Credit Unions Want Law Amended

by Linda Straker

Credit Unions in Grenada are seeking to have amended a section of legislation which governs their operations, to allow them to invest beyond the boundaries of the region and in non-traditional investments.

This was disclosed by Lennox Andrews, General Manager of the Grenada Communal Cooperative Credit Union during a media briefing on Wednesday, where he spoke about the challenges facing the financial sector.

According to Andrews, at present the financial sector is very liquid, but there is stiff competition among the players because each one of them has to compete with each other to develop more creative ideas to survive, and at the same time satisfy the expectation of depositors.

“There are plenty deposits — the question is what can we do with all this money in a small economy like Grenada? In the long-term we cannot survive just on liquidity. The challenge here is we need to invest to pay interest to our depositors, and when there are no investments, we cannot get returns to pay interest to depositors,” he said.

Andrews, who is a former Permanent Secretary in the Ministry of Finance, said that with more deposits, the image of credit unions is building, “But now these credit unions have a responsibility regarding interest payment, so we need sound business investments to grow our returns, and not just consumer loans,” he said, while explaining that the Cooperative Act limits where credit unions can invest, and as a result of the high liquidity there is now a discussion to amend the legislation.

“There is no reason why we cannot invest abroad, no reason why we cannot invest in US treasury bonds or in Peru. We know it’s a risk and we understand that risk, but at the same time the returns can be very good,” he said.

With regards to interest rate payment, credit unions in Grenada are regulated by the Grenada Authority for the Regulation of Financial Institutions (GARFIN), and not by the Eastern Caribbean Central Bank (ECCB). However, rate of interest on deposit starts at 2% which is the minimum set by the ECCB for commercial banks. Credit unions normally pay a higher rate.

In the Grenada, the total membership of credit union members is 58,040 from a population of 107,000. The Communal as a credit union has 38% of the general membership.

Denis Felix, Manager, Non-bank, Credit and Money Service sector at GARFIN, said that consultations have already taken place with the credit union sector, and “a number of areas is already agreed for amendment and this include the area of investment for credit unions.”

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