A proposed law in the Dominican Republic may lead to the country's first credit union-specific legislation, allowing credit unions to enhance their services and offer deposit insurance to members.

Madison, WI—Representatives from World Council of Credit Unions (WOCCU) and WOCCU member, Asociación de Instituciones Rurales de Ahorro y Crédito (AIRAC) in the Dominican Republic met with top officials from the Central Bank and Superintendency of Banks last week to discuss developing the country’s first formal credit union regulatory framework.

The reforms come in response to the Dominican Republic’s financial sector crisis of 2003-2004, when inflation rose to 43%. As a result, the government has been implementing a series of changes in the financial sector, the heart of which is a proposed law to ensure proper supervision for all entities.

Earlier this year, WOCCU completed a detailed diagnostic of five credit unions in the Dominican Republic. The results indicated a great need for credit union inclusion in the Superintendency of Banks’ new legislation and supervision.

If passed, the new law would lead to the first changes in legal credit union framework since 1964 and would allow credit unions to modernize and expand services as well as offer government-backed deposit insurance. Credit unions in the Dominican Republic would also join the ranks of credit union movements in Belize, Trinidad and Tobago, Jamaica and Barbados, all of which are in the process of migrating to Central Bank supervision.

“There are clearly risks involved with the transition, especially if traditional bank supervisors fail to understand the different capital and governance structures of credit unions,” indicated David Grace, WOCCU Vice President, Association Services, who met with officials in the Dominican Republic together with Virginio Rafael Gerardo, AIRAC CEO. “During the visit, we were able to begin a dialogue with these organizations to ensure their success in a strengthened regulatory environment.”

The Wisconsin Credit Union League signed an international partnership agreement with AIRAC earlier this year. During the Wisconsin league’s first learning tour to the Dominican Republic in June, they used examples from Wisconsin to help AIRAC advocate for credit union-specific legislation with the Superintendency of Banks. The next partnership exchange is scheduled for early November, when credit union leaders from the Dominican Republic will visit with credit unions in Wisconsin.