Born From Church Credit Unions, First Heritage Wipes Out a $189 Million Deficit

• First Heritage grew from church credit unions merged in the 1980s
• It cleared a $189.68 million deficit and posted a $241.4 million surplus
• Delinquency fell from 14 per cent in 2016 to 8.42 per cent in 2018
• Its loan book stood at $8.04 billion

A credit union with roots in Jamaica’s churches has climbed out of the red. The Gleaner reported that First Heritage Co-operative Credit Union posted a surplus of $241.4 million for 2018, more than double the $100 million it made in 2017, and wiped out the $189.68 million deficit it had in 2016.

The institution’s history runs through the church. According to the Gleaner, First Heritage “came out of a series of mergers, starting with the combination of a number of church credit unions which merged in the 1980s to create Churches Co-operative Credit Union.” Churches then merged with GSB Credit Union, which served government workers, to form First Heritage in 2012, before a final tie-up with St Thomas Credit Union in 2015. It is now Jamaica’s fourth-largest credit union.

Lending drove the turnaround. The loan book reached $8.04 billion, disbursements rose by more than $1 billion to $4.76 billion, and interest from loans increased to $1.34 billion from $1.04 billion. Delinquency, the share of loans in arrears, fell from 14 per cent in 2016 to 8.42 per cent in 2018, with a target of seven per cent for 2019, against an industry benchmark of five per cent. Loan impairments tripled to $107.37 million, which chief executive Roxann Linton attributed to a stricter accounting standard: “IFRS 9 is a stricter standard for provisioning and as such … it affected the bad-debt numbers.”

Ms Linton said member engagement was key. “Without that relationship and engagement with our members, we’re always at risk, especially in the environment that we’re in now where you see increased competition,” she said. “At the same time, we must say that it is a process rather than a destination.”

For church members, the story is a reminder that congregations once built their own financial institutions, pooling small savings to lend to one another. It also shows the discipline that requires: when too many borrowers fall behind, the whole membership pays. Churches thinking about savings clubs, partner schemes or housing funds for members can learn from both the ambition and the hard lessons of the credit unions that grew from their pews.

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