BY CASWELL FRANKLYN

WITH THE PASSAGE of the Co-operative Societies (Amendment) Act 2007, an American saying came to mind, "if it ain't broke don't fix it".

That is not to say that there were no problems in the credit union movement. The greater problem is that Government and the Barbados Co-operative and Credit Union League ended up fixing the wrong things, like a surgeon that amputated the wrong leg. The amendments tend to indicate that the framers had barely a little more than a passing knowledge of credit unions.

Credit unions and co-operatives, generally, have been organised on seven founding principles dating back to 1844. As a matter of fact, co-operatives in the United States are legally bound by the state governments and the Internal Revenue Service to comply with co-operative principles. The second principle provides that in primary co-operatives, like credit unions, that there must be democratic control, where each member has one vote. When Government amended the act to allow minors to become members, without a vote, it breached that fundamental founding principle. Consequently, any organisation that restricts membership in this way cannot be considered to be a credit union by international standards.

Preventing credit unions from accepting deposits from non-members could have disastrous consequences for credit union mortgage lending-programmes. From the time that credit unions started to issue residential mortgages, the funds were sourced from outside of the institutions in the form of deposits from non-members. If this source of funds dries up so too would the credit union mortgage-lending programmes. Credit union members would be forced to finance their homes through the "people friendly" commercial banks as opposed to their very own financial institutions. Who would this amendment benefit? Profits earned by credit unions are returned to the members.

Over the years a number of credit unions experienced a number of embezzlements and other criminal breaches of their by-laws. Government's response to this makes it easier for violators to escape punishment. Section 250 of the 1990 act created offences punishable by a fine of $2 000 or imprisonment for six months or both. The new section 192B appears to vest the Registrar of Co-operative with the power to determine whether or not a criminal matter should be prosecuted. This power given to the registrar appears to be an usurpation of the power of the Director of Public Prosecutions and therefore unconstitutional. The amendment allows criminal prosecutions to be determined by an operative who is subject to political control.

A lot has been said about credit unions not investing more than 6% of their assets in real estate, purportedly in line with international standards. I hate to be the one to tell Government that there is no such international standard for credit unions. That amendment was born out of a serious misunderstanding of the Safety and Soundness Principles recommended by the World Council of Credit Unions, as it relates to non-earning assets. Nothing in that principle would restrict a credit union from purchasing land to develop and sell to members, even if the value of the land exceeded the standard, since the land would not be a non-earning asset. However the new amendment, as currently worded, would prevent credit unions from assisting members to own a "piece of the rock", in this way. Even if the 6% was not exceeded and credit unions had the available resources, the new definition of credit union under Section 193 which limits the role that credit unions can play would present an obstacle. The new amendments seem to be saying, "this is not the business of credit unions, keep out!"

The new section 192C is one of the most troubling aspects of these ill-conceived amendments. The registrar can now issue directives, take over operations and appoint someone to advise a credit union. However, if these actions result in a loss to the credit union the registrar is not liable for the damage caused unless it is shown that there was some bad faith on the part of the registrar or his staff. The league claims that it is happy with the amendments. Did it not see this one? Who would compensate members if the actions of the registrar cause a credit union to collapse.

Someone came up with the bright idea that credit unions in Barbados must comply with International Accounting Standard 32, which is a standard developed and mandated by the European Union for publicly traded companies in the EU. As a result, most of the members' equity in credit unions now going to be classified as liabilities. This will hamper the growth of the credit union movement in this country. Why do we in Barbados have to follow everything, good or bad, but in this case bad, from outside. After all, the credit union movement in Barbados was not " broke".