Credit unions suffer as consumers pay off debt
A combination of lending restrictions introduced by the Central Bank and a move by customers to pay down debts has caused the total loan book for all Irish League of Credit Unions to shrink by more than 10%.
A spokesperson said: “The loan book is down 10.5% year on year as a lack of demand and continued restrictions on lending are impacting credit unions loan books.
“This lack of demand is a significant challenge for credit unions as low demand for lending is restricting their capacity to generate income.”
The level of arrears has fallen from peak levels seen in 2011 and were down more than 14% to €564m. The movement also wrote off €125m down from €135m last year.
The level of savings recorded by the Irish League of Credit Unions actually increased despite the low levels of dividend that the movement is paying. The movement’s 3.1m members saved €10.5bn to Sept 2013, up 1.1% on the corresponding period last year.
CEO of the Irish League of Credit Unions, Kieron Brennan, said that the movement is experiencing the same problems as the rest of society.
“These figures are indeed reflective of the ongoing economic challenges faced by this country and of course our 3.1m members.
“Credit unions continue to operate responsibly and have increased provisions against bad and doubtful debts.
“We continue to prioritise provisioning over payment of dividends but we do believe that this is the right decision given the current climate.”
Despite the increase in savers the movement doesn’t see any increase in dividend and is warning that the increase in the number of people making use of the new personal insolvency regime could cause dividends to fall.
A spokesperson said: “Last year credit unions paid out an average dividend of 0.96% in the Republic, and it is too early to say what level of dividends will be paid this year until the year-end audits have run their course, but the vast majority of credit unions will be in a position to pay a dividend to their loyal members.
“The implementation of the new personal insolvency regime will naturally have some impact on all lenders, and the effects have yet to be felt to date, but we expect the impact on credit unions to be minimal and we are confident that credit unions have sufficient additional provisions in place for these losses.”
