By Dennise Williams, Staff ReporterTHE IMPENDING regulation of credit unions by the Bank of Jamaica (BoJ) is a welcomed event by the credit union movement. This move came about as a result of the designation of credit unions as specified institutions by the Minister of Finance and Planning in 1999.
Currently there are 53 credit unions in Jamaica. Credit unions by their very nature are different creatures from other deposit taking institutions. According to information provided by the Jamaica Co-operative Credit Union League:
Credit unions can only do business with their members.
Members of a credit union must share a common bond such as the same location, etc.
Each member of a credit union has one vote regardless of the amount of shares held.
As at August 2003, the CUL reports that the credit union sector has about J$22 billion of assets under management. But what the impending Boj regulations mean to the day-to-day operations of the industry is not clear as negotiations by both sides are still going on. It has been bandied about that smaller credit unions might face closure because of the increased financial reserves to be required by the BoJ. Said Radcliff Clark, general manager of AAMM Co-op Credit Union Ltd, "because the details are not forth coming from the BoJ we are not prepared to guess what type of regulations we will face."
STRATEGIC ALLIANCE
However, Clark dismisses the idea that the regulations will force smaller credit unions to close. AAMM is a credit union that serves teachers and school administers. "We will look at strategic alliance to ensure continuing as an entity. But the regulations are not finalised so we don't want to pre-empt the BoJ. We are currently meeting the reporting requirements of the Boj. Each month on the 15th we send in our financials on our savings, loans and delinquencies."
At City of Kingston Credit Co-operative Union (COK), the sentiment is that the credit union sector will follow the commercial and merchant bank sector in terms of mergers needed to allow firms to meet BoJ requirements. Said our contact at COK, "there might be mergers of existing credit unions especially because of the capital base requirements that are proposed.
The draft legislation states that credit unions that offer the full array of services to clients will have to have a capital base of at least J$20 million, but of course that is not final and negotiations are still going on." And although the credit unions sailed through the financial crisis of the 1990s, the move to have them under the auspices of the BoJ is in line with worldwide trends, according to Claudette Christie, Public Relations officer of the CUL. The CUL audits its members with field officers visiting each credit union. Even so, the BoJ stepping in to oversee the sector is considered a positive move. Said Christie, "this regulation is coming on stream because it is a worldwide trend where deposit taking institutions fall under one central body. But the regulations are not on stream as yet."
However, Christie hedges when the issue of the consolidation of the sector is brought up. She states, "It may be that the credit unions will have to amalgamate for financial strength. But I understand that the BoJ will not require the number of credit unions in the market to be less."
SENSITIVE ISSUE
Regarding the very sensitive issue of credit unions no longer giving non-collateralised loans because of BoJ regulations, Christie states, "it is not true. Members will still get loans without collateral.
The credit union movement has not done away with unsecured loans. What is happening is that some credit unions may be to change some of their policies relating to unsecured loans.
Credit unions are allowed to give a certain percentage of their loans to be unsecured just like commercial banks. But what there will be is a limit on the amount of unsecured loans that members could get." Christie assures credit union members, "the impending regulation is not a negative thing for us." Officials at the BoJ were not available for comment.
