Room of Oran | Credit unions: of the people, for the people | Company

We are fortunate in Jamaica to have a wide range of financial institutions – commercial banks, insurance companies, stockbroking firms, investment management firms, building societies and credit unions – which provide various services to people who differ in many ways to meet their needs. long-term and long-term financial needs.

We’re going to look at credit unions today. A credit union is a financial cooperative in that it is owned and operated by the people who invest their funds in it and use its financial products and services. It is non-profit in the sense that it reinvests its profits in itself and its community and distributes them to its members in the form of an annual dividend.

There are two types of credit unions, which are widely distributed across parishes in Jamaica: open bond and closed bond credit unions.

Public bond credit unions have non-exclusive membership as membership is open, applicable to most people. An example of this type of credit union is Community and Workers of Jamaica Cooperative Credit Union. Eligibility for membership includes relatives of members, people living or working in a defined area, and people recommended for membership by other members based on certain criteria.

Closed-bond credit unions are exclusive to a specific group of people with a common interest, such as where they live or work, for example, the Grace Cooperative Credit Union, whose members are current employees, retirees and GraceKennedy Group employees. and their immediate families.

Because a credit union is a cooperative, all members must have a common bond – something in common – to be eligible for membership.

Beyond that, members play a key role in the administration of the credit union as members of its board of directors and of critically important committees such as the credit committee and oversight committee. Members also participate in decision-making by voting at general meetings of the credit union. Each member has one vote regardless of the number of shares held in the fund.

To join the credit union, an individual must invest a sum of money in the entity. This is broken down into units called shares. This effectively makes the members the owners of the credit union.

Credit unions are overseen by the Department of Cooperatives and Friendly Societies on behalf of the Jamaican government, but a legislative process is underway that will eventually lead them to be regulated by the Bank of Jamaica.

The Jamaica Cooperative Credit Union League (JCCUL), the national association of credit unions, has established a self-regulatory mechanism for credit unions and will continue to serve them in a member-mandated role.

Credit unions exist to provide savings facilities to their members and make loans available to them at a lower rate than financial institutions such as commercial banks.

They operate within a framework that secures their members’ money. For example, the monitoring committee must carry out a monthly audit and submit a report to the board of directors; there is an annual external audit carried out by a professional auditor who is not a member of the credit union and who is appointed by the Registrar of Co-operative Societies; the credit union must set aside 20 percent of its annual surplus in a reserve fund; and the JCCUL has the power to place a credit union under surveillance if its members’ funds are compromised.

Credit unions offer a wide range of short- and long-term savings and loan products to their members. Importantly, credit unions offer automatic insurance coverage of up to double their members’ savings in the event of death or dismemberment.

Some of the types of loans credit unions provide to their members include mortgages, home equity, debt consolidation, education, auto, agriculture, medical, insurance car and vacation. Some credit unions also offer lines of credit to their members. Borrowers can secure their loans with cash, stocks, fixed deposits, and the assets the funds are to be used to purchase.

Credit unions offer, to a large extent, the services that commercial banks and other financial institutions offer, such as online banking and cambio services.

Credit unions do not require a large sum for individuals to join and encourage the accumulation of savings by including a portion for savings in the amount members pay when they honor their loan commitments.

Credit unions have helped many people achieve their financial and personal goals through the means they have provided to their members, young and old, to save and borrow, as well as through the role they have played in educating their members on important financial matters.

Oran A. Hall, author of Understanding Investments and lead author of The Personal Financial Planning Handbook, offers personal advice and guidance on financial planning. Email: [email protected]

Leslie M. Gill