composite photo of Rhand Credit Union and Eastern Credit
Union, two of the countrys largest credit unions in
terms of assets.
In the old days, people started sous sous, known in Tobago
as lend hand, in their villages, in the market, in their
offices, to help with bills.
To meet the bigger billsbuying a secondhand car, changing
the roof of your house or buying a computeryou approach
your bank. The bank examines your credit rating, wants statements
of savings, collateral, outstanding loans. Your loans officer
does some calculations and calls you with bad news: you
Next option: the credit union, long been regarded as the
answer to the working-class persons money woes.
The larger credit unions, though, have grown from small
outfits offering short-term loans and mortgages to financial
institutions with hundreds of millions in assets, trading
in foreign currencies and funding development projects.
They also offer certificates of deposit, make mortgage and
commercial loans, provide credit and debit cards to be used
in automatic teller machines and travel agency services.
Credit unions healthy bottom lines have not escaped
the attention of the Ministry of Finance and the Central
Bank, which are working to bring those with assets of $100
million-plus under the Central Banks supervision.
There are seven credit unions with assets of $100 million-plus.
Gary Cross, president of the 83-member-strong Co-operative
Credit Union League, wants all credit unions to move as
Today, the Business Guardian gives the views of Cross, Central
Bank Governor Ewart Williams, and Hyder Ali, acting commissioner
for co-operative development, in the Ministry of Labour
and Micro Enterprise Development.
Bank Governor Ewart Williams
no disagreement between the Ministry of Finance and the
Central Bank on the need for stricter regulation of credit
unions, said Central Bank Governor Ewart Williams.
talking and trying to find the best medium for this. One
recognises there are larger and smaller credit unions and
there needs to be some differentiation in treatment,
one stage, the differentiation was on an institutional basis,
that one regulator would do the large ones, and another
the smaller ones.
Williams said theres the notion that selecting some
credit unions for stricter regulation will undermine the
unity of the movement, but a way is being sought to not
undermine them but still recognise their differences.
way of dealing with this is looking at the differences in
terms of risk, Williams said.
larger institutions are likely to have greater or take greater
risks and need greater monitoring. Small institutions are
likely to be more traditional.
Williams said the Ministry of Labour and Small Micro Enterprise
Development will continue to monitor credit unions
need to work out that role. Once the division of labour
is clarified, that will be used as the basis for legislation.
At one stage, we thought all we had to do was amend the
Financial Institutions Act, Williams said.
getting clearer that will not deal with the issue. Either
we see what we can do with the present Co-operatives Act,
or theres a Co-operatives Bill done under an IDB programme
on credit union strengtheningwork with both these
documents to get workable legislation. Its not either,
Speaking at Easterns 31st AGM last month, Williams
said self-regulation of credit unions has never worked on
a sustainable basis anywhere.
is usually effective only when those who are inclined to
obey the rules, not for those that need it most, he
said. And I can assure you that there are credit unions,
both large and small, that are not operating in accordance
with sound prudential principles.
Non-performing loans in the industry average between 20
and 25 per cent while commercial banks have a three per
cent delinquency ratio, Williams said.
my vantage point, the case for stricter credit union supervision
Cross, president of the Co-operative Credit Union League
regulator is enough
credit union movement subscribes to one regulator, said
Gary Cross, president of the Co-operative Credit Union League.
see the move to isolate credit unions based on asset size
as a deliberate decision to fragment and fracture a movement
with an excellent record of service to the poor, marginalised
and disadvantaged in the society, Cross said.
In an interview at Eastern Credit Unions La Joya complex
in St Joseph, Cross said the credit unions proposed for
Central Bank supervision have invested in traditional areas:
the UTC, commercial banks.
The former Eastern president said the credit union injected
$5 million in a Udecott housing project in San Fernando.
have fairly safe investments. I dont think the project
financing exceeds $10 million and its relatively short-run
financingthree to five years, Cross said.
He doesnt disagree with the Government or the Central
Bank, but advocated that any legislative framework cannot
separate the movement.
we are to go to the Central Bank, we go together,
Cross said. We have no difficulty with the rigours
of impending legislation, but do not isolate or fragment
There hasnt been a significant failure of credit unions,
Cross said, but admitted that sheer growth demands more
are not major financial players. We subscribe to all the
fit and proper rules, but dont consider ourselves
Ali, acting commissioner for co-operative development
Ali, acting commissioner for co-operative development, said
savings mobilised through credit unions are significant.
lot more people are putting their money in the credit union
movement sector than any other simply because tax legislation
is encouraging that kind of activity, Ali said.
Given credit unions rapid growth, Ali said somebody
has to ensure their rigid supervision to ensure strict adherence
to the law.
one credit union fails, the entire image of the sector is
tarnished. Eight per cent of working people invest in credit
unions. Government must have a responsibility to ensure
their money is protected, Ali said.
He said the Co-operatives Department within the Ministry
of Labour and Micro Enterprise looks at governance while
the Central Bank looks at financial matters.
concerned with dollars and cents, Ali said. Our
responsibility here would be to protect members rights
and privileges and how credit unions set up their institutions
to do business.
Enill, Junior Finance Minister
with the issues
Enill, Junior Finance Minister, said the Co-operative Societies
Act does not deal with financial-type issues.
my perspective, the issue has, in fact, been resolved. That
is to say over two years now, everybodys been working
on credit union legislation to deal with prudential standards,
Enill said. The act came out of the Agricultural Societies
Act and was never intended to deal with some of the things
you are required to with financial institutions.
He said having sorted out the regulation of insurance companies
by Central Bank, its recognised that the larger credit
unions operate with very sophisticated products and services.
complexity of credit unions operations had surpassed
the capabilities we could bring to the table, Enill
those circumstances, we found ourselves in a situation where
we needed an institution like Central Bank that had the
capacity to hire the right level of expertise to deal with
that kind of situation.
Enill said a high-powered World Bank (WB) and Inter-American
Development Bank (IDB) delegation visited Trinidad last
month to conduct a financial sector assessment programme.
That study includes banking, mutual funds, insurance, small
businesses, micro enterprise and credit unions.
reason is to determine as we move forward any system risks
we need to protect ourselves against, Enill said.
The WB/IDB team is to return to Trinidad in July and submit
a report to Enill by September.
Following is a list of the top six credit unions assets
and some of the investments they have made:
1. Hindu Credit Union$1,030,680,694
2. TECU Credit Union$752,397,068
3. Eastern Credit Union$588,012,415
4. Teachers Credit Union$290,577,228 (2003 financial
5. Rhand Credit Union$246,121,303
6. Police Service Credit Union$234,884,241
There are now about 131 credit unions in T&T, whose
assets have been estimated at $4 billion.
Credit unions have invested in real estate, fixed deposits,
mutual funds, local and foreign debt issues and equity shareholdings,
travel agencies, guest houses, insurance brokers, security
companies and furniture.
the law has to say...
Credit Union Supervision Act seeks, inter alia, to:
provide a framework for the supervision and regulation [of
the financial operations] of credit unions so as to [maintain/contribute
to] public confidence in the financial system and [to ensure]
the protection of the savings of credit union members and
The act proposes to establish a Credit Union Supervisory
(a) supervise credit unions in order to determine whether
they are in a sound financial condition and are complying
with their governing legislation and supervisory requirements
under that law, this act and the regulations
(b) advise the management and boards of directors of credit
unions of non-compliance under the law governing credit
unions, this act, the regulations or guidelines and require
that they take corrective measures determined by the director
to deal with the situation in an expeditious manner
(c) establish prudential norms and standards of sound business
conduct for credit unions
(d) promote the adoption by credit unions of policies and
procedures to control and manage risk
(e) monitor and inspect credit unions for compliance with
supervisory requirements and prudential norms
(3) Duties. For the purpose of carrying out its objects
under subsection (2) the office shall
(a) adopt guidelines to be followed by credit unions in
relation to safety and soundness, appropriate standards
of conduct and performance and sound business practices
(b) take such steps as are necessary to ensure that safety
and soundness, appropriate standards of conduct and performance
and sound business practices are maintained in credit unions
in accordance with this act, the regulations, any guidelines
made hereunder or any relevant Act
(c) subject to Section 15, consider applications by credit
unions for licences to conduct specified classes of business
under this act, and grant or refuse to grant or suspend,
cancel or revoke any such licence
(d) implement measures designed to reduce the possibility
of a credit union being used for any purpose connected with
an offence involving fraud, theft or money laundering
The act also states that the office will be an agent of
the government and shall have a board of directors consisting
of a chairman, a director, the permanent secretary of the
Ministry of Finance or his delegate, the Central Bank Governor
or his delegate and the commissioner for co-operative development.