Up until 2008, credit co-operatives were self-regulated. The turning point was when the financial crisis hit the world and Singapore was not spared.
The crisis highlighted the importance and complexities of the financial markets and governance issues. Subsequently, legislation was introduced to regulate credit co-operatives and amendments to the Co-operative Act were eventually passed in Parliament. The Registry of Co-operative Societies proposed a set of Prudential Conditions for compliance by credit co-operatives. The timeline given for compliance was rather short.
It was a trying and challenging period for credit co-operatives. Changes are always difficult, more so when historically none of the credit co-operatives have collapsed due to investment, low liquidity, bad debts and/or low capital adequacy ratio etc. Co-operatives did not see the need for these Prudential Conditions as they were generally conservative in approach mindful that they were custodians of the members’ monies.
Singapore National Co-operative Federation (SNCF), the apex body of the Singapore co-operative movement, played an important and critical role in engaging the government and facilitating ground up feedback from co-operatives. SNCF did a Study on the Impact of these Prudential Conditions on the co-operatives’ businesses and how these conditions would affect their members whom they serve.
SNCF also engaged the assistance of the World Council of Credit Unions (WOCCU) to share their international experiences with both the Registry and co-operatives. WOCCU, being the ‘neutral’ professional body helped in sharing the experiences of other countries with what worked and what did not. SNCF also engaged the global body to train through a hands-on workshop, the credit co-operatives on the merits of these financial ratios.
It was important for SNCF to build trust with the Registry and also with its credit co-operatives members. The tripartite relationship was critical in working out an amicable plan to reach the outcome of the Prudential Requirements i.e. to manage risk and to protect members’ capital and savings in order for the sustainability of the credit co-operatives.
SNCF continues to engage the Registry and the Ministry. To date, six Prudential Conditions have been announced and they introduced a risk-focused regulatory framework that gives co-ops greater operating flexibility while elevating their levels of governance and accountability. Through this exercise, we know that the Government listens to the feedback while the credit co-operatives demonstrate that they are managing their risk well as they improve on their capability and governance.
The International Year of Co-operatives 2012 is timely as it helps jumpstart SNCF efforts to create the awareness of co-operatives and its contributions to the Government, the schools, the young, the seniors and the community. It also helps to bring together all co-operatives as one movement, to bond and make a difference in society.