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Guyanese have lost their financial innocence. They have learnt, over the years, that financial institutions can fail and they can lose their savings. Financial institutions include banks, insurance companies, building and loan societies and cooperative credit unions. There have so far not been any massive failures, on the scale say of the Bank of Credit and Commerce International (BCCI) but the recent collapse of Globe Trust due to bad management and reckless lending policies hurt a substantial number of relatively small depositors.
The Guyana Public Service Co-operative Credit Union (GPSCCU) was also the subject of a major investigation by a senior civil servant, Mr Roy Mc Arthur, appointed by the Chief Co-operative Development Officer, Ms Lilian Miller, and his findings were, to put it mildly, highly critical of the management of the very substantial funds administered by the management committee of that union which consist of savings from the monthly salaries of civil servants. On the strength of that report Ms Miller appointed a new committee which has never been able to take office because of legal proceedings filed by the old committee. Those proceedings were successful in the Court of Appeal on a purely procedural issue which requires Ms Miller to give the committee a formal opportunity to respond to Mr Mc Arthur’s findings. Unless and until Ms Miller takes further action the old committee, condemned in Mr Mc Arthur’s report, continues to administer millions of dollars of the savings of civil servants.
Now there is a new credit union which appears to be operating like a bank, without a banking licence, and which has given rise to considerable public concern. It is called the National Co-operative Credit Union (NCCU) and operates out of premises occupied by FIMB Inc and Guyflag Insurance at Ruimzight, West Coast, Demerara. It has been reluctant to disclose to the public the names of the members of its committee of management and the nature of its association with those two institutions. This `credit union’ has been soliciting deposits from the public in advertisements and has reportedly taken in some substantial sums. It is also offering loans. As a co-operative society it would not have to pay tax on its earnings. This newspaper was told by a member of the Guyana Co-operative Credit Union League, to which most co-operative societies are affiliated, that the Co-operative Societies Act does not allow for the establishment of a national credit union and that the NCCU had applied for affiliation but had been asked for more information which it has not provided to date. This would not be the first occasion, of course, on which a normal business operation has sought to obtain the protection of the law relating to co-operative societies, and to gain the blanket exemption from income tax and other forms of taxation that has been granted to such societies.
So far, Ms Miller says she has not approved the credit limit for loans by the NCCU but it has been in operation, taking deposits and making loans, since March this year. Minister within the Ministry of Social Services, Bibi Shadick, within whose portfolio co-operative societies fall, says she has asked her officers to re-examine the rules of the NCCU. “Those rules can’t stand.... They are too wide,” she told this newspaper. But so far nothing concrete has been done by the government or any officer.
These credit unions handle hundreds of millions of dollars of public savings. Though Ms Miller said she had recently beefed up her staff complement and now had four officers to inspect the operations of credit unions we do not believe that either her department or the ministry of social services is geared to handle and supervise operations of this size. It may be recalled that the GPSCCU had not had its accounts audited for several years when Ms Miller intervened. The time has surely come for the government to recognise that substantial public savings are at stake and that credit unions, or at least those with savings above a certain size should be brought within the ambit of the Financial Institutions Act and should be subject to supervision by the Bank of Guyana with whom they should be required to file annual audited accounts. The situation is clearly unacceptable as it is. Moreover, it should not be possible to evade the need for obtaining a banking licence and all the statutory requirements that go with that by using the provisions of the Co-operative Societies Act which were never intended for that purpose.
We call on the Minister of Finance to get involved in these matters and to consider appropriate legislation which should include the updating of the Co-operative Societies Act and to assign personnel to work with Ms Miller in dealing with these matters.