Savings pullout likely
THE?FALLOUT from Government’s Budgetary proposals is continuing with the island’s largest credit union reporting that its savings growth could plummet by more than $100 million in the next five years, crippling long-term lending and undermining the institution.
Moreover, Barbados Public Workers’ Co-operative Credit Union Limited (BPWCCUL) is projecting that as much as $2.4 million could be withdrawn by members next year and up to $5.74 million within five years because of the elimination of tax allowances.
In a confidential document secured by BARBADOS BUSINESS AUTHORITY over the weekend, BPWCCUL told the local umbrella body – Barbados Co-operative Credit Union League – that of the $10.6 million held in special deposit accounts to benefit from the tax break, more than half was likely to pulled out by 2015, in a worst-case scenario.
At best, BPWCCUL said, $1.43 million would be withdrawn from members’ special deposits when they mature within five years and the benefits of keeping the funds there disappear.
According to the BPWCCUL report, “Based on the foregoing, the credit union deposit base is projected to decline between $0.6 million and $2.4 million next year to $1.4 million and $5.7 million by 2015 due directly to withdrawal of deposits on expiration of the mandatory holding period for tax purposes.”
It added: “More importantly is the estimated stagnation of overall deposit growth as a result of the abolition of the tax allowances.”
The credit union cautioned that between April and November 2008, when there was uncertainty about the conditions attached to the tax benefit associated with credit union savings, deposit growth in BPWCCUL “plummeted by approximately 50 per cent”.
The major casualty of the falling deposits will be mortgage lending which it said depended largely on long-term funding.
The island’s largest credit union assessed that smaller credit unions could likely also fold.
So concerned are officials of the movement about the situation that a meeting was scheduled on Friday with Minister of Finance Chris Sinckler. The outcome of that meeting has not been disclosed so far.