Credit unions move to establish greater role in mortgage and SME lending

Over 30 credit unions hope to establish a Central Liquidity Management Mechanism for the sector

Credit unions are ethical, not-for-profit lenders that continue to provide effective and viable alternatives to financial institutions that operate for profit.

Some 35 credit unions across Ireland have expressed interest in establishing a Central Liquidity Management Mechanism (CLMM) for the sector which would enable credit unions to play a much greater role in mortgage and SME lending.

A CLMM, if fully enabled, will act as a centralised treasury function working for all member credit unions.

Should all 35 credit unions participate, this will represent an investment of almost €2m to support the CLMM. All other credit unions have until year-end to finalise their intentions.

The establishment of a CLMM for the sector, essentially a treasury function, will help establish a Corporate Credit Union - a credit union for credit unions. 

In addition to establishing new funding structures for use by individual credit unions, it will provide other, highly skilled services such as Asset and Liability Management for participating credit unions.

The move to create a CLMM has been led by five credit unions and supported by the two key representative bodies for the sector, the ILCU and CUDA. The five leading credit unions are Member First Credit Union, Health Services Staff Credit Union, Comhar Linn INTO Credit Union, First Tech Credit Union and St Raphael’s Garda Credit Union.

Up to now, credit unions only source of funding is through member shares. The new enterprise will provide tools to ultimately enable credit unions to play a much greater role in mortgage and SME lending in particular.

Earlier this year the Central Bank of Ireland confirmed that credit unions will be allowed to increase the level of mortgage lending they do as a percentage of their total assets. 

The move will see credit unions playing a more significant role in providing housing in local communities across Ireland, the five leading credit unions said. However, to reach that volume, they said credit unions will require more sophisticated treasury management resources, hence the interest in a centralised function.

A spokesperson for the five credit unions behind this week’s meeting said: “We have made good progress on this initiative since we first met with other credit unions in August. There is a lot of work to be done but the goal is to transform the lending potential of the sector in Ireland. 

"Our objective is to design the necessary infrastructure to enhance credit union resilience and enable the sector to grow substantially as it has in other jurisdictions.”