5 months ago
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The latest credit union merger involving Gateway and EduCom has got approval from their memberships, shrinking the movement once again.
But the umbrella body that speaks for all credit unions, JCCUL, says it’s likely that even more tie-ups will be initiated within this year, eventually leading to around six to 12 more projected mergers within three years. The way JCCUL sees it, there may well be no more than a dozen community banks in operation in the medium term.
Acting CEO of EduCom Co-operative Credit Union, Camille Drummond, said a joint project team is now working out the finer details of the merger, having secured the nod from the memberships.
“This particular merger is really the combination of two very strong entities, equally strong entities, and this presents such a significant opportunity for our stakeholders. We’re really looking forward to be stronger together and impacting the lives of many,” Drummond said.
She added that an aggressive timeline of January 2025 has been set to complete the combination of the two entities, the name of which is to be decided through a ‘name your credit union competition’ that will be open to all members of the two credit unions.
The movement has seen a spate of mergers over the past decade or more amid positioning to strengthen balance sheets ahead of the sector’s transaction to central bank oversight.
From more than 40, the credit union movement has been culled to 25 operators. The Gateway-EduCom merger will cut that number to to 24, with more reductions likely to come.
Jamaica Cooperative Credit Union League CEO Robin Levy noted that there was a time in recent history when the movement sported more than 130 members. But in the early 2000s a merger task force was formed to combine credit union that were alike, that is, those having similar bonds and therefore similar membership.
That initiative led to a shrinkage of the sector to around 45 credit unions, which were further merged to now number 25.
Levy says going forward there will be even more mergers, news of which should percolate into the public by year end.
“We’re not sure that will be completed by that time; what I do know is that in another year or two we should be below 20,” Levy said, later adding that the final number could end up between 12 and 18 credit unions.
At last estimate, there were about one million credit union members served by the 25 entities. Levy is urging those members not to be alarmed by the coming changes, but seek instead to get actively involved in the process, as the tie-ups are meant to make the sector healthier.
“Some of these are just natural things that have been spoken about and have been in the pipeline, maybe for decades. They may have different reasons such as looking at costs, efficiencies, and a variety of reasons,” he said.
He also cited one example of why it makes sense for small operators to merge: the size of the investment needed to procure software for online platforms. While spending millions of dollars is doable for banks with billions of assets, it’s onerous for a credit union whose asset size is counted in hundreds of millions, and therefore better to take on such expenditure at scale through merged operations.
Comparatively, the credit union sector with assets totalling $180 billion spread among 25 institutions is a fraction of the size of the commercial banking market, with $2.47 trillion of assets held by eight banks.
A few credit unions are already having discussions regarding tie-ups, Levy said, but declined to name them, saying that it could lead to hurtful speculation.
“I’m not sure that would be wise at this time, especially since it may start a rumour. Let’s just say that there are some very obvious candidates,” he added.
Based on the Financial Gleaner’s own assessment of the list of credit unions, the Jamaica Police Credit Union, JDF Credit Union and the Essential Services Credit Union, serving mostly workers in the correctional services, seem like a natural fit. And, small credit unions such as Broadcast and Allied Services, Jamaica Postal, and Insurance Services Credit Union, might also benefit from merger deals with others, especially with the more stringent regulatory oversight expected from the Bank of Jamaica once the central bank officially assumes the role of supervisor of the sector.
Levy still declined to comment on the current suitors.
He noted that the pending changes would not upend the movement’s ethos of personalised service.
“Credit unions will always be member-owned, or it won’t be a credit union; it will be something else. As long as the members are in charge, the members own it, meaning ‘one person, one vote’, regardless of how much money a member has. That is in the Act and that is in the DNA of credit unions,” he said.
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