Credit union membership surge as farmers applaud co-op ethos

As banks close branches and cut services, people now see the credit union as their best alternative, says Bantry CU chief

Finbarr O’Shea, chair of the Cultivate marketing committee and CEO of Bantry Credit Union.

People's need for access to cash and in-person rural banking services is driving a surge in growth in credit union business, not least in the demand for Cultivate farmer loans.

A new Cultivate 2022 half-year report shows a 37% increase in the total number of loan applications for these “farmer-friendly” loans versus the first half of 2021. The average Cultivate loan application for H1 2022 was for €28,083 given over 5.75 years to a farmer with 34 hectares and a total €126,946 debt on their farm; with average debt up 22% vs H1 2021.

In real terms, farmers are keeping their debt levels relatively flat. With 33% of these farm loans being used as working capital, most farmers are taking on a little extra debt to cover their rising fertiliser and other input costs. Other loans related to farm buildings (17%), farm equipment (16%) and tractors (14%).

The competitive 6.55% (6.75% APR) interest rate is clearly appealing to farmers, particularly to beef farmers who make up 71% of all loan applicants (versus dairy at 17%). Perhaps as importantly, the withdrawal of so many services by the pillar banks is creating a void for which it seems credit unions are the ideal solution.

“People definitely now see the credit union as their best alternative,” said Finbarr O’Shea, chair of the Cultivate marketing committee and CEO of Bantry Credit Union. “At Cultivate, we stick to our three mottos with all loan applications: Simple, Local and Personal.

“There’s no red tape, no hassle. Credit unions are co-ops owned by the communities they serve, rather than always focusing on shareholders. We know the value of personal service. People want to come in the door and talk to a person.

“Loan applicants want a simple yes or no. They also want to talk to someone face-to-face. One farmer wanted to come into the office to tell me why he was taking out a €15,000 loan. I told him there was no need, but he insisted in driving 20 miles to explain his plans. That’s the kind of personal service that people want.” 

Cultivate Credit Union farm finance, H1 2022 Review: How the beef and dairy sectors compare in January to June 2022.

 Launched by a handful of credit unions in Galway five years ago, the Cultivate loans were being offered by 100 credit union offices by the start of 2021. That has now grown to 150 CU offices in 23 of the 26 counties in the Republic.

With dairy being stronger in Munster and Leinster, the western origins partly explain why beef farmers are the main clients for Cultivate loans. The other reason is the €75,000 loan ceiling. Many dairy enterprises tend to operate at bigger finance levels.

The broader banking picture is also playing a critical part in the rise of Cultivate loans and the rise of credit unions in general. The departures of Ulster Bank and KBC, both big players in rural Ireland, have been very significant.

Add to that Bank of Ireland’s decision to close over 100 branches across the island and AIB’s decision to go cashless, removing ATM services from 70 of its 170 branches nationwide. For some rural people, it could mean round trips of 80km to 100km just to access a cash machine. Bantry, a popular town with tourists, currently has just one ATM on its main street.

Contrast that with the service levels of the credit unions, many of whom are now recruiting office staff, racing to install ATMs, developing mobile apps and adding a series of new tailored mortgage, car, educational and other loan services.

Bantry Credit Union is offering an educational loan at 3%, effectively cost-neutral for the CU and a great start in life for the student. Community service is also core to the scholarship scheme that Bantry CU has been running for the past 20 years.

The pandemic years, of course, really showed the community ethos and personal touch of the local credit union for anyone who wants an in-person meeting with their loan provider.

“I haven’t heard of any credit union that closed its doors due to Covid,” said Finbarr O’Shea. “Of course, we had to take measures like having two teams, one in the office and one working from home. We followed all the precautions. We’re not currently ‘returning to the office’. We never left the office.

“What you’re seeing now, with all the enhanced services being rolled out by credit unions, is a product of the fact that we are effectively owned by our communities. We are financial co-ops, and our sole motivation is to stay within our communities. We’re here to serve our communities. That’s why we exist.” 

 One client that clearly appreciates that co-operative ethos is the Irish farmer. In the newly published H1 2022 Cultivate report, that bond is visibly translated into numbers.

The report breaks down farmers’ motivations for taking out a Cultivate loan: Buying stock, building extra cattle bays, developing pasture infrastructure from reseeding to roadways and water systems, building a calving house, investing in new milking parlour equipment (e.g. bulk tank), building a machinery shed, upgrading their tractor or machinery and working capital.

The report also quotes a number of farmer members, explaining why the credit union model works for them, in both business and community terms.