SINGAPORE — After three years of work, a Bill to strengthen the competence and governance of co-operatives was finally passed in Parliament on Tuesday (Jan 9), following a fraud case where two employees cheated a co-operative of about S$5 million of members’ savings.

The two employees, jailed last year, were found out in 2014. They had duped the Singapore Statutory Boards Employees’ Co-operative Thrift and Loan Society into issuing cheques, by using names of phantom members to apply for termination of memberships, to withdraw money, or get a loan.

Months after the case was reported, the Ministry of Culture, Community and Youth (MCCY) launched a public consultation on proposed changes to improve governance and the regulations for credit co-operatives, which typically serve to collect money deposits from members and provide loan services at affordable interest rates.

On Tuesday, Members of Parliament (MPs) debated the Co-operative Societies (Amendment) Bill, with many mentioning the cheating case, as well as their concerns on whether co-operatives are sufficiently competent to handle large amounts of money in today’s increasingly complex financial environment.

They also wanted to know if the Government would support co-operatives with regards to training.

The key amendments of the Bill included raising the competency standards of the co-operatives, specifying that the Minister for Culture, Community and Youth can prescribe training and qualification requirements for a co-operative’s management committee and key employees.

Credit co-operatives that put members’ deposits at risk may also be shut down or face deposit restrictions and dividend caps.

GREATER REGULATORY POWERS

The powers of the Registrar of Co-operative Societies will be enhanced, to take swift action when there is misconduct or mismanagement, or if it is necessary to protect members’ interests.

There are 85 registered co-operatives in Singapore and 24 of them are credit co-operatives.

Ms Sim Ann, Senior Minister of State for Culture, Community and Youth, told Parliament that as at Dec 31, 2016, members’ deposits in credit co-operatives amounted to S$820 million, and loans to members amounted to S$209 million.

The bad loans written off for financial year 2016 was about S$2.3 million, which is about 1 per cent of the total outstanding loans.

Commenting on the push for better safeguards, Mr Desmond Choo, MP for Tampines GRC, said: “The fact that the two employees were able to carry on with the deceit for so many years underscores the need to regulate co-operatives more stringently and ensure that proper governance procedures are in place.”

He called for professional training for employees working in co-operatives to improve their skills, while Mr Darryl David, MP for Ang Mo Kio GRC, asked how such training would be tracked.

Responding to their concerns, Ms Sim said that the Registry of Co-operative Societies has developed a customised, heavily subsidised training programme, which would cover topics such as governance, internal controls and regulatory requirements.

MANAGING RISKS

Some MPs also called for more checks and balances such as having audits and rating systems, while Mr Gan Thiam Poh (Ang Mo Kio GRC) asked if members’ deposits could be covered by deposit insurance.

Mr Melvin Yong, MP for Tanjong Pagar GRC, wanted the ministry to consider introducing “an annual ranking of sorts”, or to grade credit co-ops based on the timeliness and completeness of their annual reports as well as on the audits conducted by the ministry.

To these, Ms Sim said that credit co-ops cannot be covered by deposit insurance as they are not part of the banking system, but there are various governance requirements in place to manage risk.

As for ranking, there is no public ratings system available. “Members should be aware of their co-ops’ information through the co-ops’ websites, annual reports and audited financial statements which are tabled at the annual general meetings,” she said.

A few MPs raised the question of whether credit co-operatives are still relevant in this age, when there are many types of financial and credit schemes available to members.

Ms Sim argued that they still play “an important social role”.

“(This is) especially so in promoting (the need to set aside) savings and giving loans at affordable interest rates to members in need. As co-ops are less profit-driven compared to financial institutions, they are more willing to go the extra mile for their members by extending loans to lower-income earners and rescheduling members’ loans to help them tide over difficult periods,” she said.