St Catherine, EduCom credit unions to merge
The St Catherine Co-operative Credit Union (SCCU) is proposing to merge its operations with EduCom Co-operative Credit Union, partly because of increased competition from major banks and other financial institutions which have adopted some credit union approaches.
It is also informed by the pending formalisation of supervision of credit unions by the Bank of Jamaica (BOJ) and the added demands those new standards will place on credit unions, according to information outlined in a fact sheet on the merger and presented to members.
When combined, the credit union will be ranked the fifth largest in Jamaica, based on assets.
SCCU General Manager Garfield Sang confirmed that the institutions are looking towards a January 1, 2017 deadline for the merger, which is not intended to be an amalgamation but a transfer of engagement.
Sang said 78 per cent of SCCU's members gave approval for the merger, in excess of the 75 per cent required. However, EduCom's members are to vote at a later date on the proposed arrangement.
According to the fact sheet, the merger of the two co-operatives will take place by SCCU transferring all of its property, other assets and engagements to EduCom, and EduCom agreeing to accept the transfer of engagement.
Each member of SCCU will be issued shares, deposits and loans in EduCom equal to the amount they now hold in SCCU as at the date when the transfer of engagement becomes effective. This means that SCCU members will not experience any financial loss from the merger.
Some SCCU volunteers will continue to serve as volunteers of EduCom. Hence, after the merger, four of SCCU's board members will join the EduCom board and serve two-year terms in the first instance.
Board members from both companies will be freely elected thereafter. SCCU members will serve on the supervisory, credit, nomination and other committees.
Under the arrangement, effective January 1, 2017, SCCU will take on EduCom's name, but its business operations will continue.
Sang told the Financial Gleaner that the January 1 deadline was feasible because of the nature of the arrangement, since they are not seeking to create a new entity.
According to the fact sheet, another factor impacting the credit union movement in Jamaica since the early 2000s is the performance of the Jamaican economy, which led to increased operating costs as well as a reduction in the number of persons able to utilise the services.
It noted that SCCU is the merger of nine credit unions in 1977 and its board of directors has been sensitising members to the possibility of more mergers.
As a result, the board and management have engaged in exploratory talks with other credit unions but none of those discussions had reached the stage where it offered sufficient benefits for members and hence none of them needed to be brought the membership for a decision until now.
The credit unions advised members that the tie-up will strengthen their combined capital base to meet stringent central bank regulations.
A larger entity also has a greater capacity to meet the other financial, technological and human resource requirements, which improves their ability to continue to operate as they would be better able to secure a licence from the BOJ, as will be required under the new regime.
Moreover, the bigger credit union will be better able to compete among the many players in the financial sector so that rates and terms for savings and loans may become more competitive.
EduCom was established in April 2015 from the merger of Kingston-based AAMM Co-operative Credit Union which was founded in 1960, and the UWI (Mona & Community) Co-operative Credit Union, founded in 1954.
A comparative table also presented to members of the credit unions show that when combined the membership will be approximately 56,000, and there will be 11 branches spread across Kingston, St. Catherine, Mandeville and Montego Bay.
SCCU's total assets at December 2015 was $1.74 billion, while EduCom's was $5.59 billion and when combined will be $7.34 billion.
Total savings portfolio was $1.35 billion and approximately $4.17 billion for SCCU and EduCom respectively at December 2015 and when combined will be $5.52 billion. As at the same date, EduCom had the higher loan portfolio at $4.2 billion and when combined will be $5.24 billion.
The staff complement, when combined, will be 170, down from 180 at present as according to the fact sheet, duplication at the managerial levels will be eliminated on merger.