IT IS AN INTERESTING TIME for credit unions. On the one hand, some in the movement would like to see the establishment of a cooperative bank to challenge the commercial banks that are all foreign owned; on the other, some credit unionists disapprove of measures to make them stronger.
This is why the suggestion from the president of the BET Credit Union, Michael Alleyne, that there be mergers in the sector is a clarion call.
The spectacular growth, both in membership and deposits, over the past decade by credit unions has turned them into a significant segment of the local financial services industry.
But, the sector is dominated by fewer than ten of the three dozen or so credit unions and even with the big players they are still limitations on what they can offer members whose requirements are constantly changing. This has led to a blurring of the lines between credit unions and banks, making ineffective money cooperatives increasingly irrelevant.
Some of them are faltering in two critical areas: attracting new members and active borrowing by existing members, which are both necessary to ensure growth. This is why the leadership must appreciate Mr Alleyne’s courage in addressing this critical issue which has long been shrouded by suspicion and sentiment. His is not the first call for such a move, but it is particularly relevant at this time.
The secondary credit union body – The Barbados Cooperative and Credit Union League – has the information on the performance of all its members and is in a position to speak to the issue and offer moral suasion on why mergers would be in the movement’s best interest. The league is also be aware of similar developments in active and big credit union markets in the United States, Australia, Jamaica and elsewhere.
Credit unions in Barbados must appreciate the benefits of mergers, given the expectations of members who want expensive enhanced technological solutions and a wider range of convenience services.
Consolidation within the industry would put it in a better position to lobby Government for urgent needs such as the much-talked-about deposit insurance on loans now available only to clients of commercial banks. The credit unions must also be able to flex some muscle in the interest rate regimes both for deposits and lending.
Then there are the demands of the regulatory agency which require credit unions to be better managed to meet new standards, some of which can be costly to institute, while for the very large credit unions, they will need to be ranked by a credible rating agency, sooner rather than later.
Only a strong and unified credit union industry can survive in today’s fiercely competitive market.