Loans for credit union members facing financial hardship

Letitia Telesford -
Letitia Telesford -

Credit union members facing financial hardship as a result of the coronavirus pandemic will soon be able to access low-interest, short-term loans via a $100 million liquidity support fund which the government has earmarked for the credit union movement. The money is part of a broader economic stimulus package to mitigate the impact of covid19 on vulnerable groups.

In a statement Monday, the Central Finance Facility (CFF), which serves as a development finance agency to the local cooperative movement, said recent discussions involving a government ministerial team, the Association of Cooperative Credit Union Presidents, and the Cooperative Credit Union League had been fruitful.

At an April 2 meeting to discuss a draft Memorandum of Understanding (MOU) coming out of those discussions, more than 50 credit union leaders affirmed their support for the government’s stimulus measures and confirmed that financial support for their membership would materialise despite the potential for increased costs, heavier workloads and other risks.

According to the CFF, that support would come, primarily, in the form of loans for members who have lost their jobs and loans to business owners looking to prevent staff layoffs.

The CFF said it would also offer financing to members who were looking to implement operational contingencies to ensure business continuity in light of covid19 stay-at-home orders.

CFF President Letitia Telesford told Newsday that under the proposed facility, credit union members could borrow up to $5,000 per month for a maximum term of three months.

The interest rate on each loan would be 0.5 percent on the reducing balance, a key feature of credit union lending that incentivises faster loan repayments by charging interest only on the unpaid portion of the loan.

Telesford explained how the process would work:

“Basically, the member would go to their credit union providing all the relevant proof of having a reduced income whether it’s total retrenchment or just a reduction,” said Telesford. “The credit union would then be able to give them up to fifty percent of their salary but this is loan—this is not a grant. We have to pay back this money.”

The kinks are still being worked out, but according to Telesford, individual credit unions would file monthly reports with the CFF which will in turn file a report with the government for reimbursements.

Based on the terms of the MOU, the government is supposed to issue reimbursement cheques directly to credit unions within fifteen days.

So far no money has changed hands but the CFF leadership expects an agreement with stakeholders in days, adding that they are ultimately driven by a member-first ethos that has held the movement together for generations.

“The gist of our meeting was that whether the government stepped in or not,” said Telesford, “we have to help our members.”

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