Credit Union loan arrears fall 20%

The value of credit union loans in arrears fell by almost a fifth in the last 12 months as the financial position of many lenders and borrowers begins to show signs of improvement.

Gross loan arrears with the country’s 370 credit unions stood at €644m in June, down 17% or €130m on the same period last year. Loan arrears peaked at €925m in December 2011 in gross terms, but have fallen by €281m since then.

The Irish League of Credit Unions, which produced the overview, does not hold figures for the number of people in arrears.

A number of other indicators, including rising loan demand, falling writeoffs and the increasing number of credit unions making a surplus and likely to pay a dividend, reflects a more positive picture for the industry, according to ILCU chief executive Ed Farrell.

“Confidence in credit unions... has again been demonstrated by the fact that the number of members has increased by almost 70,000 [to 3.3 million] in the last 12 months. Furthermore, savings in ILCU credit unions are up 2.3% for the nine months to June 2014 to €10.7bn,” said Mr Farrell.

“Perhaps most encouragingly of all, is that gross loan arrears have reduced substantially in recent years and now stand at €644m.”

Welcoming the progress, Independent MEP Marian Harkin criticised the Central Bank for not easing lending limits fast enough.

Credit unions have €5bn in funds available to lend to members, while addressing the fall in loans is the biggest challenge now facing the sector, although with a fall of 1.4% last quarter compared to 2.5% in previous quarter it appears demand in recovering somewhat.

The loan book in June 2014 totalled €3.69bn, a fall of 8.3% or €335m on the same period last year.

The value of new loans issued this year stands at €1.2bn with €1.5bn expected by year’s end.

The average new loan value is just over €3,000, while the average loan outstanding is €6,270.