Delinquencies rise at COK
Published:Sunday | May 16, 2010 | 12:00 AM
COK Sodality Cooperative Credit Union is reporting abnormal growth in delinquent loans to levels that now pose a threat to the agency's financial health.
The credit union recorded operating gains of J$129.2 million at year ending December 2009, but made a net loss of J$38 million after a J$167 million write-off of mostly bad loans.
"Delinquent loans remain the greatest threat to the viability of COK," said president Joscelyn Jolly, reporting to members at the credit union's annual general meeting on Wednesday, May 12.
"Although it's an ongoing problem for financial institutions, where most are showing exceptional increases in 2009, it's really no comfort to us at COK," he said.
Loan arrears were J$383.78 million at the end of 2009, up from J$330.74 million for 2008, placing the delinquency rate at 8.6 per cent - higher than the five per cent target established under the Pearls Standard.
Jolly said the credit union had implemented a number of initiatives to bring borrowers back into compliance, including amnesty for delinquent members, the outsourcing of collections, confiscation of assets used as collateral, and the engagement of the services of a debt-management adviser with experience in debt collection.
COK Treasurer Christopher Robinson added that the agency had introduced a new system of detection and tracking, and the re-establishment of a delinquency control committee.
Jolly said COK was in possession of collateral valued at J$938 million used to back the delinquent loans, but was having difficulty disposing of the items.
The real problem
"One of the reasons is that because of the economic situation ... that market is not as vibrant as it used to be. So, we have been working on these matters, we have been doing repossessions, but the real problem is the speed at which we can sell or realise collateral is not as it used to be," he said.
COK is now valued by assets at J$7.69 billion, a five per cent increase that would be due to its merger with Sodality last year. Its savings portfolio also increased by seven per cent, moving to J$6.44 billion, and its investments increased by 20 per cent to J$2.25 billion.
Membership for the credit union also increased by seven per cent to 234,000, of which 5,500 were members of Sodality. The merger gave COK nationwide reach as previously, its bond, which defines the space where it can operate, confined it to Kingston. It had previously expanded to Montego Bay through acquisition and merger with the former Montego Bay Cooperative Credit Union.
"All reasonable attempts by COK to have its bond expanded to correct this untenable situation were met with strong resistance from influential persons within the movement," Jolly said in his report.
"It became evident to the directors that a strategy had to be devised to negate this threat," he said. "This merger, under the new name COK Sodality Cooperative Credit Union Limited, acquires the rights to market the COK brand of services outside the city of Kingston," he added.