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Tuesday, July 8, 2025

Be­yond Thrift:

Measuring wealth creation and the W-Pearls credit union ratios

by

Taharqa Obika
19 days ago
20250619
Financial consultant,Taharqa Obika

Financial consultant,Taharqa Obika

Tahar­qa Obi­ka

Wealth cre­ation at the grass­roots lev­el calls for an in­ten­tion­al, mea­sur­able strat­e­gy for ac­cess to cred­it in the Caribbean. W-PEARLS wealth cre­ation ra­tios for cred­it unions in­tro­duce a trans­for­ma­tive fo­cus be­yond con­sump­tion fi­nanc­ing to build­ing wealth. The pur­suit of wealth has been a pas­time of hu­man­i­ty since the be­gin­ning of civil­i­sa­tion. The cred­it union move­ment is a mod­ern-day grass­roots fi­nan­cial sec­tor that sup­ports in­clu­sion and ac­cess to cred­it across the Caribbean and the globe.

Tra­di­tion­al cred­it union met­rics

Cred­it union man­age­ment is sup­port­ed by the tra­di­tion­al P.E.A.R.L.S. sys­tem of ra­tios, which as­sess­es, as the acronym out­lines, Pro­tec­tion, Ef­fec­tive Fi­nan­cial Struc­ture, As­set Qual­i­ty, Rates of Re­turn, Liq­uid­i­ty, and Signs of Growth.

In pri­or gen­er­a­tions, the pre­dom­i­nant­ly so­cial­ist Caribbean economies al­lowed cap­i­tal­ists and the gov­ern­ment to en­gage in busi­ness. There­fore, cap­i­tal for­ma­tion for en­ter­pris­es was not a ma­jor ac­tiv­i­ty for the mass­es.

Cap­i­tal for­ma­tion, sav­ings, or thrift, as re­ferred to in the co­op­er­a­tive move­ment, was di­rect­ed to ed­u­ca­tion, home own­er­ship, health­care, and recre­ation. It was and still is not un­com­mon for the biggest “loan sale” pe­ri­ods to be back-to-school, Christ­mas (home re­pairs), and even Car­ni­val or Ju­ly-Au­gust va­ca­tion, the lat­ter for recre­ation. How­ev­er, none of the above are di­rect­ly re­lat­ed to cap­i­tal for­ma­tion for en­tre­pre­neur­ship and wealth cre­ation. Though it can be ar­gued that ed­u­ca­tion even­tu­al­ly leads to bet­ter out­comes, and the po­ten­tial to gen­er­ate and store wealth. How­ev­er, the is­sue re­mains that there is no di­rect fo­cus on wealth cre­ation in the ori­en­ta­tion of the cred­it union mod­el in the Caribbean.

Leg­isla­tive lim­i­ta­tions

There are many rea­sons why cred­it unions in the Caribbean may not ap­pear to be ori­ent­ed to wealth cre­ation. One such rea­son can be found in leg­isla­tive re­stric­tions. Cred­it unions, at least in my na­tive T&T, where I once worked at the reg­u­la­tor for co­op­er­a­tives, are not al­lowed to lend to busi­ness­es in the strict sense. Cred­it Unions are on­ly al­lowed to lend to mem­bers who can ei­ther be in­di­vid­u­als or oth­er Co­op­er­a­tives. There are a lim­it­ed num­ber of ac­tive non-fi­nan­cial co­op­er­a­tives in T&T, ac­count­ing for sig­nif­i­cant­ly less than one per cent of all es­tab­lished busi­ness­es. There­fore, the busi­ness loans would be in­signif­i­cant on an of­fi­cial scale. How­ev­er, notwith­stand­ing this leg­isla­tive set­back, cred­it unions have been able to lend to busi­ness own­ers and pre­vent comin­gling by sep­a­rat­ing ac­counts. It would be a good en­deav­our to mea­sure the val­ue of these strict busi­ness loans in re­la­tion to the to­tal loan port­fo­lio.

Grass­roots em­pow­er­ment:

Wealth cre­ation at the grass­roots lev­el goes be­yond of­fi­cial busi­ness­es. Sev­er­al ac­tiv­i­ties are de­signed to gen­er­ate wealth. These wealth-cre­at­ing ac­tiv­i­ties can be shift­ed from the deck of con­sumer loans and added to the pure busi­ness loans. A com­mon case would be an in­di­vid­ual tak­ing a loan to pur­chase a car that they in­tend to use a ride-shar­ing app to op­er­ate as a pri­vate taxi. An­oth­er clas­sic ex­am­ple of en­tre­pre­neur­ial bor­row­ing can be that of a trav­eller who takes a loan to go to Mi­a­mi to pur­chase items for re­sale on re­turn to the Caribbean. Some ven­dors may bor­row to stock up on items to sell at Car­ni­val, Christ­mas, the Eman­ci­pa­tion Vil­lage in Trinidad, or oth­er fes­ti­vals. These are all in­come-gen­er­at­ing ac­tiv­i­ties, and the es­tab­lish­ment of a suite of tar­get­ted wealth cre­ation ra­tios will en­able the cred­it union to bet­ter man­age its con­tri­bu­tion to en­tre­pre­neur­ship.

Em­pow­er­ing cred­it union mem­bers:

Ex­tract­ing wealth cre­ation lend­ing from the loan port­fo­lios will al­so help cred­it union meet the needs of its mem­ber­ships. Many fam­i­lies are to­day seek­ing to cre­ate in­ter­gen­er­a­tional wealth. It will al­so help quan­ti­fy the im­pact of loans to em­pow­er mem­ber­ship. The W-PEARLS sys­tem can be used to mea­sure the par­tic­i­pa­tion and in­clu­sion of women and youth in wealth-gen­er­at­ing ac­tiv­i­ties fa­cil­i­tat­ed by the cred­it union. It can sup­port strate­gic part­ner­ships, as Sus­tain­able De­vel­op­ment Goal 4.4 aims to in­crease rel­e­vant skills for em­ploy­ment and en­tre­pre­neur­ship.

Pol­i­cy lev­el im­pli­ca­tions.

This ra­tio, use and re­port­ing can sup­port pol­i­cy for­mu­la­tion and im­ple­men­ta­tion at the na­tion­al eco­nom­ic lev­el when ag­gre­gat­ed across the ecosys­tem. For ex­am­ple, if we set a tar­get of eight per cent of wealth-cre­at­ing loans as a share of to­tal as­sets, then in the case of T&T, if it is achieved, it would mean that over $1.6 bil­lion or about US$250 mil­ion would be ac­tive­ly sup­port­ing en­tre­pre­neur­ship. This is be­cause the cred­it union sec­tor’s as­set base is re­port­ed to be US$3 bil­lion in T&T. This sta­tis­tic can sig­nif­i­cant­ly im­pact pub­lic pol­i­cy as per­tains to en­tre­pre­neur­ship de­vel­op­ment at the na­tion­al lev­el and can gar­ner added sup­port to the cred­it union move­ment in terms of ad­vo­ca­cy.

A re­gion­al call to ac­tion.

As some­one with over two decades in the fi­nan­cial, co­op­er­a­tive, and ed­u­ca­tion sec­tors and a for­mer ad­vi­sor to the Min­istry of Trade in T&T, I be­lieve that it is im­por­tant to im­ple­ment any pol­i­cy that pro­motes en­tre­pre­neur­ship de­vel­op­ment. The W-PEARLS sys­tem can sup­port the ori­en­ta­tion of cred­it union ad­min­is­tra­tors, reg­u­la­tors, and gov­ern­ment pol­i­cy mak­ers in any Caribbean ter­ri­to­ry to wealth cre­ation. As the Caribbean Con­fed­er­a­tion of Cred­it Unions (CC­CU) con­tin­ues with its trans­for­ma­tion agen­da, I in­vite cred­it unions across the re­gion to con­sid­er pi­lot­ing W-PEARLS in their in­sti­tu­tions.

Box

What is W-PEARLS

The W-PEARLS sys­tem is an in­no­v­a­tive fi­nan­cial mon­i­tor­ing and man­age­ment tool de­signed to com­ple­ment the tra­di­tion­al PEARLS frame­work used by cred­it unions, with a spe­cif­ic fo­cus on mea­sur­ing and pro­mot­ing mem­ber wealth cre­ation.

De­vel­oped by Tahar­qa Obi­ka, a fi­nan­cial strate­gist, for­mer Co­op­er­a­tive Reg­u­la­tor, Head of Op­er­a­tions at a ter­tiary Co­op­er­a­tive and for­mer Trinidad and To­ba­go Sen­a­tor, W-PEARLS in­tro­duces a set of ac­tion­able ra­tios that track the pro­por­tion, per­for­mance, and im­pact of loans used for in­come-gen­er­at­ing ac­tiv­i­ties. By align­ing cred­it union lend­ing with pro­duc­tive out­comes—such as en­tre­pre­neur­ship, as­set own­er­ship, and eco­nom­ic mo­bil­i­ty—W-PEARLS em­pow­ers in­sti­tu­tions to ful­fil their co­op­er­a­tive man­date more ef­fec­tive­ly. It al­so en­hances strate­gic de­ci­sion-mak­ing, reg­u­la­to­ry re­port­ing, and stake­hold­er con­fi­dence while po­si­tion­ing cred­it unions as in­clu­sive fi­nan­cial part­ners for youth, women, and un­der­served com­mu­ni­ties across the Caribbean.

Ra­tio*For­mu­la *Pur­pose

1. Wealth Gen­er­at­ing Loan Share*Loans for in­come-gen­er­at­ing mem­ber ac­tiv­i­ties / To­tal loan port­fo­lio × 100 *Tracks share of loan port­fo­lio dri­ving en­ter­prise in­come. Tar­get: ≥10%.

2. Wealth loan to as­set ra­tio*Wealth-cre­at­ing loans / To­tal as­sets × 100*Mea­sures as­set base ef­fi­cien­cy. Tar­get: ~8%.

3. New Wealth Loan Al­lo­ca­tion Ra­tio*New wealth loans / To­tal new loans × 100*In­di­ca­tors of cur­rent lend­ing pri­ori­ti­sa­tion. Use­ful quar­ter­ly/year­ly.

4. Wealth Loan Delin­quen­cy Ra­tio* Non-per­form­ing wealth loans / To­tal wealth loans × 100 *As­sess­es risk pro­file of these loans. Aim low, <2%.

5. Wealth Lend­ing Yield Com­par­i­son*{In­ter­est in­come from wealth loans / Avg bal­ance} / Over­all yield *Com­pares re­turns; helps price wealth loans com­pet­i­tive­ly.

Tahar­qa Obi­ka (MBA Fi­nance, BSc Eco­nom­ics) de­vel­op­er of the W-PEARLS Wealth Cre­ation Ra­tios is a fi­nan­cial con­sul­tant, cred­it union ad­vi­sor, and for­mer sen­a­tor of Trinidad and To­ba­go, ded­i­cat­ed to ad­vanc­ing wealth cre­ation in the Caribbean.

📩Email: tahar­qa.obi­ka@gmail.com, 📞 Phone: +1 (868) 749-692


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