Did Governor General Confirm Credit Unions’ Worst Fears?

Few would dispute the contributions of the credit union sector to Saint Lucia’s social and economic development. Credit unions embrace thrift and co-operative principles; members are encouraged to save for the benefit of all. In terms of lending, credit unions largely meet the need of the unbanked or people who under normal circumstances would have no, or very limited, borrowing power at commercial banks. Based on a 2017 Eastern Caribbean Central Bank Financial Stability Report, the sector controlled 48% of total loans for the year, which represents an increase from 45% in 2016. Obviously credit unions control a huge share of Saint Lucia’s financial services pie.

Notwithstanding the importance of this sector, related sources worry that the actions of some in the higher echelons of the movement could destroy the co-operative spirit in Saint Lucia. Most alarming is that the Credit Union League—the umbrella of all credit unions, with responsibilities of promoting, developing and representing all credit unions—may unwittingly be a co-conspirator in the annihilation of small co-operatives.

There are sixteen credit unions in Saint Lucia, governed by the Co-operative Societies Act Chapter 12.06 of the Revised Laws of Saint Lucia and by-laws of individual societies. In addition to laying down provisions for the establishment and good governance of individual credit unions, Section 214 of the Act makes provision for the creation of an apex body owned and governed by all credit unions. This apex body is governed by an elected board of directors with term limits. The function of the apex body is stated under section 215 of the Act as follows: “The national league or council shall coordinate, assist and promote all registered societies and shall perform such functions as may be determined by its constituent members.” Additionally, section 3 (1) of the by-laws of the St. Lucia Credit Union League outlines ten objectives, among them:

• Secure active participation in the democratic processes of co-operative control at all levels and in the exercise of officer responsibility.

• Provide information and guidance to Credit Unions and other co-operative leaders and personnel so that the societies they serve will offer the best possible service to members to make such opportunity equitable.

• Contribute to the development of higher standards of credit union management, operation and supervision by advice and direction in the interest of members and membership of affiliated credit unions.

Based on the outlined purpose of the league, one would expect the apex body to be the epitome of good governance, accountability and transparency.

Our sources assure us the management of the St. Lucia Credit Union League is at a tailspin that started soon after its AGM on June 26, 2018 when a new board of directors was elected. Soon after, an alarm was raised by a member credit union that one of the elected directors of the league had undischarged court judgments against him. This individual was previously disqualified from serving at his credit union level by the Financial Services Regulatory Authority (FSRA), a statutory body established to regulate providers of financial services in Saint Lucia, again in consequence of undischarged judgments.

By letter dated March 2, 2016, the FSRA instructed that, based on the provisions of section 50 (4) b of the Co-operative Societies Act Chapter 12.06 of the Revised Laws of Saint Lucia, “any director who is in default of debt owed to the Society, any financial institution or any creditor . . . shall not constitute part of the management of a society until his or her disability is removed; but he or she may retain his or her membership of the society during the period of such disability.”

On July 31, 2018, the League again wrote to the Authority seeking guidance on whether the individual was duly qualified to hold office pursuant to the above referenced section of the act. However, on this occasion, by letter dated August 10, 2018, the Authority, instead of maintaining consistency and exercising leadership, decided to adopt a hands-off approach. It drew the League’s attention to section 50 (4) (b) of the Co-operative Societies Act, Chapter 12.06 and the League’s by-laws. The response further expressed that the Authority expected that the remaining directors serving on the board of the League, in their good judgment, prudence and corporate governance practices, would make the appropriate decision in the circumstance. In a nutshell, the FSRA said members should handle matters of this nature internally.

In sustained efforts to address this issue, from September 2018, shareholders of the League have been calling for a special general meeting of delegates. Section 40 (1-2-3) of the Co-operative Societies Act, chapter 12.06 of the Revised Laws of Saint Lucia and by-law 34 of the by-laws of the League make it mandatory that the special meeting be called by the board within twenty days of receipt of the request for the special meeting, provided that the request is signed by at least five shareholders and the purpose for the meeting is stated clearly and specifically. The original request was signed by five credit unions; the second by six, and the third by eleven.

Notwithstanding that those requests met all legal requirements, the current board of the League continues to ignore its own by-laws, provisions of the Act and the wishes of its members by refusing to call the meeting. Instead the board called a meeting with its own agenda. This meeting did not materialize because the group of eleven stood its ground. At this juncture, the board notified member credit unions that the FSRA had directed them not to call the special meeting until the Authority had conducted a full inspection of the League’s affairs. It is important to highlight that since the current board took over, functionality at the League has been brought to a standstill. The new board took office like a whirlwind, our sources claim. First it suspended all existing policies; completely ignored the manager. Both staff and League directors tendered resignations. From August 2018 to February 2019, fifty per cent of the staff, including the manager, have quit. Three out of seven directors have also resigned in direct protest against the board’s mode of operation. Currently four credit unions out of sixteen—the Civil Service, Police, Mabouya Valley and Workers—are running the apex body of credit unions. The board has taken no steps to fill the vacancies.

Nevertheless, the FSRA continues to recognize what some have described as “this rogue board”. It points to the fact that although section 41 (1b) of the Act gives the FSRA the authority to order the board to call the meeting, it has refused to do so. Instead, the FSRA called a meeting scheduled for April 15 replicating the agenda of the meeting called by the League. The meeting did not materialize because the group of eleven decided it was improperly constituted. It appears, to our sources at any rate, that the FSRA has a strong interest in keeping the League in the hands of “this rogue board”.

The STAR was further informed that in 2015 the Credit Union sector submitted a position document to the government on the highly contentious pending Co-operative Societies Bill that is intended to repeal and replace the existing Co-operative Societies Act. The sector’s position was communicated through its representative body, the League, following extensive consultation with all shareholders.

Since 2017, the Credit Union sector and the FSRA have been at a deadlock regarding certain clauses of the Bill. The Authority, despite having been shown that the Bill was flawed, refused to compromise and work with the sector to correct the contentious provisions. Consequently the legislative drafting consultant, in a memo of March 31, 2017, stated that consensus was required on many clauses and reiterated that there were still many issues to be resolved

Notwithstanding that there has been no further consultation or attempt to arrive at consensus, sources have confirmed that the Authority has met with the rogue board to gain approval on the Bill. It is believed that the Authority and the illegitimate board of the League have conspired to mislead government in believing that credit unions have agreed to accept the Bill, as drafted. It is strongly believed that this is the main reason the FSRA has taken a side in this matter. It is also believed that the FSRA had a vested interest in seeing the back of the manager of the League who has since resigned, because she stood like a champion opposing the Bill.

Nevertheless, the Credit Union sector’s position on the Bill remains the same. The sector has provided clear evidence that the Bill is not “harmonized”, as claimed; the requirements are far more onerous in Saint Lucia’s Bill than what obtains in other OECS territories. The sector has made it known that the Bill will result in forced closures of several of the smaller credit unions in Saint Lucia, since they will unable to meet certain thresholds. A worrying aspect of the Bill, if passed, is that it will give the FSRA legal authority to close or merge those who fall out of certain thresholds. Also, the Bill misrepresents the structure of a co-operative entity under the global co-operative business model and therefore infringes on the democratic rights of owners or members of co-operative societies. For these reasons, the sector has expressed serious concerns regarding the future growth and development of co-operatives in Saint Lucia should this Bill be passed. Only four or five credit unions will survive.

In other OECS countries where the harmonized bill has been passed, although less stringent that Saint Lucia’s, the number of credit unions
has been reduced significantly, in some instances by over 50%. Our sources are of the view that the local regulatory authority, which is supposed to work toward developing the sector, is hell-bent on destroying it.

The governor general’s throne speech on April 9, wherein he announced the government’s intention to pass the OECS Harmonized Bill, seemed to add credibility to what our sources told the STAR. Shortly before we went to press, one of them said that should the Bill be passed in its current state, the big losers will be the ordinary people who cannot raise collateral to borrow from commercial banks.