BRIDGETOWN, Barbados–The movement by Barbadians of their deposits out of commercial banks on this island and into credit unions is presenting both opportunities and challenges, according to local CU officials.
Anthony Pilgrim, general manager of the Barbados Cooperative and Credit Union League Limited (BCCULL), told the Barbados Advocate the extremely low interest rates on deposits is driving the trend.
“We all know that deposit rates at commercial banks are virtually zero, that is well known, and recently Scotiabank carried their rates even lower,” Pilgrim was quoted as saying. He added credit unions have become even more attractive to depositors who are migrating from the banks.
The challenge for credit unions, he said, is how to use the additional cash to the benefit of the movement.
Pilgrim told the Advocate credit unions are working to strike a balance by growing their loans and exploring other opportunities for investments.
Pilgrim added local credit unions have also reduced their rates somewhat.
Currently credit unions in Barbados offer rates that range between 1.5% and 2% on deposits, although some CUs pay a little more, according the Barbados Advocate. Commercial banks are paying below 1% and in some cases 0%.
“The prevailing low interest rate regime in Barbados followed a decision three years ago by the Central Bank of Barbados to cease fixing the minimum deposit rate and instead allow commercial banks and other finance houses to set the rates,” the Advocate reported. “Several Barbadians have remained hopping mad about the decision since the rates at the banks plunged from 2.5% to what is now on offer.”
Pilgrim told the Advocate he does not believe the Central Bank will revisit the matter despite calls for it to do so.