft bill says members of boards and committees will not be able to serve more than two terms. But that kind of restriction does not exist for other financial institutions, like banks. So then why should it apply for us?” Moore spoke about the draft bill being silent on dispute resolution in carrying out credit unions’ business. “Take bad debt as an example. The draft bill says credit unions must write off bad debt in 12 months. But the mechanism for credit unions to collect bad debt lies with the Commissioner of Credit Union Co-operatives and this is not easy. Yet, the bill does not say anything about this.”
Survival of credit unions
Moore remains optimistic about credit unions’ survival. “Credit unions were born in times of economic uncertainty and thrive under these conditions. If the Government makes moves that do not allow the credit union movement to survive, then there will be social unrest from working people in this country. Credit unions exist to meet the economic and social goals of people. People come to credit unions when the banks and other financial institutions reject them. They get loans from credit unions for cars, homes and education.” He said credit unions have been able to survive the international recession. “When you look at what happen in 2008 internationally with the global recession, credit unions were able to survive that because of the principles that credit unions run on, which is the development of the people it serves. It is not based on greed like other financial institutions.”
There are approximately 500,000 members of credit unions in T&T who belong to 126 registered credit unions.
According to Moore, only the Hindu Credit Union (HCU) is now under liquidation. “However, there are one or two other credit unions that are under going restructuring. But the HCU is in a class by itself. The reason for this is that the HCU did things that no other credit unions did and the regulators were lax. There was also political interference in that case. So for those reasons, they remain a case by themselves, which no other credit union falls under.”
Palo Seco Credit Union
Alvin Stephenson, president, Palo Seco Credit Union, supports the credit union movement being regulated but, at the same time, expressed concerns about several items in the Draft Credit Union Bill. The Palo Seco Credit Union has a membership of 12,000 and an asset base is $250 million. “There are certain things in the proposed legislation that we feel will restrict credit union activity.” Stephenson said a main concern is a provision in the bill which states that credit unions should not own more than 20 per cent of the assets of their business that is non-core. “You have credit unions like Eastern Credit Union that owns the La Joya Complex and TECU that owns beach houses. What are they supposed to do, sell off these non-core assets? These assets of a credit unions actually improve our consolidated accounts.”
Stephenson argues that this provision would restrict credit unions from diversifying. “How can we diversify and grow if this is restricting us?” he asked. He gave the example of First Citizens bank (FC) and suggested that credit unions be treated in a similar fashion. “FC is going public, but the Ministry of Finance would determine what their first public offerings would be. There should be something similar for the credit unions. Let them examine our business plans so they can see what is possible for us or not.” Stephenson said the proposed term limits for board members does not respect the realities of the movement. “Credit unions have limited resources and we do not have a wide pool of human resources to choose from for credit union leadership. It is a democracy and it should be credit union membership to choose how many times board members serve.”
Theophilus Alfred, general manager, SECU Credit Union, said it is in favour of the proper regulation of the credit union movement, but it should not stifle credit unions’ growth. “In the legislation, care should be taken so that the credit union movement should not be disadvantaged. “The act should be couched in such a way so as to encourage the growth and proper management of credit unions. Our board and the executive is currently reviewing the draft legislation.”