Credit unions advised to switch business models
Published:Friday | May 13, 2011 | 12:00 AM
As the new and tighter regulatory regime unfolds, the head of the Caribbean Confederation of Credit Unions, Melvin Edwards, is advising Jamaican community lenders to consider tweaking products and seek out mergers to strengthen their operations and stay competitive.
Edwards said Saturday that there were indicative signs of growing inflows; of deposits "as more persons consider credit unions safer than banks, building societies and insurance companies", but said that few credit unions in Jamaica will survive in the current environment of falling interest rates and yields, if they do not "switch from the 20-year-old pattern" of operating on high net interest margins.
"In the face of similar challenges, competitive credit union thinkers in other jurisdictions have reworked their business models and adopted new survival mechanisms without departing from the fundamentals of cooperativism," he said, while addressing the 50th anniversary banquet of the C&WJ Co-operative Credit Union in Kingston.
"Creative strategies include redefining and repackaging fee-based services and products, pursuit of mergers, amalgamations, shared branches and other joint ventures, to achieve economies of scale and scope; lower unit costs while protecting jobs; improving efficiency ratios in operations by eliminating waste; cutting loss-makers and increasing worker productivity."
He urged more investment in technology and strengthening sales teams to grow revenues and defend market share.
"Refusal to act and slowness to respond in the face of narrowing business choices are recipes for losses and failure at a time when development planners are appreciating more and more the untapped potential that co-operative credit unions offer in liberating low-income families from misery, hopelessness and economic deprivation," Edwards said.