CREDIT UNIONS APPREHENSIVE

With just two months to the Bank of Ghana’s deadline for all Cooperative Credit Unions in the country to obtain operating license to continue with their businesses, apprehension is increasing among Cooperatives about an anticipated repercussion.

The April 2018 deadline for all existing Cooperative Credit Unions to obtain Operating License has been necessitated by the enactment of Legislative Instrument 2225 of 2015 which has also created the Cooperative Credit Unions Supervising Agency at the Bank of Ghana to regulate activities and operations of Cooperative Credit Unions and Other

Cooperative Financial Institutions in the country. Some Managers of the Credit Unions fear that the simmering situation, if not well managed, could lead to panic withdrawal among customers and clients with a dire consequence for the financial

sector.

The Situation

 In the Ashanti region alone, there are about 185 Cooperative Credit Unions with a membership of about 30 thousand who are mostly micro scale entrepreneurs.

 These business people depend on such financial institutions for readily available and affordable as well as flexible credit facilities to either start up or boost their businesses. 

Credit Unions also substantially help in mopping up liquidity from the system such that petty traders can save as little as one Ghana Cedi a day through the ‘Susu’ scheme to meet their financial needs.

 In an interview, some customers of Credit Unions explained that they feel more comfortable doing business with those organizations than with the traditional banks because of their availability, friendly terms of business among other reasons.

"Anytime i approach my Credit Union for funds to re-capitalize my Kente business, they are ready to support", said one customer. 

The Legal Regime

Until the enactment of Legislative Instrument 2225 of 2015, Cooperative Credit Unions and related financial institutions were operating under NLCD 252 of 1968 under the supervision of the Department of Cooperatives. 

The Central Bank, since taking over supervisory role of such operators, gave the operators  about a year of grace period to obtain Operating License to regularize their business. 

The deadline expires next month, April 2018. The Central Bank has already recommended mergers while possible takeovers of those that would not be able to meet the timeline. 

The Apprehension

It has also been gathered that during this period of regularization, some workers, Directors and Mangers are likely to lose their jobs as a result of the stringent requirements. 

Apart from the fear this has generated among the workforce, Managers and Directors say the Form given them to apply for the Operating License is not only complex but lacks clarity for completion. 

The President of the Saint Martin De Porres Cooperative Cooperative Credit Union, Osei Frimpong, said the Board of Directors was reconstituted only five months ago and thus would need more time to study and properly complete the Application Form. According to him, the Central Bank must be careful in enforcing its directive in other not to jeopardize the Credit Union industry. 

He questioned "what will happen to the five thousand active members we have if they withdraw our Registration after the deadline?"

 The Manager of the Garden City Radio Fan Clubs Cooperative Credit Union, Kingsford Owusu Ansah, said if the Bank of Ghana’s directives are not properly managed, it could cause panic among the many people, mostly micro scale enterpreneurs who rely on Credit Unions for start-up or top-up capital to grow or sustain their businesses. 

According to Mr. Owusu Ansah, there is the need for extensive education on the new measure for all the key players to engender confidence and trust in the industry.

The General Manager of the Saint Martin’s Credit Union, Augustine Freduah Agyemang, said the Bank of Ghana must be clear about some of the criteria and also simplify the Application Form for completion.