IMF ranks St Lucia largest credit union sector in ECCU

By Caribbean News Global

TORONTO, Canada, (CNG Business) – The International Monetary Fund (IMF) ranks Saint Lucia as “having the largest credit union sector within the Eastern Caribbean Currency Union (ECCU),” noted the economic and social review 2021.

“ A recent IMF consultation report indicated that credit unions’ private deposit growth continues to outpace that of commercial banks. Total withdrawable shares and deposits for the year ended December 31, 2021, amounted to $1, 079.8 million which is a 12.0 percent increase from the year 2020.”

The economic and social review 2021, reads:

“Credit Unions are member-based registered financial co-operatives, which exist to serve their members, through thrift promotion and the establishment of credit lines. They are not-for-profit organizations with a key emphasis on the financial sustainable development of their members and by extension the wider communities in which they operate. Thus, one of the credit unions’ principal mandates is that of members’ overall social and economic development, which in turn plays a significant role in contributing to the socio-economic development of Saint Lucia. To date, there are a total of 16 registered credit unions and one credit union league operating in Saint Lucia.”

“In spite of the increased economic pressures of the COVID-19 pandemic, the overall performance of the sector for the year ended December 31, 2021, was deemed to be relatively stable with increases in total assets, institutional capital, liquidity and equity. For instance, total assets have continued to grow over the past eight years. Although there have been slight fluctuations in the levels of growth, at no point in time, in the past eight years did the total assets figure ever decrease,” documenting that, “Total assets grew by 11.0 percent in 2019, then grew at a slower pace of 8.0 percent in 2020 (owing to the adverse effects of the COVID-19 pandemic and growing levels of unemployment) after which it rose again, by 11.0 percent in 2021.”

Relative to the Credit Unions’ capital and total assets, said the economic and social review 2021: “ Institutional capital grew again, this time by 6.4 percent in 2021.”

The report noted that the overall delinquency ratio within the sector has been on a steady decline, for the past eight years, with the exception of 2020 in which the total delinquent loans over total loans ratio increased from 9.0 percent to 13.0 percent, which is signifciantly above the 5.0 percent PEARLS maximum benchmark. The most impactful change however, relating to delinquency was in 2021 when the ratio dipped from 13.0 percent to 10.0 percent.

“The sectors gross loans at year end 2020 amounted to $766.3M and by yearend 2021 has increased to $891.6M – a 16 percent percent increase. Delinquent loans over 90- days fell by 2.4 percent, decreasing from $67.1M in 2020 to $65.5M in 2021, mirroring a small but extremely significant improvement for the sector. These figures are representative of slow but steady progress in the recovery of the economy from the COVID-19 pandemic. Moderate headway has been noted from the sector, as various industries in the likes of tourism, fisheries and agriculture have begun to regain their presence, thereby resulting in a reduced rate of unemployment, owing to the gradual abating of the pandemic.”

“Noteworthy also is that total provisioning increased by $11.8 million or 42.0 percent, moving from $28.2 million in 2020 to $40.0 million in 2021, signifying heavily reduced risk exposure as it relates to impaired assets. This was occasioned, in part, by the FSRA’s enforcement of the Regulatory Provisioning Requirement under Regulation 30 of the Co-operative Societies Regulations,” the economic and social review 2021, continued.

“The sector remained liquid in the last few years … whereby the average sector liquidity ratio between 2019 and 2021 exceeded the minimum benchmark ( 15.0% as set by PEARLS). It is important to note a decline in the liquidity ratio by 9.0 percentage points from 2019 (44.0 percent) to 2020 (35.0 percent) which could be attributed to the global pandemic. However, the sector displayed signs of growth in average liquidity from 2020 (35.0 percent) to 2021 (39.0 percent) with a notable increase in this ratio by 4.0 percent.

“The sector continues to thrive with regards to liquidity to the extent that a few credit unions have expressed concerns over having excess liquidity, associated with declining interest rates which resulted in reduced yields,” noted the economic and social review 2021.

PEARLS – The Credit Union monitoring system: Protection, Effective Financial Structure, Asset Quality, Rates of Return and Cost, Liquidity, and Signs of Growth.