EDITORIAL: Credit union needs its own space

THE YEAR 1947 IS RECORDED AS THE BIRTHDATE of the credit union movement. At that time, we understand, a group of modest earners formed a savings union which was later known as the Shamrock Credit Union.Little time elapsed before the Co-operative Societies Act was passed in 1949 and amended in 1951. To date co-operatives in Barbados have had to conform to regulations which have not only defined their range of activities, but also restricted diversification. Despite these challenges the movement continued to grow its assets, supported by a solid deposit base.An example of the rapacious growth of the movement is demonstrated by the growth of the Barbados Teachers’ Co-operative Credit Union. Formed in 1967, by 1990 it had a membership of 3 000 and deposits of $21 million, and paid a dividend of two per cent in 1993. Dedicated to looking after the welfare of its members, this credit union lends up to $100 000, and this amount is insured – provided loan payments are current –and repayable by the insurance company upon death.Borrowing by the masses from the commercial banks has always been a hassle. This fact, no doubt, catapulted the importance of the co-operative in the eyes of low and middle income earners and soon the movement was a real threat to commercial banks.Held in high regard by Government and other regulatory bodies, the leaders of the movement soon recognised the need to provide some of the offerings of the commercial banks at much lower costs, with less onerous terms and without undertaking undue risks. In fact, many of the services provided are indeed similar to those provided by the commercial banks and often at no cost.With the introduction of technology and the stigma of being an institution for “penny savers” removed, the credit union today is used by the wider community with heads held high in recognition of the success of the movement, led by its own people, and happy to know no financial crisis or meltdown has ever stained its pages of history.Earlier this year, the Barbados Public Workers Co-operative Credit Union Limited was able to complete the purchase of CLICO Mortgage & Finance Corporation and it is now the intention to incorporate a holding company to oversee the activities of the two institutions while each will continue to satisfy its individual reporting requirements. This is a landmark objective. No doubt this will be the catalyst for other forward-looking objectives and sooner or later will spawn the establishment of a cooperative commercial bank. This is of great importance since from the formation of the cooperative movement, its leadership must have been embarrassed that contrary to the much vaunted ambition of self-sufficiency, it had no choice but to park substantial deposits with commercial banks. These substantial and inexpensive deposits were on-lent to the public and even to members who have no choice, at rates much higher than available from the credit unions. There is a need and good ground for vertical integration.