MCCU Annual Report - page 19

Mr. Rattray asked the Treasurer to explain “all members on record” under Permanent Shares
on page 33 of the booklet. Mr. Scott explained that at the previous AGM a motion was put to
the membership and it was voted on, that we would top-up the accounts of some members
that were not active from part of the surplus. This would re-engage members and they
would be encouraged to come in and the money that was used to top them up they would
be asked put it back. He further explained that it is a legal requirement for members to have
Permanent Shares, therefore after a while those without would have to be struck from our
books. In order not to lose the significant number of inactive members, the top-up was done.
Mr. Michael Walker sought further clarification on the percentage of members with Permanent
Shares. The Accounts Manager responded by saying that when permission was granted by
the membership to allow for the top-up, not all members were qualified for it. Members with
$500 and more were topped-up to $2,000 so they could be kept on record. Mr. Allen added
that $5 million was requested for the top-up exercise but only approximately $2.8 million was
used; however, when the dust was settled it was discovered that a number of persons who
did not have even the $500, and having used several methods to contact them, there was no
response, so without any other option, they had to be taken off the records.
Mr. Lincoln Foster asked what was the difference in interest that the Credit Union earned on
the NDX versus the interest that members pay on loans. Mr. Foster said, based on what was
happening with the NDX, asked if it would not be better for the Credit Union to encourage
members to borrow more rather than lending it to the Government. Mr. Allen responded that
interest rates are driven by market conditions. He said that there were two different rates;
one which is earn from investments, which is set by the government, and the interest that is
charged on loans are market driven and also by the need for the Organization to ensure that
interest rates are competitive. Mr. Allen also informed him that we did not have a choice in
participating in the NDX, although it was voluntary, but we needed to play our part in that
very important national event.
Mr. Foster further suggested that rather than investing with government, the Credit Union
should invest more in the members as the benefits of an organization should be flowing down
to its members. Mr. Scott explained that there was a 32% growth in loans in 2012, which
meant that the Credit Union would not refuse good loans just to put the money elsewhere
as that would not make any economic sense. He said that our main purpose is to serve the
members and to note that we have a well controlled delinquency rate. Mr. Foster pointed out
that what he meant was that the high interest rate is a deterrent to borrowing and at the
same time the Credit Union had no qualms about investing with government at low interest
rates. Mr. Scott said that the Credit Union has a pool of asset and we either lend it or invest
it and do not keep it in a vault. Mr. Foster claimed that the Credit Union was acting like a
commercial bank where it does not take the members’ circumstances into consideration. He
said that he was concerned that members would be asked to pay more interest to make for
the shortfall of the NDX. Mr. Scott said that he would notice in the next report for 2013 that
interest rates on loans were coming down.
Mr. Hubert Renford asked what would be the consequence if the Credit Union did not sign on
to the NDX. Mr. Allen explained that if we did not sign on they would have called and tried to
get us to do so, as they have done with a few other institutions. If they could not persuade
us then they would have paid us off; however, that would put us on a black list of entities
that do not have the country’s interest at heart. He said that it would also have an impact
on the negotiation that the Credit Union League had with the Bank of Jamaica regarding the
Regulations of credit unions and not participating in the NDX would have eroded the gains
that the League had made with BOJ.
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