Rule change scuttles credit union foreign expansion plan
Published:Friday | June 18, 2010 | 12:00 AM
Avia Collinder, Business Writer
Plans by the St Thomas Co-operative Credit Union Limited (STCCU) to grow its way out of the ensuing recession by setting up a subsidiary financial institution in another Caribbean territory, has been shelved on the request of the movement's oversight body, even though its rules as currently written allows overseas expansion.
The Jamaica Co-operative Credit Union League (JCCUL) is concerned that its jurisdiction does not stretch beyond Jamaica, and would make it difficult to monitor STCCU's overseas activities.
STCCU general manager Hopeton Morrison has confirmed pulling the plug on the planned expansion to the unnamed country - a project in the works since 2008, and on which the agency has already expended investment capital.
The credit union's 15,000 shareholders will be advised of the shift on Saturday, June 19, at its annual general meeting, Morrison said.
The expansion, for which regulatory approval was said to have already been granted by Jamaican authorities and officials of the other Caribbean state, was facilitated by a provision allowing overseas residents, who have in the past lived and worked in the parish of St Thomas, to be STCCU members.
The branch was being set up to serve these members.
Rule four of the credit union currently stipulates that membership is open to all persons of good character and of the age permitted by the Co-operative Societies Act who were born, reside or resided, work or worked in the parish of St Thomas and its environs or residing overseas, as well as their relatives, spouses and children.
The rule is expected to be amended to eliminate the words 'residing overseas'.
Members will have to vote their approval at the meeting for the change to take effect.
Lack of jurisdiction
However, citing the JCCUL's lack of jurisdiction over companies overseas, the registrar of the umbrella group is said to have called for the rule change.
Morrison has noted that, but for the recession, the overseas expansion plan would have been implemented two years ago.
Despite the setback, however, he was still bullish on the outlook for STCCU, pointing to improvements in the credit union's project management technical skills since 2008 and a new unit to drive business among small and medium entities as avenues to new income streams.
The 37-year-old credit union last reported annual profit of J$3.9 million. It is currently capitalised at J$92 million and reports assets in the region of J$800 million.
Morrison is also optimistic that goodwill flowing from the entity's relationship with members will translate into increased income when the recession is over.
On Saturday, members will also vote on a new rule to bring all member accounts in line with new accounting rules converting J$1,500 in members' shares to capital.
The technical upgrade is already paying off with the firm boasting a J$96-million European Union funding pool that the credit union has attracted, it said, by leveraging its project management skills.
The stimulus money is for institutional strengthening among firms and capacity building in communities. It has already supported some 27,360 businesses and projects facing cash needs amid the recession.
As an indication of the downturn in core business, STCCU saw a more than 50 per cent drop in net surplus attributable to shareholders, tumbling to $3.9 million last year, from $8.4 million.
This big fall, financial controller Jacqueline Peart said, was due to a tighter credit policy in 2009 and the allocation of $6 million to write down bad debt.
Last year, $2 million of the $6 million was used to write off loans outstanding for longer than 365 days. In the same period, delinquencies ran at 3.4 per cent of the $600 million loan portfolio, better than the just under 5 per cent rate the year before.
Even so, loans grew by eight per cent, displaying a slower momentum than the 33 per cent growth seen in 2008. But Peart said the credit union's cash position remains positive even in the face of a more than 50 per cent jump in expenses last year to J$162 million. The big rise, she said, was the result of one-off expenses attached to the administration of the EU fund.
Deposits have been growing at the same time, the credit union's general manager said, pointed to an 18 per cent growth in savings last year to J$66.65 million.