Our attention has been drawn to an article published in the Sunday, January 29, 2012 edition of the Jamaica Observer under the caption “Is your money safe?” which is grossly misleading and injurious to the reputation of credit unions in the Caribbean.

The Caribbean Confederation of Credit Unions strongly objects to comments attributed to Mr. Wayne Dass, CEO of Caribbean Information and Credit Rating System Ltd. (CariCRIS), which insinuate that investments in credit unions in the Caribbean are risky and unsafe. The comments made are at variance with the facts and available data on credit union performance in the region and could not have had the benefit of any credible research.

Whereas Mr. Dass has forwarded to the Confederation a copy of communication sent to the Observe refuting some of the comments ascribed to him and the inferences made, it is incumbent upon the Caribbean Confederation of Credit Unions to set the record straight.

The statement that “Some credit unions are overinvested in one sector with 60 to 80 percent in real estate, for example” and that a more appropriate share would be 20 to 30 percent, is assumed to be a reference to the sectoral composition of the loan portfolios of credit unions but cannot be applicable to all credit unions in the Caribbean.

Additionally, whereas credit unions may make loans to members for real estate purposes, it should be noted that in The Bahamas, Barbados and the Eastern Caribbean, as well as other territories, credit unions are prohibited by law from investing more than 5% of their assets in any real estate not required for their operational uses. Credit unions are also required by law to maintain statutory reserves, liquidity reserves as well as capital to asset ratios of 10%.

Credit unions in the Caribbean have never argued that they should have a lighter regulatory environment than banks because “They have social objectives”. What credit unions have argued is that there should not be subjected to the same regulatory requirements as banks because they operate on an entirely different co-operative business model, which does not mobilize capital from the public at large, nor seek to maximize profits for the benefit of a few shareholders but is based on:

• Member only access.
• Equitable distribution of surplus to all members/shareholders.
• Equal voting rights for all members/shareholders.
• Affordable access.

The suggestion that the PEARLS systems used by credit unions is not explicit enough because of notable credit union collapses in the region, misrepresents the intent and integrity of these Standards. PEARLS is an accredited set of prudential performance standards for the worldwide credit union industry, that are as stringent as those employed for the Banking industry.

It is noted that despite the assertion of “notable credit union collapses” in the region, only one instance has been cited as opposed to the numerous failures that have occurred in the banking and financial services sector in several Caribbean countries during the last 10 years, where there was supposedly “stronger oversight in place.”

Whereas the collapse of Trinidad and Tobago’s Hindu Credit Union in 2008, is a matter of record, the operations of this institution were not characteristic of other credit unions in Trinidad and Tobago, nor the rest of the Caribbean. Generally, credit unions do not engage in risky investments and seek to protect the interest of their members.

Credit Union members can be assured that the Confederation and its member credit unions consider the safety of members’ investments to be of paramount importance in their operations.

The Caribbean Confederation of Credit Unions will collaborate with any agency or institution on initiatives that can further advance the development of the credit union sector, and are proven to be in the sector’s interest.