"We shall lay in Parliament a new Credit Union Bill with international standards and best practices from other jurisdictions which will transfer supervision of credit unions from the Commissioner for Co-operative Development to the Central Bank of Trinidad and Tobago."It was only one sentence in a two-hour and ten minute budget presentation by Finance Minister, Larry Howai last Monday, but it has the potential to affect 500,000 lives and $12.5 billion in shareholder's assets.
For the Co-operative Credit Union League of T&T (CCULTT), however, it represented what its president, Joseph Remy termed yet another "disrespect" to the movement he said had a "critical role in the macro socio-economic development of T&T."Remy, who presented these figures the day after the budget was read at the People's Budget Forum at the OWTU hall in San Fernando, said the importance of the bill far outweighed the apparent lack of significance implied by the one sentence mention.
It was not the only place such sentiments were expressed.The Central Finance Facility (CFF), an organisation that acts as a "credit union for credit unions" by providing financial advice and opportunities for them to invest members' funds, held its own post-budget forum with panellists, including economist Indera Sagewan Alli, urging the movement's members to raise public outcry "that there was just one line in the budget that spoke to credit unions."
And that cry has been sounded.Remy–who is also president of the Federation of Independent Trade Unions–asked the audience, made up largely of members of the Oilfields Workers Trade Union (OWTU), the Communications Workers Union (CWU), the Steel Workers Union as well as representatives from credit unions, to join with CCULTT in stopping the passage of the bill.
Remy said the trade and credit union movements have developed hand in hand over the decades in this country and the trade unions should lend their strength to the credit unions' fight."We have built this society around the principle of co-operation, around the principle of collectivism. What we are seeing now is a trend to move this society away on the materialistic path to individualism and we must stand up strong and challenge that."
The credit union league president then hurled the accusation that banks, viewing the credit union sector, as a threat and said the banks were determined to do everything in their power to destroy credit unions.Remy promised that the league would again be making its feelings known to the Finance Minister.
This, after having presented at least one position paper and, from all indications given by the Finance Ministry and the Central Bank, subsequently helped in the creation of two other policy proposal documents that eventually led to the Credit Union Bill presented.Central Bank Governor, Jwala Rambarran, has said on at least two different platforms between 2013 and 2014, that the legislation has sufficiently taken into account the views of the credit union movement.
At the 2013 annual general meeting of the Telephone Workers Credit Union, Rambarran said: "As far as I can judge, today, the credit union movement as a whole is strongly supportive of the need for specific legislation that recognises these special characteristics of credit unions, and supports the rationale behind the Central Bank as prudential regulator of the entire credit union sector."
In 2014, at the Aero Services Credit Union annual general meeting, the Central Bank governor said in 2005, when Cabinet first took the decision to change the regulatory structure for the institutions, the move was met with "uneasiness...perhaps rightly so..." because of the "fear that the Central Bank did not understand the unique character of credit unions and would unfairly treat them just like banks."
Rambarran continued: "I feel confident almost ten years later that the Central Bank is certainly more appreciative and understanding of the special nature of credit unions, especially the cooperative ethos which distinguishes you from any other type of financial organisation where usually the most important motive is profit."However, if Remy's views are any indication, this is not as foregone a conclusion as the governor and finance minister seem to think.
Caught in the middle, are the very people–members, shareholders, depositors, investors–both sides claim they want to protect.Since 2005, the public has seen the failure of the Hindu Credit Union in 2008. Six years later, provisions are being made for depositors who held over $75,000 at the institution to receive their money in the form of bonds.
In the same year, there was also the apparent collapse of the Point Fortin's First National Credit Union, where neither members nor creditors could access funds or monies owed to them.In 2013, the credit union was evicted from its premises in Techier Village and the Commissioner of Co-operatives launched an investigation. On checking, the Sunday BG found that credit union non-operational and the investigation still in progress. Meanwhile, members are still unable to access their money.
Impasse: economics vs ideology
Clarifying his earlier statement in a subsequent interview with the Sunday BG, Remy said there was a partly intentional, partly unconscious effort to dismantle the credit union system. He said both sets of thinking are evidenced in the proposed Credit Union Bill.
"I think it is a combination of deliberate intent and misunderstanding of what credit unions are. In some of our interactions with the Central Bank, we have found they did not have a clear understanding of what credit unions are. We believe in the movement that credit unions, based on the fact that they reach out to the soul of people by their community linkages, are posing a threat to some of the major financial institutions. The asset base is growing, the membership base, the account base and we believe they may want to slow down or stymie that growth."
The statistics show that, as a percentage of total financial assets, credit unions assets, over the period 2008 to 2012, averaged 3.5 per cent. In their best performing year for the period, credit unions held $9.5 billion in assets. Over the same period, their assets were on average 5.7 per of GDP.
Commercial banks, on the other hand, held on average 49 per cent of the country's total financial assets and, in their best performing year, these were worth around $140 billion. In 2012, commercial banks' held assets that were equivalent to 80.7 per cent of T&T's GDP. (Source: Summary Economic Bulletin March 2014)Remy said the argument against the Credit Union Bill, as it currently stands, goes beyond its financial, technical aspects, many of which he said the movement agreed with.
Contrary to what the governor expressed, Remy said the traditional financial sector still does not understand the foundations of the credit union movement. He said the ideological underpinnings of credit unions were to make funding more accessible to those denied by banks and to do so in a manner that drew on the collective and a common bond and not for profit.
Remy said for the movement to come under the control of the very banking system, it evolved separate and a part from, was the destruction of what it meant to be a credit union.But given that the protection of membership hangs in the balance while the credit unions, the finance ministry and the Central Bank battle it out, is this a reasonable position?Consider the case of Ricky.
Ricky's story
Ricky considers himself a business man. The owner of six taxis, Ricky returned to T&T from Canada in the late 90s with a small amount of savings. This was not enough to buy his first taxi. The banks he approached turned him down."The banks didn't want to take the risk with me, as I had never taken a loan in this country before and I didn't have much for collateral."
One major credit union (name called) was willing to take the chance and lent him the money. Ricky recalled that his loan was approved within a matter of hours after speaking with the credit officer and within a few days of joining the union, opening the account and purchasing some shares.
Ricky said the credit unions did not have the impersonal feel of banks and he felt as though he could relate "man to man" with the official. Ricky said credit unions were more understanding when he was late with payments and gave him the time he needed to catch up. He has since built a relationship with the officer, has paid off his initial loan and has taken others to acquire his other vehicles. Through his taxis, Ricky has been able to build a home and educate his children, now working adults.
Ricky said, he often refers others to the officer, who in gratitude, sometimes pays him "a little something" for the referral.
New measures
If Ricky's case were to be considered under some of the new provisions for credit unions, according to Remy's argument, Ricky would not be able to access the original loan that was able to provide him with so much.The new measures include among other things, more stringent criteria for the investment of member funds and tightening up on the number of non-performing loans, a category Ricky's loan may have possibly fallen into on more than one occasion.
The ease with which Ricky was able to get the money may also be a thing of the past.However, the fact that Ricky might have turned out to be a bad customer and not repay the loan at all, as well as the potential cost to the union must also be taken into account. Multiply that situation by several hundred customers, several thousands of dollars and a bad economy, and the potential for another HCU or First National is very real.
In a recently released CariCris rating of the Eastern Credit Union, the agency cited two of the ECU's major weaknesses as being its "weak credit-risk management and operational controls" and "a large non-performing loan portfolio."
With 160,000 members and $1.5 billion in assets, the ECU is, in terms of membership and asset base, the largest credit union of this country. As such, if its credit controls have been found wanting, the question of what may be occurring in the smaller credit unions is a legitimate one.
Remy has asked that the Central Bank and the Finance Ministry dialogue further with credit unions to find the middle ground between these two positions, because the current bill does not reflect it."This time, it is difficult to say there is a middle ground because the bill puts credit unions under the control of the Central Bank."He also said that the credit union movement is willing to accept an "enhancement" of the Commissioner of Co-operatives role, while his office still remains in control of credit unions.
Remy also does not see his call to the trade unions as politicising the issue, saying that there are direct "linkages" and synergies between the two organisations.He expressed hopes that this engagement between all parties would happen soon.Meanwhile, the members wait.