High loan defaults threaten credit unions
President of the BET Co-operative Credit Union Michael Alleyne has sounded an urgent call for mergers within the credit union movement to stave off the collapse of small financial cooperatives.
He warned that high loan delinquency rates and stricter financial regulations were putting the survival of credit unions in jeopardy.
Speaking at a dinner and award ceremony marking the 50th anniversary of his credit union at the Hilton Resort on Saturday, Alleyne conceded that even the BET cooperative – the ninth largest in Barbados with a $28 million-plus asset base – faces collapse if it does not make immediate changes.
While noting the BET Co-operative Credit Union’s growth from offering members maximum loans of $5,000 to $350,000, and what he described as a sound savings portfolio, Alleyne said such accomplishments would not be enough to ensure the continued operation of that cooperative.
“The level of delinquency has been a bug bear in our efforts to increase our loan limit,” he said, indicating that management was looking at holding “deeper discussions” with the Financial Services Commission to better manage the delinquency rate within its loans portfolio.
Addressing the effects of regulatory and compliance changes required of credit unions across Barbados, Alleyne said: “In order for us to deal effectively and timely with those requirements, strategic alliances or even mergers must be seriously contemplated among some of the medium-sized and small units within the credit union movement.”
He acknowledged that the idea of alliances and mergers was not new, and said he was only re-emphasizing what has to be done “as soon as possible”.
“We must be unified and must see the challenge as one that we must face. If we have to commit to strategic alliances, it must be the way to go. If there must be mergers, that must be the way to go. We should not see them as negative things,” Alleyne contended.