Richard Deane, Business Writer

General manager of the Jamaica Public Service (JPS) Employees Co-operative Credit Union Limited, Joydene Jarret outlines the financial institution's performance at the 53rd annual general meeting, held at the JPS Sports and Social Club, Ruthven Road in St Andrew on Saturday. Standing at left is the credit union's president, Derrick Tulloch. - Winston Sill/Freelance Photographer

The lure of astronomical returns by alternative investment schemes may have enticed members of the JPS Employees' Co-operative Credit Union to take a significant chunk of savings out of the institution last year, but the co-op was still able to report a robust 55 per cent hike in its surplus for 2007.

Surplus jumped from $29 million in 2006 to $45 million last year, the credit union's treasurer Gerlyn Gray, told its annual general meeting on Saturday.

Strong performance

But Gray said that this strong performance was despite the competition for cash felt by her organisation from the several unregulated schemes, which, at their height offered Jamaicans interest as high as 200 per cent a year.

"The credit union also felt the impact of alternative investment schemes," Gray said at the AGM. "This resulted in a decrease of 5.41 per cent or $53.91 million in our saving portfolio at the end of the year."

It is perhaps the first time that an official of a formal, although small, financial institution has publicly quantified the specific impact on their business by what Jamaica's Financial Services Commission (FSC) labels as unregulated financial organisations (UFOs).

But in a subsequent interview the credit union's general manager, Joydene Jarret, sought to soften Grey's assessment of the effect of UFOs. She admitted that the alternative schemes did draw away deposits, but that was not the only reason why savers pulled their money.

The FSC has had running court battles with a number of these organisations, which resisted its attempts to bring them under its regulatory umbrella, arguing mostly that they are private investment clubs. While some of these schemes apparently trade in foreign exchange on the global market, the business of others has been hard to determine, and the FSC has consistently warned investors against the dangers of Ponzi schemes.

Among the most widely known of the so-called alternatives, is the Carlos Hill-led Cash Plus Group, which outlined a raft of investments in real estate and other businesses. The scheme, however went into voluntary receivership last week, apparently after it became clear that it could not pay back depositors/investors billions of dollars in principal and interest. The company, which resisted but lately ended its court attempts to block FSC regulation, blames its troubles on banks which closed its accounts after Cash Plus failed to provide adequate information about its business.

The savings siphoned away by the alternative schemes may have in some way limited the capacity of the JPS credit union, but the organisation benefited from lower interest rates during the year, which kept its interest expenses in check.

In fact, interest expenses declined $5.1 million, or approximately four-and-half per cent, when compared to 2006.

"In reaction to trends in the market, interest rates were adjusted downward in 2007, thus contributing to the decrease in expenditure for the year," Gray explained.

At the same time, interest income increased by $20.7 million, or just under 10 per cent, moving from $217.78 million to $238.49 million.

richard.deane@gleanerjm.com