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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 • • • • • 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!