Transcript Caribbean Credit Unions

Caribbean Credit Unions
Social, Economic and Political Footprint and Potential
Ralph Henry
June 30, 2009
Birth and Rebirth
• Birth - the Cooperative Movement in the
cauldron of the 1930s
• Great Depression
• Crisis of 2008/2009 being the full exposure
of a Caribbean Economy faltering since
the mid 1990s
• Need to be born again
D.T. Girvan of Jamaica
• Girvan of Jamaica Welfare Ltd –
adaptation from the Canadian Experience
• C. R. Ottley and Trinidad and Tobago
• Elsewhere in the Region
• Some Friendly Societies transformed into
Cooperatives and Credit Unions or
members formed cooperatives with new
facilitating legislation
Institutional Change in Social Protection
• Friendly Societies
• Provident Funds
• National Insurance Systems
Credit Unions and Caribbean Identity
• Credit Unions and thrust to form bond
across the Region by the early 1950s
Size of Movement Today
• Assets of Credit Unions vis-à-vis the
Banking system
• Size relative to GDP
• Comment of World Bank in respect of
OECS
World Bank Commentary
The widespread access to at least some financial services is
chiefly related to the remarkably high penetration of the
cooperative credit unions. Banks and some of the finance
companies serve wealthier clients. ….. Most of the nearbank
financial intermediaries, including the credit unions….have,
as their stated primary objective, to finance development
activities or to provide financial service to their members,
who are largely drawn from middle and lower-income
groups
• http://www1.worldbank.org/finance/assets/images/ECCU_FSA_web.pdf
Sense of Proportion
• ECCU 2007 GDP (mkt. prices) - US$ 4.8b
• Credit Union Assets Dec 2008 – US$ 4.4b
• Although stock and flow comparison, but
useful
Lessons of the Experience
• Caribbean people have been adept at
forming institutions that work for them
• Facilitating and enabling legislation and
infrastructure redound to the social good
Adaptation from Cultural Moorings
• Adoption of Institutions that converge with
interest and culture – rotating credit and
self-help all part of the post-slavery and
post-indentureship experience,
reminiscent of systems in Africa and India.
• Ex-slaves and their descendants found
solace in the Friendly Societies - death,
injury, illness and respectable burial –
elementary social protection
Challenge of Early 21st Century
• Structural Transformation still the
challenge after four decades of being in
charge of our destiny
• Economic Diversification from reliance on
limited range of products and services as
exports
• Debt Crisis among Governments of the
region – accumulated debt equivalent to
the size of GDP or more, in some cases
Economic Policy
• Reliance on Foreign Direct Investment
• Creation of conditions for foreign capital to
develop ourselves
• Assumption that industrial development and
transformation based on private sector
growth have to be led by capital from abroad
• Assumption that the region and its people are
too poor to mobilise much of the capital
required for development
Ideological Debates of 1970s
• Moved from the other extreme, that only
domestic capital could transform the place
• Pragmatism of Eric Williams - the role of
the state and development of a People’s
Sector including cooperatives
• Roll back - IFIs and Stabilisation and
Structural Adjustment
Positive Side of Picture
• Some level of human resource
development
• Some capital mobilised in Credit Unions
• Recognition of need for domestic
entrepreneurship
• Cant of the role of SMEs, but really about
small and micro-business to stay small
and micro, seldom about small to get big.
Creation of New Institutional Mechanisms
• The capital has been mobilised and has to
continue to be mobilised
• New mechanisms to secure its use in our
own development needed
Efficacy of Credit Unions
• Associational Principle
• Equity rather than profit
• Service to community
International Society and Impact
• Positives and Negatives
• IFIs, Basle Accord, WTO, G 20 and Offshore Finance, IAS.
• Integrated Supervision
• ‘If it quacks like a duck….!’
Magic of Market Place
• Omniscience of Washington and
Catheticism
• But note Canadian experience with Credit
Unions different to the UK
• Canadian Bank Laws and who could enter
• ILO, ICA vs Washington Institutions
‘Core’ Business of Credit Unions
Thrust of some of the new regulatory
regime
1. Core business is to remain
on the periphery of wealth
creation
Other Implications of “Core”
2. The structure under which
considerable asset base might have
been built is not be used to enlarge
possibilities for people at the lower
end of the economic pyramid
Growth and Development
• The Imperatives of Development Elimination of Underdevelopment
reflected in High Poverty, Inequality and
Unemployment
• Savings
• Investment and
• Entrepreneurship
Test for New Regulatory Regime
• Be enabling of development and promote
economic transformation
• Contribute to inequality reduction
• Improve economic participation of all
sections of society, especially the
marginalised whose savings credit unions
by their sheer nature, can mobilise for the
development process
• Liberate entrepreneurship
Getting it Right
• Getting the Regulatory Order Right for our
Conditions
• Learn from Experience – Barbadian
approach to structural adjustment in the
early 1990s
Intergenerational Legacy
Employees Begat Employers
• When the History is written
• Employee Credit Unions
• ‘Passing on the Business’ to the next
generation
• Sowing the seeds of entrepreneurship in
societies that are not so much short of
entrepreneurs but do not recognise them
Other Sectors
• Application of high level knowledge in
production
• Trade in services
• Export oriented industries and
competitiveness
• Resources
The Way Forward
• Development Finance
• Provision of funding for excluded including
young entrepreneurs
• Strategic acquisitions
• Strategic alliances
• Subsidiaries – eg Fonterra of New
Zealand
• Spread risks across the Caribbean space
• ‘Inshore’ the offshore funds of Diaspora
Up the Profile
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Advocacy
Mass Media and Marketing
Politics
Education of members
Marketing of credit union philosophy of
development
Rising to the Challenge
• What would the pioneers have done with
the resources already mobilised?
• Regulators and Regulated becoming fit
and proper
• Economics, but also History and Sociology
of Development
THANK YOU!