Treasurer’s Report

Fellow members, the days of ‘ti boutique’ in reference to our Credit Union are long gone. There is no question, we are now among the key players operating in the financial landscape of St Lucia. I wonder whether the founding members ever envisioned that their hard-earned savings, which formed the foundation of this institution, would help to build what we have become. Congratulations to each of you for playing your part to bring us here. Having said this, I must remind you that such a position comes with a responsibility that is not only for the Board, the various Committees or the members of staff, but for every member of the institution. With the challenges that 2020 have presented so far, we must work together as a true family if we are to at least break-even at the end of this financial year.

On behalf of the Board of Directors, it gives me great pleasure to present the financial report of the Mon Repos Eastern Co-Operative Credit Union for the year ending December 31, 2019.

Summary of Key Financial Activities for 2019

1. Key Accounting Ratios

Net Worth Ratio – 8.98%

Loans to Asset Ratio – 63.08%

Return on Asset Ratio – 1.85%

Delinquency Ratio - 4.46%

2. Other Highlights

St Lucia experienced growth of 1.73% in 2019.

Although the economy grew, the unemployment rate decreased by only 0.17% from 20.88% in 2018 to 20.71%. The estimated youth unemployment rate, while the lowest since 2015, continues to be high at 45.23%. We can all appreciate why this situation continues to be a concern given that the Central Statistics Office in St Lucia defines youth as ages 15-29. Liquidity continued to be high in the domestic financial market in 2019 resulting in competitive interest rate adjustments among financial institutions as each tried to attract

customers in an effort to increase their loan portfolio. The liquidity position had the effect of increasing the cost of funds as savings increased while options for placing excess cash remained limited.

Interest rate adjustment downwards for mortgage loans Credit Life insurance with maximum coverage of $400,000 took effectin the last quarter of 2019, providing added protection for the loan portfolio and for members. The ATM was installed at the Mon Repos branch in December 2019 accounts 24/7, two (2) months later. and access to

MEMBERSHIP

At December 31, 2019 there were 7,472 members up from 6,762 in 2018. This represented growth of 10.50% or 710, of which almost 50% were at the Vieux-Fort branch. During 2016 – 2019, the largest growth was in 2016 as new branch Vieux-Fort added almost 500 members. Of note is that with the exception of 2018, this branch has added at least 50% to the total. However, while the total for the Credit Union increased in each year, growth has been at a decreasing rate.

MEMBERS

2015

2016

2017

2018

2019 Mon Repos Micoud Vieux-Fort

2,512 1,718 53

2,666 1,902 550

2,850 2,069 999

3,072 2,315 1,375

3,236 2,502 1,734

Total Growth

4,283

5,118 19.50

5,918 15.63

6,762 14.26

7,472 10.50

ASSETS

The year 2019 saw the Credit Union achieving a milestone as it recorded more than one hundred million dollars in assets.

At December 31, 2019, total assets had increased by 15.87% or $14.12M, to $103,298,536 from $89,151,919 in 2018. The breakdown of the assets is as follow:

a)

b)

Members’ loans made up 63% ofthe total with a value of $65,163,128. This was a slight reduction of 1.12% as compared to $65,928,321 in 2018, which reflected the continuing battle between financial institutions, especially the commercial banks with more aggressive rate reductions, forthe same pool of customers. We lost a significant number of our loans in favor of other institutions with more favorable rates. A downward adjustment to rates was made during the latter part of the year with quick responses from members, however many of these loans were not able to reach disbursement stage by year-end. Cash increased from $16,045,431 in 2018 to $28,374,416, an increase of 78.84%. This was an indication of the high level of liquidity in the domestic financial market.

c) Investment was the largest component of ‘Other’, which increased from $4,546,227 in 2018 to $7,137,290, or 56.99%.

LIABILITIES

For the period ended December 31, 2019 total liabilities was $89,189,825 from $77,075,366 in 2018, an increase of 15.72%. All categories of deposits grew during 2019 as members increased savings to take advantage of more favorable rates

especially as compared to the commercial banks. The largest component, members’ fixed deposit grew by 16% over 2018 from $29,243,021 to $33,921,717. Members’ deposits went from $18,689,092 in 2018 to $25,153,912 or 34.59% while Members’ regular shares went from $27,743,255 to $28,073,867.02 or 1.19%.

The result of this increase in savings was increased cost to the institution in the form of interest on savings, while at the same time experiencing difficulty in placing those funds given the limited investment opportunities.

MEMBERS’ EQUITY

In 2019,

there was growth of 16.83% in total members’ equity, moving from $12,076,552 to $14,105,800. All components of equity increased: Members’ equity shares from $2,715,945 in 2018 to $3,127,070 or 15.14% reflecting confidence in the

institution during an equity growth campaign. Retained earnings from $2,809,772 to $2,968,779 or 5.66%. Statutory reserve from $5,510,679 to $6,312,181 or 14.54%. The statutory reserve represents a commitment by way of resolution to allocate 45% of profits to the statutory reserves.

INCOME

In 2019, gross income was $7,684,054, an increase from $7,666,012 in 2018 or by 0.24%.

Interest on members’ loans continues to be the

key source of income. 2019 recorded

$6,670,976.37 compared to $7,088,036 in 2018, a reduction of 0.06%. This can be attributed to a

reduction in interest rates on mortgage loans for members during the latter part of the year. Also,

as indicated earlier, some of the board approved loans did not get disbursed during that year. Of note, is that non-interest income increased by more than 81% in 2019, moving from 5.31% of gross income in 2018 to 9.62% in 2019.

While there was a small increase in gross income, net income for 2019 fell by 14.74% from $2,091,409 in 2018 to $1,783,124 and total comprehensive income from $2,459,726 to $1,772,571.

EXPENDITURE

There was an increase in expenditure by 24.58% moving from $4,736,496 in 2018 to $5,900,930. This was due to increases in: (1) interest on fixed deposits by 51.76%; (2) interest on regular shares and deposits by 12.91%; (3) Cuna insurance by 41.15%; (4) Legal & professional fees by 244.22%. Also contributing to the increase, was the introduction of Credit Life insurance and ATM related

costs.

OUTLOOK

Reduction in the rate of interest on vehicle loans, implemented earlier this year to make us more competitive. Rolling out of ‘24/7 Online Banking’ to all interested members in the coming weeks.

The first half of 2020 has seen the explosion of the COVID-19 virus on a global scale – an

unprecedented situation exacerbated by the interconnectedness of our economies. The negative effects of this health pandemic has led to an economic crisis which the IMF has projected will lead to the contraction of the global economy on a magnitude comparable to, or worse than the 2008 Global Financial Crisis. While St Lucia has fared well so far, in terms of affected cases of the disease, our heavy reliance on the regional and international markets, have seen the closure of a number of employment sources and by extension an increase in unemployment. How has our Credit Union responded in the short term?

Loan freeze for six (6) months for those who have lost their jobs. This took effect from March 01, 2020 and will end on September 30, 2020. Moratorium on mortgage loans for those who have received a salary reduction. Delay principal payments for those who have received a reduction in pay. Education loans of up to $5,000 at 5.5% for purchase of school books and supplies. Allowance for a separate relief loan for payment of insurance premiums on home and vehicles securing loans with the Credit Union.

The challenge we will face as a Credit Union should not be underestimated. For the first time every economy has been negatively affected, and the developed ones are not in a position to provide assistance to smaller ones like ourselves, certainly not on the level that we are used to. It means St Lucia can expect to see vast reductions in the level of remittances from relatives, as well as grants. We have not diversified effectively and most of our eggs are in a sector that is largely out of our control. Additionally, our spending vis a vis our output/revenue has left us with no cushion to sustain us in hard times. In the short to medium term, there will most likely be further increases in unemployment and/or further cuts in salaries. We will have to adjust and adapt so we can do much, much more with far less. However, it is not all gloom and doom. St Lucia and our Credit Union have immense talent and brains. We have to put our minds together to come up with ideas on how we will continue to build our organization so we can improve the well-being of our members, especially the poor and vulnerable, which can then spill over into our communities and throughout our island. This is a call for Officers, Staff and all Members to work together for our survival and continued growth. It will require us to dig deep within ourselves; it will require us to make greater sacrifices; it will require us to work so hard that at the end we will truly be able to say ‘indeed by the sweat of our brows, we accomplished this’.

Fellow co-operators I thank you in advance for your continued co-operation. May God continue to be our guide and bless our undertakings in the coming months and years.

_________________ Rufina Charlery (Ms.)

TREASURER