The page contains a case study of a previous FIDC project- a consultation on creating a credit union for the Falkland Islands:

Phase I

Initial research was conducted to evaluate whether a credit union would be suitable for the Falkland Islands. The research consisted of investigating the functions, structure, membership, products and services, and purpose of a credit union, as well as a brief look at relevant Falkland Ordinances carried out by FIG Crown Council.  This information was contained in a Board paper presented to FIDB in June 2012. The Paper also recommended that further research be conducted and for contact to be made with credit unions and credit union associations.  The Board approved the recommendations and subsequently we made contact with WOCCU.  A number of discussions were held with their CEO, Brian Branch.

As a result of the discussions with WOCCU, Dwayne Naylor, Consultant at WOCCU, visited the Falkland Islands in April 2013 as part of his research in evaluating the suitability of establishing a credit union in the Falkland Islands. During this visit he met with a number of FIG Directors and Heads of Departments, and private sector individuals to discuss the financial services currently offered in the Falkland Islands.  The discussions provided documentation and feedback regarding the suitability of the credit union business model in the Falkland Islands.

Phase II

The September 2013 Report became the focus for a phase of public consultation to be held in the Falkland Islands. Mr Naylor returned to the Falkland Islands for his second site visit to assist the public consultation for our Credit Union project. Mr Naylor arrived in the islands on the 26^th October and departed on the 2^nd November 2013.  During his week in the Falkland Islands, Mr Naylor worked with our Business Relations Manager, and our Development Intern.

Mr Naylor had interviews with FITV, FIRS and the Penguin News to discuss the credit union project and to promote the public consultation.  They also met with the FIG Chief Executive, FIG Head of Policy, FIG Head of Finance, FIG Head of Legal Services, the Falkland Island Chamber of Commerce, RBA and FIFCA to discuss the suitability of credit unions in the Falkland Islands. Two public presentations based on the WOCCU suitability study were also held to open discussion and better inform the public on the project and the credit union business model. The presentation held in Stanley attracted nine people and the presentation in Camp attracted 17 people.

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The public were strongly encouraged to complete and return a credit union survey, which was widely distributed, before the deadline of the 29^th November 2013.  We received a total of 52 completed surveys. The highlights of the results of the survey were;

The highlights of the results are as follows;

• 96% of respondents believe that there is a need for alternative banking services in the Falkland Islands;
• 92% of respondents believed that a credit union could be a viable solution in providing an alternative source of banking services in the Falkland Islands;
• Respondents identified Community Adoption (56%), Capital (44%) and Regulation (38%) as the three largest barriers for establishing a credit union in the Falkland Islands;
• 77% of respondents would open a personal account in the Falkland Islands credit union;
• 19% of respondents would initially deposit £5,000+ in their credit union account. 

Subsequently, we, along with the WOCCU, produced reports based on Phase II. A brief is provided below for each report;

The FIDC Credit Union Consultation - Consultation Results and FIDC Report was produced by FIDC Business Relations Manager, Michael Betts, and FIDC Development Intern, Joshua Peck. The Report is split into two sections, the first focuses on analysing the results of the Credit Union Survey and the second section focuses on FIDC's interpretation of the results.

The Falkland Islands - Credit Union Suitability Study (Phase II) was produced by World Council of Credit Unions (WOCCU) Consultant Dwayne Naylor. The Report is based on the findings of his second site visit to the Falkland Islands.

Phase III

At the April meeting of the Falkland Islands Development Board, the difficult decision to close down the FIDC Credit Union project was made. This was not done lightly, as there is no doubt that there is widespread public support for such an institution, however the barriers were too significant to overcome.  

Firstly and most importantly, the projected finances strongly suggested that a Falklands credit union would not be viable. In the most conservative scenario it was estimated that the credit union would make a £750k loss in the first five years of operating.

Secondly, it became increasingly clear that the establishment and on-going support of a credit union would require significant input from FIG. This included initial capital funding, deposit insurance which could not be sourced privately, regulation updates for banking and cooperative legislation, additional external audit contracts, employment of an experienced official to regulate the credit union and on-going operational/technology funding, all of which would be a large, costly and risky undertaking.

Thirdly, there are plans for positive developments in the Falklands that could improve access to finance elsewhere. At the moment, FIDC is currently reviewing its loan strategy and FIG, in partnership with FIDC, is investigating a local investment strategy.  Both could potentially improve access to finance for Falkland Island businesses, without the need for and cost of establishing a new financial institution such as a credit union.

In light of the factors regarding the financial viability of a Falklands credit union and the significant support required from FIG, there are significant doubts that the credit union model is a viable solution to resolve access to finance issues in the Falkland Islands. These factors were recognised in the Falkland Islands Development Board’s decision, which was supported by the Community Leaders and WOCCU Consultants.