Monday, May 07, 2007

Help Independent Credit Cooperatives Today

Make a crucial decision today and become members of two cooperative societies, before it is too late: TCC, "the credit cooperative with a heart", and TRC Multi-Purpose Cooperative Society Ltd!

If you are unconvinced, read on to find out more.

Credit cooperative societies play an important but understated role in our society.

Every month, a member of the society makes a fixed monthly contribution to the cooperative society. This act of constant giving generates a pool of funds for the members to tap.

Members can then take credit facilities at interest rates much lower than what banks would normally provide.

Credit cooperative societies have effectively reached out to individuals that many banks would rather turn away; individuals who would otherwise fall prey to illegal moneylenders.

These lenders often charge exorbitant interest rates and will stoop to the lowest levels - including the use of brute force - to recover their funds from such debtors.

Unlike banks whose main focus is to generate shareholder value, credit cooperatives focus on generating goodwill among members.

They do so, for example, by providing financial assistance and scholarships to the less fortunate in a manner more robust than most banks.

A recent amendment to the Cooperative Societies Act proposed by the Registrar of Cooperative Societies will limit the ability of such cooperatives to tap that spirit of giving in order to help the less fortunate.

Once Parliament passes the proposed amendment, these credit cooperatives will only be able to market themselves or reach out to a limited group of individuals.

The rationale for this amendment is that it will promote good corporate governance and provide a risk-based approach in the oversight of these cooperatives.

The regulator has noted as much in its public announcement, "Credit co-ops are not regulated to the same level as financial institutions and should only play a niche role in the Singapore financial system. They should not open their membership to the general public, but should only serve a defined group of members which share a pre-existing affiliation to each other."

However, this is being read in some circles as protecting the reach of banks, which are an extremely powerful lobby in Singapore's financial sector.

The announcement is also perceived to appease another powerful group in Singapore - the trade unions. The compromise reads, "The existing union-linked credit co-ops and other large credit co-ops with broad potential reach will not need to redefine their membership base. However, they will not be allowed to add to their already large (potential) membership base by amending their by-laws to expand their membership definitions or add new groups of members."

As a result, less powerful and independent credit cooperative societies which do equally important work will find themselves extremely disadvantaged by the proposal.

These include TCC, "the credit cooperative with a heart"; and TRC Multi-Purpose Cooperative Society Ltd, a credit cooperative which seeks "to promote greater awareness and consciousness of a progressive and improved lifestyle among members of the Indian community".

The regulator has sought to console these less powerful and independent credit cooperative societies by saying that: "Individuals who obtained co-op membership before new regulations were in place will be allowed to continue as members even if they do not fall within the new membership definition of the credit co-op. As a concession to existing credit co-ops which have genuine difficulties in redefining their membership due to their particular circumstances, the credit co-op may apply to the regulator for special consideration."

How open the regulator will be to "special consideration" remains a huge unknown.

But going by the reaction of these less powerful and independent credit cooperative societies, which are currently executing various membership referral initiatives, it is unlikely that there will be much room for them to negotiate after this defined membership regulatory regime is implemented.

With the recent negative publicity in Singapore about the raising of funds by charitable bodies, it is highly likely that the regulator will get its way.

Concerned by this development, I have sent in my applications to become a member of TCC through its website.

Above all, reader, I hope you will likewise join me in this intiative in order to enable less powerful and independent credit cooperatives to extend help to the financially needy and less fortunate in our society. And likewise, do encourage your loved ones to do the same too.

It is only with a strong pool of members that less powerful and independent credit cooperatives can continue to make a meaningful difference in our society. You can help make that difference today, before it is too late!

Dharmendra Yadav

Please consider the environment - do you really need to print this?

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