CREDIT unions think their new regulatory framework under the Bank of Jamaica could be in place later this year, after a marathon 12 years of talks.

But issues remain to be worked out, said Glenworth Francis, general manager of the Jamaican Co-operative Credit Union League Limited.

“We welcome additional, and even tighter, regulations as long as they are going to recognise the unique nature of credit unions and not turn us into banks,” said Francis.

“We have had some serious points of debate but there are just a few points outstanding.”

Among them is whether credit unions would be allowed to have more than 10 per cent of their loans unsecured.

“Credit unions were started to help people who could not find collateral for loans,” said Francis. “We feel that would hamstring us.”

Another issue is the use of non-standard collateral, such as furniture and appliances rather than the more traditional houses and cars. “It is security for a poor man,” argued Francis. “He values them and doesn’t want anyone coming to take them.”

A third is whether a minimum level of capital to start a new credit union should be set at $5 million.

Size shouldn’t stop people from coming together to prepare a business plan and present it to the registrar, he said. “If a group of farmers want to buy fertiliser and seed that should be possible. Capital depends on what they want to achieve.”

Francis is also concerned that the government might try to grab savings that are left untouched for more than 15 years.

“Members who have benefitted from the credit union movement tend to leave their savings there so that the younger members can benefit from it,” he said.

Often members move abroad for long periods, he noted. “When they come back, the first place they head to is the credit union. They expect the credit union to protect them and protect their savings.”

At present, credit unions come under the Registrar of Co-operatives and Friendly Societies, an agency within the Ministry of Industry, Investment and Commerce.

But in many ways, they are self-regulating, said Francis.

“The credit unions send their data to the league each month and we, over the years, have built up a system of inspection and monitoring and quasi-regulation.

“The credit union movement in Jamaica operates on the system established by the World Council of Credit Unions called PEARLS.”

This international standard tracks such things as liquidity, solvency, prudence and management.

“Each month we plug in their figures and look at what the direction is and what kind of corrective measures they should take,” he said.

“Because of this system we have been able to weather most of the storms that have passed by. During the collapse of the financial institutions in the nineties the credit unions were able to prove that they were sound. None were under stress at that time.”

“We have a record of soundness. Over the past 70 years, not one credit union has failed.

If a credit union does get into trouble, the league has the power to intervene, offering assistance and, if necessary, firing the managers and replacing the board.

The league then tries to either nurse them back to health and return them to their members, or find a stronger credit union with which they can merge.

The most recent case was the Clarendon Co-operative Credit Union, which was merged with the Communications and other Workers of Jamaica Co-operative Credit Union Limited last year.

The island’s credit unions also contribute to a $2.2-billion stabilisation fund that can be called on if one of them gets into trouble.

However, it is rarely needed, said Francis. The only case of a bailout came after bauxite miner Revere went out of business in 1975. The company credit union was rescued by the fund and the money was eventually recovered from its assets.