The leadership of the local credit union movement must certainly be wondering why such an extensive section of the Barbadian public remains exposed and unprotected from the vagaries of operating in the local financial system.
Credit unions in this country hold the deposits of more than 200 000 Barbadians. That represents an enormous portion of our population, across all demographics and economic stations.
For the most part, however, the near $3 billion held by credit unions in this country are the hard-earned savings of ordinary men and women from working class homes. They are confident that credit unions are operating in their interest more so than other financial institutions and they place their savings there.
Credit unions had their genesis here in the 1940s as savings societies and cooperatives, built on the philosophy of self-help.
In fact, it was a group of low-income earners and members of the St. Patrick’s Roman Catholic Church who formed a savings union in 1947, which was known as the Shamrock Savings Union. It would go on to become the island’s first registered credit union – the Shamrock Credit Union.
Commercial banks have been around long before credit unions, but for the majority of working class citizens, banks were exclusionary. Many remained unbanked and relied on their own ingenuity and family support to acquire homes and other necessities.
Given this background and the tremendous growth that has taken place in the movement, it is baffling that in 2022, credit union members are still without the benefit of deposit insurance, a government-backed safety net that savers with commercial banks and several other deposit-taking institutions enjoy.
Deposit insurance is a measure which was introduced under the Barbados Deposit Insurance Act, 2006 and managed by Barbados Deposit Insurance Corporation (BDIC).
Its main function is to provide protection for depositors’ savings up to a maximum of $25, 000 per depositor, per bank or financial institution.
Presently, the savings of BDIC’s 11 member institutions are protected. These are Republic Bank, Scotiabank, First Citizens Bank, CIBC FirstCaribbean International Bank, RBC Royal Bank, ANSA Merchant Bank, SigniaGlobe Financial Group, Capital Financial Services Inc, RF Merchant Bank & Trust, and Ascendancy Finance (Barbados) Ltd.
There are approximately 30 active credit unions in Barbados, with the largest by assets and membership being the Barbados Public Workers’ Co-operative Credit Union, City of Bridgetown Credit Union, and the Barbados Workers’ Union Credit Union.
The nagging question is the unequal treatment of depositors with credit unions, who will be left unsheltered, should there be an unfortunate event that results in a collapse of the institution.
We must not believe that such an occurrence is impossible. In the financial sphere, the collapse of Trade Confirmers and even the more recent collapse of the CL Financial Group which led to contagion in the Barbados subsidiaries of CLICO, are a reminder of the havoc that occurs in people’s lives when their nest eggs are suddenly ripped from under them.
Even within the credit union movement, despite the aggressive regulation of the sector by the Financial Services Commission (FSC), members of the Barbados Secondary Teachers Credit Union had their credit union placed under strict management instruction by the regulator in an effort to protect their deposits.
At the last annual general meeting of the Barbados Cooperative and Credit Union League, president Hally Haynes disclosed that the island’s largest credit union was now under enhanced watch by the Central Bank of Barbados because of this credit union’s importance to the overall stability of the local financial system.
Government and the financial sector’s regulators concede the critical role of credit unions to the island’s financial architecture. They know the level of exposure to which so many poor and middle-class citizens would be subjected if an event occurred that threatened the stability of credit unions.
Why in these circumstances are credit union members not given the same level of protection as depositors in commercial banks and certain other deposit-taking institutions?
It is now left to credit unions to exercise their strength in numbers and speak more assertively to this issue. Credit union members should not allow themselves to be treated as second class citizens.
They need to demand that promises by government to address this unequal treatment be addressed as a matter of urgency.
