Discussion on Credit Union Impact in Budget 2017
The UWI Credit Union post-budget forum highlights the impact of Budget 2017 on individual CU members, focusing on price increases, property tax, educational funding, and government liabilities. Recommendations for CU actions and questions for discussion are presented, emphasizing the need for unity in lobbying efforts.
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UWI CREDIT UNION POST BUDGET FORUM Martin G. Franklin 17thOctober 2016
Lone Reference to Credit Unions in the Budget Further, we are strengthening the co-operative and the credit union sectors to provide improved services to their members. Public consultations have been completed and the legislative framework is expected to be introduced in Parliament in FY2017. (pg 36) It is imperative that the entire CU Movement be united in their lobby with the Ministry of Labour & the Central Bank on the revised draft legislation.
Order of Presentation The rest of this presentation is organised into three (3) parts: 1. A focus on the ways in which the Measures proposed in Budget 2017 will impact Individual CU Members 2. Suggested Action for CUs in light of the Measures proposed in Budget 2017 3. One Question each for the Movement and for UWICU
Touching Individual CU Members Expect some upward movement in prices of goods and services as businesses and transportation providers seek to pass on the increased costs of the 15% Increase in Diesel Fuel from $1.98/ltr to $2.30/ltr. Homeowners will be required to pay Property Tax for the first time after a break of some 6-7 years. Tax will be assessed on the basis of 3% of the Annual Rateable Value (ARV) of the residential property. ARV = Expected annual rent to be obtained from TT resident tenants and as such, rental rates expected from expatriate tenants would not form the basis for the assessment
Touching Individual CU Members Members over the age of 50 registered for tertiary education will receive no GATE funding effective academic year 2016-2017. Members must begin planning for the academic year 2017-2018 when students from h/holds with monthly incomes [$10,000 , $30,000] will pay 25% of fees > $30,000 will pay 50% of fees Post grads subject to medium term development needs Government has put on public record its intention to meet Backpay Liabilities for the Protective Services by March 2017 as well as negotiate and fund 2011-2014 wage settlements for TTEC, Petrotrin, Trinmar, NP, UWI and UTT. Total Liabilities = $6billion
Touching Individual CU Members Reduction in Allocation to CEPEP Reduction in Allocation to URP Reduction in Transfers and Subsidies to Public Utilities Return to Government Savings Bonds; Dominations of $1000 3yr Bond 3%; 5yr Bond 3.5%; 7yr Bond 3.75% Maximum Holding across all 3 classes - $100,000 Introduction of Housing Bonds and Education Bonds
Touching Individual CU Members BYOD Bring Your Own Device Policy for CSEC and CAPE students Sale of Assets to generate $4.1b which will be applied to closing the $16b gap between Budgeted Core Revenue and Budgeted Total Expenditure 51% NGC s Shareholding in TTNGL $1.5b 20% of TTGovt s Shareholding in FC Holdings Ltd. $1.5b 50% of Industrial Estates currently vested in eTeck $0.5b Special arrangements will be put in place for existing shareholders of TTNGL and FC Holdings Ltd. to access the IPOs.
Touching Individual CU Members Legislation for the improvement in tax administration (The Revenue Authority) integrating BIR and Customs & Excise by 2ndqtr 2017. tax leakage (3/5 majority; maturity)
Implications for CUs Assist members in surviving the macro economic conditions in the short term and preferably be poised to be stronger in the medium term. CUs must intensify efforts aimed at encouraging members to be prudent and to budget. CUs must point members to the difference between wealth consumption and wealth creation and provide them with the knowledge and skills to balance these. CUs must enhance Loan Consolidation and Debt Restructuring Product in anticipation of the increase in the number of distressed members
Implications for CUs Focus members on Energy Efficiency and the alternative of Renewable Energy (in particular, solar) and design products that will assist members to convert to CNG and installing Solar Systems Restructuring of the Petrotrin Debt Burden Provide more attractive interest rates on mutual funds and fixed deposit accounts in preparation for the $6b backpay payout Push to be Agents (and even Investors) for the Savings Bonds; Provide Loans for the purchase of bonds by members and create short tem liquidity by dealing in the Bonds.
Implications for CUs Incentives for stimulating agricultural sector in Budget 2017 Tax holiday for agri-processing operations in which at least 75% of processing is done in TT and 75% of the ingredients were produced or harvested locally Agro-processing Parks in Moruga and Wallerfield initially Irrigation Projects, Access Roads, Upgrade of Fish landing Sites Modernisation of land records CUs must innovatively craft products that can support this initiative having regard to the threat to Food Security; the potential of this sector in the context of the diversification of the economy; the potential for linkages with the School Feeding Programme, the proposed Sandals Hotel in Tobago and the Hotel to be constructed in St Clair; and the emphasis in the Budget on Cocoa and Coconut Industries Be on the alert for opportunities to partner with others to profitably build capacity (and provide loan funding) in processing, business strategy, operations management, packaging, marketing and distribution etc.
Implications for CUs Budget makes provision of $5m annually for the Entrepreneurial Talent Grant. Mere skimming of the surface CUs must forge partnerships with institutions that provide incubators for potential entrepreneurs e.g. Youth Business of T&T (YBTT), National integrated Business Incubator System (IBIS) and the Centre for Enterprise development (CEDCARIRI) Design loan products for entrepreneurs who have undergone the training and incubator period and require financing in excess of the funds provided by these institutions to expand their business. CUs need to come together to manage the risk
Implications for CUs Diversification Strategy identified Maritime Services (ship repair and dry docking) Creative industries (cultural museum, Carnival Institute, diplomatic infrastructure) Energy Services (export to Ghana, Guyana & elsewhere) Tourism CUs must invest in the market research required to identify financing and capacity building needs of SMEs in the maritime, creative and tourism services so as to identify products and services needed to advance these SMEs Lobby for a Partial Loan Guarantee Scheme (govt, development banks, CUs, commercial banks) and a Collateral Registry for SMEs (pledge AR towards WC and build credit rating/loan relationship)
Implications for CUs Housing Provisions in Finance (No 2) Act of 2016 for a Multi-family Dwelling Tax Incentive Tax exemption up to December 2025 on profits from the initial sale or on premiums/rents derived from the letting of newly constructed multi-family dwellings constructed after 1 July 2016. No clear definition of Multi-family Dwelling to date No regulations to date This has the prospect of changing the economic analysis of housing initiatives for CUs. Potential for expanding the Mortgage Financing Facility recently started by CFF
CUs More importantly, the Movement must innovate and create a bigger space for itself notwithstanding the pending changes to the legislative framework and the increasing cost of operations arising out of the increased requirements of the regulators. Educate our members; financial education, money management Increase Revenue from Investments Create niche products targeted at the Millennials, Ageing Cohort, the unbanked , those requiring a second chance , Pension Products for SMEs, Health Insurance Provide ancillary services e.g Insurance, other services offered currently by the financial institutions, financial consulting, portfolio management advice Brainstorm what is needed to make CUs the primary financial institution for their members Respond to competition from Banks (customer care and superior customer service vital components)
Question for the CU Movement Where is the CU Movement in our schools and tertiary institutions?
Question for UWICU What do UWI students know of UWI CU? What does your Bond say about students? Should it say something about students? Where is UWICU in inculcating a Savings Culture among students Can UWICU design limited products/services to students prior to graduation: Can UWICU consider being associated with an incubator (possibly with NEDCO) and/or a Co-Curricular Course on campus Why not lock students in with the aim of being their Financial Institution of 1stor 2ndChoice post graduation?
