More aggressive marketing and a tightening of credit by commercial banks has driven a surge in membership and profitability at one of the country's largest credit unions, according to its chairman.

Alfred Poitier, chairman of the National Workers Co-Operative Credit Union Ltd. (NWCCU), said the credit union has seen "enormous growth" in membership to around 8,500 members and has doubled its profitability in the first six months of the year, while continuing to balance its obligations to provide a service that is not entirely "profit-driven".

Total deposits with the NWCCU have grown by close to $9 million the past three years, to $48 million.

Poitier's comments come as The Central Bank of The Bahamas, in its Quarterly Economic Review, said that the credit union sector has "continued to expand over the year" with the assets of the 10 credit unions expanding by an estimated $29.9 million (10.9 percent) to $303.1 million, keeping pace with the 10.1 percent growth in 2011.

Loans outstanding advanced by some $20.6 million (11.4 percent) to $200.6 million, with consumer credit and mortgages comprising the largest shares, at 75.4 percent and 5.9 percent respectively.

In line with the growth in membership, the deposit base expanded by an estimated $5.6 million (2.4 percent) to $235.4 million, the bulk of which related to members savings (50 percent) and term deposits (44.1 per cent).

Putting these figures into context, Poitier said: "If you look at credit unions historically in depressed economies they tend to thrive and this has a lot to do with one of underlying principles of credit unions - that they are designed to serve the underserved; those considered to be unbankable. When people can't get the credit they need through the commercial banks they often tend to look at credit unions - worldwide not just in The Bahamas."

In the first six months of 2013, the NWCCU achieved $750,000 in profit - a figure which Poitier described as "kind of a big deal".

According to the chairman, credit unions have traditionally been quite subdued in their efforts to promote their services but this has changed in recent years.

As a result of this, and the overall downturn which led to a tightening of credit conditions by commercial banks, Poitier said that over the past two years the NWCCU has experienced "a significant increase in deposits from people in all walks of life".

"We have been trying to make it easy for people to service their normal commitments. Initially the NWCCU was founded from members of hotel workers - those who usually suffer the most in The Bahamas when there's an economic downturn. We've had to be creative in how to deal with them when they see their hours reduced, and now we've transferred that benefit into the entire community. As long as you are employed, and a Bahamas resident, you can join now."

Poitier said a key difference between the services offered by the credit union and the commercial banks is the higher rate of return on deposits. Educational savings accounts with the NWCCU offer up to 6.5 percent, while a fixed deposit account can provide 5.5 per cent. Lending rates are "on a par" with those at commercial banks.

Poitier said that the NWCCU has encouraged savings among its members by mandating savings products alongside its loans. "Our members save more than the national average, at $2,000. The national average is less than $200."

The growth in the credit union sector may be somewhat concerning to those who feel that the sector is not subject to the same stringency of regulation as commercial banks.

At present, credit unions are regulated by the Department of Cooperative Development, under the Ministry of Agriculture and Marine Resources, and have yet to come under the regulation of The Central Bank of The Bahamas.

Deposits held with credit unions are not subject to deposit insurance, which would provide for the protection of funds held in the case of an institutional collapse, as are deposits held with commercial banks up to a certain amount.

Poitier said the NWCCU met with the central bank on Monday evening to discuss proposed amendments to the draft Credit Union Bill.

The bill is the culmination of a two-year project which was instituted by The Central Bank of The Bahamas in September 2011 to ensure the institutions are managed to international standards and are eventually transitioned into central bank supervision.

Poitier said that it is not fair to say that credit unions are "unregulated" at present, asserting that the NWCCU complies with international standards, with risk management measures including putting capital aside into a "stabilization fund" in case issues may arise.

However he admitted that the passage of the Credit Union Bill would help "dispel the myth that they are not regulated or don't have structured regulation".

"I think the bill, once enacted, will give a different view of credit unions. I think in The Bahamas they are underdeveloped. In the Caribbean, North America and South America credit unions play a much larger role in society.

We're looking for positive growth and development, and for people to truly understand the role of credit unions in any society." The chairman said that at present the NWCCU is challenged with loan arrears, like the commercial banks. "It's a bit high and we would like to get that a bit lower."

However, he said that the credit union's "vetting process" is "the same" as that of commercial banks. "Our concern would be at same level as it would be or should be at banks.

The same process banks go through to vet their members, we go through. I said that credit unions are founded to serve the underserved or unbanked - that is more so with regard to people who are on a lower income, or don't have any assets, but in terms of their ability to repay, it's all relative. A commercial bank may say your income is too low, but a credit union may see your income is low but your expenses are low too, or maybe they may be living with a relative. The credit union will consider those things, but the vetting process is the same.

"With direct salary deductions we'll make a determination as to whether they have the ability to repay by looking at deductions reflected in their pay slip."

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