Co-op legislation needs fine-tuning
-consultant
By Nicosia Smith
Stabroek News
April 2, 2004
An overseas financial consultant says local co-operative laws are generally adequate but need some fine-tuning.
Robert Charbonneau, a Canadian financial consultant who visited Guyana through the Caribbean Regional Tech-nical Assistance Centre(CARTAC) in Barbados, was here to offer assistance to the co-operative division at the Ministry of Labour, Human Services and Social Security. Some 19 of the top 500 Canadian companies are co-operatives.
In an interview with Stabroek Business, Charbonneau noted that local co-operative laws need some adjustments because they do not identify the conditions under which loans are given and investments are made.
He said that in Canada, members cannot borrow more than 1.25% of the co-operative's total assets at one time nor can the co-operative invest more than this amount at one time.
There is also no relationship between the level of shares and loans.
In Guyana a credit union can invest as much as they want since there are no such stipulations. And according to local co-operative laws, a member can only be loaned three times the amount of money that they have saved in the co-operative.
Some local co-operatives are experiencing severe delinquency problems on loans.
Charbonneau explained that overseas, the practice is to assess members based on their ability to repay their loans. In the event that a member cannot continue their payments, the co-operative must have a plan to help their members to do so.
He also explained that the management committees of local co-operatives need to become aware of good corporate practices.
Among the co-operatives that Charbonneau visited was the National Co-operative Credit Union Limited where the management discussed with him their plans which he says were in keeping with the goals of co-operatives generally.
The NCCUL was criticised in the past for accepting deposits from non-members (the NCCUL common bond area is agricultural and associated industries) as well as for its plans to begin accepting deposits from other co-operatives.
On the issue of accepting deposits from non-members, Charbonneau said that in Canada, co-operatives accept deposits from non-members which are also co-operatives, but there is a limit as to the number of non-members allowed.
According to Charbon-neau, the non-member stipulation is set to ensure that members of the co-operatives continue to govern the co-operative.
Many say the Co-operative Societies Act needs to change, so that it excludes non-members from banking with credit unions. As the law is now, co-operatives can accept deposits from non-members but only members are entitled to dividends and bonuses.
Clive Nurse, the Chief Co-operative Development Officer (CCDO) says everyone has the right to deposit as much as they choose with a co-operative.
In regard to accepting deposits from other co-operatives, Nurse says the NCCUL has not sent any resolution to him to request that other co-operative societies be allowed to deposit with them, but according to present laws he can approve such a request under the right conditions.
Myrtle Richards, principal of the Kuru Kuru Co-operative College in an earlier Stabroek Business report, explained that for primary societies(co-operatives) such as the NCCUL to accept deposits from other primary societies, the co-operative seeking to make the deposit would have to do so with a resolution.
Richards said co-operatives could deposit with other co-operatives if the members of the co-operative seeking to make the deposit, send a resolution to the CCDO for approval.
Contrary to the opinion of some, Nurse does not believe that the NCCUL's common bond area (agriculture and associated industries) is too large.
However, the NCCUL was asked to submit to the CCDO an amended constitution, which it claims has certain elements to allow them greater scope.
Nurse told Stabroek Business that he has not yet signed the amended constitution of the NCCUL.
Nurse said that in places where the word 'Bank' appears it was changed to an 'Institution' and the word 'Trust' was removed from the NCCUL's name.
The NCCUL was formerly known as the National Commercial and Credit Union Trust Limited.
The fact that the NCCUL was asked to amend their rules, Nurse notes, is an example of the monitoring being done by the co-operative division and its commitment to regulate the industry. He says the ministry does have plans to make drastic changes to the law but will look at changes to broaden the scope of the laws so that credit unions can do more for its members.
NCCUL
Last month Dr. Fred Sukdeo, chairman of NCCUL said the credit union had made remarkable strides. Sukdeo had argued that had it not been for the NCCUL some rice farmers in Region Three would have faced serious difficulties.
Rice cultivation, he noted, increased by 25% along with production and the farmers' net income also increased as a result of NCCUL's intervention. NCCUL has 1,000 members and accumulated assets of $1.3 billion, of which $1.2 billion was loaned to farmers.
Among the NCCUL's offerings are special savings plans such has retirement plans; education plans; small business plans and a children's savings plan.