Once viewed as the second cousin in our financial services sector, today, credit unions have become the lifeblood of many lower and middle-income Barbadians, who have found the movement to be a safe haven in the current economic storm.
We are home to 30 credit unions operating under the umbrella of the Barbados Co-operative & Credit Union League Ltd (BCCUL), and they provide services to almost 190 000 members who work in the public and private sector, as well as in a host of self-employed and entrepreneurial pursuits.
Like most sectors in Barbados, the operations of credit unions have been negatively impacted by the COVID-19 pandemic. But the trauma of this period has been eased somewhat by the movement, as a significant number of credit union members took advantage of initiatives such as moratoria on loan payments, extended credit repayment periods, and offers to renegotiate loans.
For many mortgage holders and borrowers impacted by job losses, lay offs and business interruptions, events which were spawned by the pandemic’s many economic fall-out, the environment has been a strain.
This island’s commercial banking sector, which continues to be dominated by foreign owners, has worked for those who have wealth and know how to manoeuver and take full advantage of the services these entities provide.
The foreign ownership of commercial banks, mainly by reputable Canadian interests, has had its advantages for the country. It has allowed us to benefit from key commercial partnerships needed in correspondent banking.
In a world where countries’ economies can be stifled unless their businesses and citizens are able to conduct foreign transactions with ease – moving money from one country to another or to pay for goods and services, the ability to secure correspondent banking arrangements is critical.
But as commercial banks now operate in a liberated interest rate environment, their customers here have had to endure record low interest payments on their savings.
In most cases, it is costing some of us more money to remain customers of the bank because bank fee structures have eroded any interest benefits savers were obtaining by retaining a relationship with their bank.
In 2018, Governor of the Central Bank of Barbados Cleviston Haynes warned commercial banks against “chasing away customers” through their imposition of ever-increasing fees and charges.
Haynes told a media briefing: “We recognise that banks have their challenges… such as non-performing loans and therefore as a business they might think that this is the way they want to go.”
He added: “What we have to look at is the basic services which Barbadians utilize at the banks are not priced in a way that they will force persons out the banking system because banks play a particular role to intermediate funds.”
The low interest rate environment and increasing fees has had a domino effect. Customers may retain accounts with commercial banks, but many have chosen to move substantial sums to their credit unions where they benefit from higher interest rates and a share in the excess revenue credit unions generate.
The movement of money from banks to credit unions has not only expanded the membership of credit unions but provided a larger base from which they can extend loans and help to build and sustain the goals and ambitions of members.
In a 2009 paper written by University of West Indies academics Ronnie Griffith, Kimberly Waithe, Troy Lorde, and Roland Craigwell, they described credit unions as “[contributing] to economic development by mobilising significant volumes of savings”.
They said these savings act as a catalyst for both domestic investment and consumption through the loans that stimulate activity throughout the economy.
We know that credit unions add value to financial transactions and allow for greater savings, and they have contributed significantly to the competitive costs of borrowing over time. Most important, these indigenous institutions enjoy the confidence of their owners who comprise most of the adult population on the island.
But as we witness the consistent shift by so many savers away from commercial banks to the credit unions, it is creating a headache to find investment opportunities to sustain the higher liquidity, especially at a time when members have less appetite for borrowing in the unstable economic period.
Despite the challenges, the movement is pressing ahead, expanding its technological base, exploring investments in clean energy options, and preparing for a return to economic expansion after the pandemic.
The increasing participation of the credit unions in various aspects of Barbados’ socio-economic life was demonstrated yesterday with the donation of almost $90 000 to the National COVID Vaccine Fund by the BCCUL.
While presenting the cheque to Minister in the Ministry of Finance Ryan Straughn, BCCUL president Hally Haynes emphasised the movement’s desire to help get Barbados back on track.
“We fully appreciate the need to keep the Barbados economy going, to avoid further disabling lockdowns, while at the same time, keeping our communities and members safe,” Haynes stressed.
We fully agree. And so, it is in everyone’s interest in the business community, including credit unions, to ensure that this economy is sustained and kept stable.