Unions are opposed to the legal reform which aims to extend the scope of the supervision of the Superintendent of Financial System over savings and loans cooperatives.
In the view of Julio Cesar Portillo, secretary of the board of the National Commission for credit unions in El Salvador and CEO of Co-Andes de R.L. ,"... the reform presented to the Legislature, seeks to impose on savings and loans cooperatives a framework of regulation and supervision which is exclusively for private financial companies and for-profit institutions such as banks. "
In the second quarter of 2016 three entities accounted for 63% of the assets of the cooperative system, which accounts for 10% of the Costa Rican financial system.
From a report by Fitch Ratings:
Cooperatives in Costa Rica: Defaults and Pressured Profitability
Concentration of Business Model: The cooperatives rated by Fitch Ratings (Coopenae, Coopeservidores and Coopeande 1) are the three largest in Costa Rica and account for 63.3% of the assets of the cooperative system, a sector that still has a low participation in the national financial system(10.6%). These entities have a business model focused on consumer finance for its members, which makes them dependent on the behavior of a single segment.
In the view of the union of cooperatives the Law on Social Solidarity Economy being discussed in Congress is unnecessary and will only create more bureaucracy and duplicity of functions.
More bureaucracy, confusion in the application of the laws governing cooperatives and duplication of functions is what will come from, if approved, the Social Economy Act, which is being promoted by the Solis administration. This is the approach of the National Council of Cooperatives (Conacoop), an entity created by law and who has the power to make rules for the sector.
Since mid-2014 credit unions and mutuals have had to increase their reserves due to an increase in expected losses by banks.
The need to increase reserves due to increased losses expected to be suffered by institutions for non-payment of their debts is mainly due to a greater number of "bad debtors" according to an article on Elfinancierocr.com.
In Costa Rica a bill has been put forward which aims to allow cooperatives and private and public pensions funds to invest in public infrastructure.
The bill introduced in the Legislative Assembly "... aims to allow different private and public organizations dedicated to raising money from pension funds, to invest in the construction of public works."
As part of the reform to the tax concentration law cooperatives are calling for the elimination of the retention of 1% per month on their gross income and for a special tax rule to be created.
The Concertación Tax Act indicates that cooperatives are free to pay income tax if their gross annual incomes are less than or equal to $1.5 million. However, this same law also states that 1% must be retained per month in advance even if the stated income level is not reached.
Between 2006 and 2013 the number of agencies in the network of cooperatives in the country doubled.
Salvadoran Credit Unions have experienced a significant increase in the last year in order to expand financial services in most areas of the country.
The Federation of Savings and Credit Cooperatives of El Salvador (Fedecaces) announced that "growth is supported by an increase of over 20% in the portfolio of loans and deposits, after the close of 2013."
At the request of producer cooperatives Congress is considering eliminating the tax for the sector.
What has been suggested is reforming a decree which "designates a 1.5% retention of Income Tax (ISR by its initials in Spanish) on cooperatives for their agricultural activities, which according to these entities affects them, because they generate illiquidity and this prevents coffee farming being a sustainable activity," noted an article in Laprensagrafica.com.
The reform of 47 articles of the old Law on Cooperatives and the addition of another 14 has been agreed to by the Honduran cooperative movement.
An article in Proceso.hn reports that the nationalist deputy Rolando Dubón Bueso noted that "cooperatives favor the development of a democratic economy which is people-centered, and which cares for the environment while promoting economic growth, social justice and a fair form of globalization. "
In El Salvador, any business or individual can act as a financial intermediary with the support of a financial institution.
The regulation, which will take effect on August 1, enables banks to make agreements with third parties who can receive deposits from the public or lend money, up to certain limits, backed by a financial institution.
The model, which is already operating in countries like Colombia, seeks to expand the scope of financial services beyond bank branches.
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