Hally Haynes, president of the Barbados Co-operative & Credit Union League Ltd, has expressed surprise at the announcement by Minister of Finance Christopher Sinckler that the tax allowances for credit union savings will be removed with effect from income year 2011.
Haynes said yesterday that “credit unions still have a pivotal role to play in the social and economic lives of their members and the budgetary measure announced on Monday could negatively impact on the future growth and developmental prospects of credit unions”.
He also said that, “While it is true that a few credit unions have significant assets under management, the vast majority are still relatively small.”
Sinckler spoke of the plan to eliminate the tax benefits on Monday evening when he presented the Budget in the House of Assembly.
Haynes noted that these allowances were introduced in 1979 and have been increased over time by successive administrations.
The allowances have played a pivotal role in the mobilisation of savings by credit unions and as a result the movement has grown by leaps and bounds over the intervening period to the point where it now has assets under management in excess of $1.4 million.
Haynes also painted a picture of how savings have grown in last four years.
In 2006/2007 it grew by 12.05 per cent; in 2007/2008 it grew by 3.58 per cent; in 2008/2009 it actually contracted by 8.7 per cent mainly due to an amendment to the legislation that impacted on membership; and in 2009/2010 it grew by a highly commendable 17.34 per cent to reach $973 million.
“There is no gainsaying the fact that this pool of savings is the lifeblood of credit unions.
From this pool credit unions have been able to fund loans for their members for housing, land purchases, education and other purposes that have led to significant improvements in their standard of living and the life chances of succeeding generations.
“It can therefore be argued that anything which negatively impacts on savings will lead to a corresponding decrease in the capacity of credit unions to lend,” the Credit Union League president said.
Haynes further noted that the Credit Union League Ltd, the umbrella body for the credit union movement in Barbados, is generally supportive of the recent measures introduced by Government to address the burgeoning fiscal deficit.
He said, “We fully understand that in this hostile economic environment, sacrifices have to be made by the country in order to close the fiscal gap in the face of declining revenues and high expenditure levels.
“Nevertheless, we are of the firm view that these allowances are still very much needed in support of the continued growth and development of credit unions, especially in these challenging times when our members need more than ever to access financial services from an institution that has a social conscience with a mission that is focused on meeting their needs.”
Indeed, in the current crisis, credit unions have been acting responsibly and working with their members as their circumstances have changed. In this regard, credit unions have been providing financial counselling services and restructuring loans in cases where members have been experiencing difficulties in meeting the current loan payments.
Haynes added: “Unlike some of our competitors with a profit maximisation raison d’etre, we have continued to ensure that the cost of borrowing remains reasonable and affordable.
“The credit union movement therefore looks forward to the opportunity to discuss the impact of this budgetary measure with the Minister of Finance in the near future. In this regard, it is hoped that the Government considers favourably the restoration of the tax allowances to credit union members,” he said. (ES)
