By Marlon Madden
Crucial legislative amendments to provide credit unions with insurance for members’ deposits is expected to be completed by the end of this year.
General Manager of the Barbados Co-operative Credit Union League Ltd (BCCULL) Anthony Pilgrim made the disclosure on Wednesday, as an international consultant insisted that the local credit union movement deserved that protection, similar to what is provided to commercial banks and other deposit-taking institutions.
Last week, BCCULL president Kemar Cumberbatch reported that the Ministry of Finance had authorised the Barbados Deposit Insurance Corporation (BDIC) to put measures in place to provide deposit insurance for credit unions, following a cross-regulatory meeting earlier in the month.
On Wednesday, while saying that he did not expect the move to happen overnight, Pilgrim said he expected the required amendment of several pieces of legislation to be done by the end of this year.
“We are happy to report that after such a prolonged period of advocacy we are finally at the stage where we are seeing concrete progress being made,” he said at a press conference at the BCCULL’s office at the Patrick E. McDonald Building in Collymore Rock, St Michael.
Currently, the island’s six commercial banks and four non-bank deposit-taking financial institutions are members of the BDIC which ensures that the savings of each of their depositors are covered up to a maximum of $25 000.
Pilgrim noted that the credit union movement had done two studies – one in 2010 and one in 2021 – which suggested that the movement should be given the same level of added protection as commercial banks, and this laid the groundwork for the design features of a deposit insurance scheme.
The credit union sector boasts assets of about $3 billion from approximately 230 000 members.
International consultant Dave Grace, Senior Partner of Dave Grace & Associates, who conducted the two studies, has been in Barbados in recent days meeting with key stakeholders on the process.
He said based on the percentage of gross domestic product (GDP), Barbados has the third largest credit union movement globally and it is critical that those deposits are given the added layer of protection.
“When you look at the credit union system here compared to the banking sector assets, it is extremely important. The time has come to ensure that credit union members have the same level of coverage as bank customers do in terms of deposit protection,” he said.
“Generally what you see as you look at other countries is that as credit systems get deposit insurance, even more people have more confidence in the sector. Already there are 230 000 credit union members in Barbados and we anticipate that number and the confidence in the sector will continue to grow as deposit insurance comes in place.
“The average credit union member has about $9 300 in savings. We know that 91 per cent of all depositors in credit unions have less than $25 000 and if you look at that same thing in banks, it is about 80 per cent, which tells you that credit unions have smaller deposits in there. They serve the working men and women, people of more modest means, and we believe that those people should have their deposits covered just like they are covered in banks,” Grace added.
Meantime, Pilgrim said the movement is working on a framework that will see the smaller credit unions being able to offer members more digital services.
He said that since the COVID-19 pandemic, the demand for digital services has increased exponentially, especially among the younger demographic.
“We are very much aware of that and the sector is working assiduously to respond to those needs, which are quite understandable,” said Pilgrim, without committing to a timeline for all credit unions to roll out more digital products and services.
However, he told reporters that the movement providing more digital products and services was “certainly a work in progress”, as he pointed to the City of Bridgetown Credit Union, the Barbados Workers’ Co-operative Union Ltd and the BWU Co-operative Union Ltd recently joining the Automated Clearing House platform.
Pilgrim added that while some credit unions did not have an automated teller machine (ATM) service, some were issuing prepaid cards.
Indicating that it was very expensive for credit unions to invest in the hardware and software required to have ATMs, issue debit cards, or join the Automated Clearing House platform, Pilgrim explained that the plan was to embark on a shared services framework for the smaller credit unions.
“That is a work in progress . . . . We are working to provide a mechanism for the credit unions who cannot afford to do it individually, to do it through a third party at a more affordable cost,” he disclosed, adding that individual credit unions would have to choose to join the shared services framework and it would still depend on affordability.
