Both an opportunity and challenge for credit unions

AS Barbadians continue to migrate their deposits from commercial banks to credit unions, an official in the credit union movement says that this is presenting both an opportunity and a challenge to the movement.

Anthony Pilgrim, General Manager of the Barbados Cooperative and Credit Union League Limited (BCCULL) spoke to the Barbados Advocate yesterday about the extremely low interest rates on deposits prevailing in the local financial system. The BCCULL is the umbrella body for credit unions in Barbados.

“We all know that deposit rates at commercial banks are virtually zero, that is well known, and recently Scotiabank carried their rates even lower,” Pilgrim pointed out, while noting that Credit unions are even more attractive to depositors who are migrating from the banks.

However, Pilgrim said that this has presented both an opportunity and a challenge for the credit unions. First off, he explained that the deposit base of credit unions is increasing. Second, the challenge to the movement is how to use the additional cash to the benefit of the movement.

Pilgrim said that they are working well given the delegate balance, by growing their loans and exploring other opportunities for investments.

According to him, credit unions have reduced their rates somewhat, taking into consideration the fact that with some of their funds being deposited in the commercial banks, they will be cognisant that they will be subject to the lower rates, and therefore realise other opportunities for investments.

Currently credit unions offer rates that range between 1.5 per cent and two per cent on deposits to their members, although depending on the credit union, depositors could get more. As for commercial banks, they are offering well below one per cent and in some cases zero.

The prevailing low interest rate regime in Barbados followed a decision three years ago by the Central Bank of Barbados to cease fixing the minimum deposit rate and instead allow commercial banks and other finance houses to set the rates.

Several Barbadians have remained hopping mad about the decision since the rates at the banks plunged from 2.5 per cent to what is now on offer.

Pilgrim was asked whether he thinks the Central Bank will revisit the matter given the repeated calls for that to happen.

He said: “There is no indication at this point that the decision will be revisited, and the former Governor (Dr. Delisle Worrell) has pointed to the benefits of the adjustment to the rates.”
The BCCULL official added that people have called for some changes because they believe that their savings should attract a decent rate. (JB)