Credit unions 'well positioned' to be involved in savings and investment accounts 

Developing a strategy for sector was part of the programme for government with the aim of addressing structural challenges as well as leveraging new opportunities 

Chief executive of the Irish League of Credit Unions David Malone with Central Bank of Ireland governor Gabriel Makhlouf. 

Credit unions across the country are “well positioned” to be a part of the upcoming savings and investment schemes, proposed by Tánaiste Simon Harris, given their presence and relationships with the communities they serve, the chief executive of the Irish League of Credit Unions (ILCU) has said.

These comments come after last week junior minister Robert Troy published an update on the Credit Union Strategy Project as well as launched a survey of credit unions to gather input.

Developing a strategy for the credit union sector was part of the programme for Government with the aim of addressing structural challenges as well as leveraging new opportunities within the existing legislative and regulatory framework.

Chief executive of the ILCU David Malone said credit unions are “community institutions that happen to provide financial services” and as a sector it has seen significant growth over the last few years.

"One of the things about the credit union sector, one of its great strengths, is its diversity in terms of its size, scale, and scope,” he said.

“What we'd like to see in the strategy, I suppose, is to harmonise that diversity, identify synergies, and clearly what means is collaboration. Working on collaboration, where there's greater opportunities for collaboration across credit unions.” 

While credit unions do share service organisations, which handle back office support, they are independently operated organisations.

Mr Malone added that there is going to be extensive engagement with credit unions over this strategy to see where things can be improved.

Focus on sustainability

Chief executive of the Credit Union Development Association Helen Carbery said the strategy shows the Government support for the sector as well as its “focus on the need for the sector to be sustainable in the future”.

"The survey is out at the moment to ask the credit union sector what they think the problems are to solve. We have to agree on the problems,” she said.

Ms Carbery said the Government recognises running credit unions requires support given that the regulatory standards are going up.

“So we do need to solve the kind of repurposing of the credit union and also then the operating model. Both of them are necessary components to make it relevant to the consumer,” she said.

Ms Carbery said there should be a role for credit unions when it comes to helping people with their financial questions and concerns that may crop up.

She said there is a generation of workers coming up who have to “up their game” when it comes to financial literacy be it due to the introduction of the pension auto-enrolment or the proposed savings and investment accounts.

Safety issue

"People want to talk to somebody they feel safe with and that's where the credit union fits in,” she said.

When asked about the potential credit union involvement in the upcoming savings and investment accounts, Mr Malone said they have been engaging with Mr Harris about them.

Mr Harris is expected to announce the new accounts as part of the upcoming budget.

“We see an opportunity there to be honest, we think we're very well positioned to be part of that scheme, albeit maybe in a partnership approach,” he said.

"If we look at the objectives of the scheme, our understanding is it's about bringing really ordinary Irish people into investing for the first time. We've got the relationships, we've got the community presence, and we think we've got a good distribution channel there to participate in it for sure.” 

Significant growth

Credit unions have been experiencing significant growth over the last few years. As of the end of March this year, the total loan book of ILCU member institutions was valued at €6.66bn - an increase of 9.6% compared to the same period last year.

The total mortgage loan book among ILCU-affiliated credit unions — which accounts for 90% of credit unions in the country — reached €782m, representing a 24% rise year-on-year.

Altogether, ILCU credit union members have assets of just under €20bn.

"The beauty of it is in the credit union sector, you can physically go into the credit union. You can sit down and look at the person who will be approving the loan and have that discussion with them,” Mr Malone said.

"Our rates are competitive, and also our rates are quite stable because you know we don't necessarily depend on the money markets or European markets for funding. We have savings from members, and it is a very simple model, we recycle those savings to members as part of mortgages,” he said.