DUBLIN, Ireland–This country’s credit unions are on track tobe the main lenders to households and small businesses in up to 50 towns across Ireland within five years, according to one of the country’s trade associations.
The association issued its forecast as legislation aimed at helping credit unions is currently before the Parliament.
The Credit Union Development Association (Cuda), one of two CU trade associations in Ireland and which says it represents 50 “of the most progressive” financial institutions in the country, said that Irish credit unions should also see their total loans double to €11 billion over the next five years, the Independent reported.
Cuda noted the local credit unions in Tullamore, Co Offaly, Dundalk, Co Louth, and Navan, Co Meath, are already the largest household and SME lenders in those towns, including mortgages, following years of retrenchment by mainstream banks as much of the lending by remaining banks has become centralized at their head offices.
Mainstream Banking Sector ‘Shrinking’
“The Credit Union Amendment Bill 2022, aimed at enabling credit unions to co-lend and collaborate more at a time when the mainstream banking sector is shrinking, passed through the Seanad last week as it makes its way through the legislative process,” the Independent reported. “The Bill allows for the establishment of corporate credit unions, which would permit a group of credit unions to take equity stakes in a new corporate entity that would enable them to share resources and opportunities. It aims to enable credit unions for the first time to refer members to other credit unions if they do not offer a particular product — and to participate in the loans of other credit unions.”
The report added that the draft laws will also give the Minister for Finance the authority to set a minimum interest rate for the industry, fixed at 1% per month. This will give credit unions more flexibility to price risk in a rising interest rate environment, according to the Department of Finance.
As CUToday.info has reported, lending among Ireland’s credit unions is a weak spot, with the country’s CUs’ average loan-to-share ratio around 27%. That is down from around 49% in 2007.
‘Outdated Legislation’
“Credit unions are currently operating within outdated legislation — legislation that is not fit for purpose in a modern era, but with this new expansive legislation, we anticipate that credit unions will become the primary household and SME lender in up to 50 towns across Ireland within the next five years,” Cuda CEO Kevin Johnson was quoted by the Independent as saying. “Many credit unions have already broadened their range of loan offerings to include personal loans, mortgages, business loans, secured and unsecured, community and agri-loans. Through these enhancements to the Credit Union Act they will be able to grow these initiatives to allow more credit unions deliver them to more people.”
The news report added the Department of Finance retail banking review, published last month, said credit unions “could play a greater role in the provision of retail banking products and services in the coming years”, as the number of retail banks in the market shrinks to three amid the exits of Ulster Bank and KBC Bank Ireland.
There are approximately 200 CUs in Ireland, down from 428 at the end of 2006.
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