In a time of pandemic and economic downturn, strong community bonds take on renewed importance.
The events of the last five months have brought villages, towns, and city neighbourhoods across Ireland closer together, if not physically then in spirit.
In the process, many of us have become more considerate, more neighbourly, and more civically minded.
If ever there were a case of a thundercloud having a silver lining, this new positive mentality is it. An engaged and community-focused citizenship is something that we, as a society, and the government, as society’s representatives, should encourage and nurture.
An understanding of what creates community and holds it together is the credit union movement’s guiding principle.
Credit unions are valued by households and businesses precisely because they are institutions built on a mutual understanding of local people, local needs, and local opportunities.
Ibec estimates that the economy will not recover to pre-Covid-19 levels until at least 2022.
While this outlook is not as dire as our crash-era prognosis, thousands of Irish businesses will still be forced to close or at least severely impacted by nervous and slow-moving international and domestic markets.
There will be a human cost to this, too. Thousands of Irish people may be out of work. This will have consequences for local communities, many of which will not have sufficiently recovered from the recession of a decade ago.
Coupled with the increasing possibility of a no-deal Brexit, until only recently relegated to a background act, there is a real danger that some of Ireland’s rural and urban communities will be economically disadvantaged for many years to come.
Adequate access to credit in the form of loans, mortgages, and other financial supports is the enabler.
Access to credit and investment accelerate economic recovery, and it will be the areas outside our immediate city centres that will need the biggest boost. Credit unions, because of their local knowledge and local relationships, often see opportunity where other mainstream banks may not (or will not).
Even before the pandemic, there were already major shifts in credit union members’ demands. While members still want the personal and reliable savings institution that credit unions provide, their needs have changed with their circumstances; they now want mortgages, small business loans, and other specialised financial products.
Unfortunately, credit unions frequently cannot provide these services, often due to the restricted environment in which they must operate. This gives traditional banks an unfair competitive advantage and jeopardises the long-term sustainability of the credit union movement. It also severely restricts regional Ireland’s chances of economic recovery.
The financial services sector is heavily regulated for reasons that became abundantly clear in 2008.
There is no disputing the need for independent, prudent, and transparent regulation by national and international governments and organisations.
However, it is simultaneously true that existing legislative provisions actively restrict Ireland's credit unions from diversifying their services and meeting the changing needs of their members. This restriction not only harms credit unions but deeply limits the growth of local communities, local enterprise, and local families, who look to sources of finance - outside of traditional banks - to support them.
Many rural Irish towns have no commercial bank branches; 160 closed between 2008 and 2018. For older people, many of whom have significant savings, this means greatly reduced access to financial services to the detriment of local investment.
The unfolding Covid-19 downturn means that solving these problems has taken on renewed urgency. The Credit Union has an asset base of over €18 billion. These assets can be used to fund badly needed capital projects, like new housing and retrofitting schemes, projects highlighted in the programme for government. However, current credit union regulation means that most funds deposited in local branches are diverted away from Ireland and invested in EU member states’ infrastructural projects, like roads in Germany.
Credit union regulation also means that many branches legally cannot accept the current influx of cash deposits from their members, who are saving more due to Covid-19. Caps as low as €15,000 and €25,000 are being introduced in response, which means money is forced out of the community and into international banks.
The programme for government proposed allowing credit unions to become the key provider of community banking services in Ireland — that proposal must be honoured. We need Taoiseach Micheál Martin’s government to draft a new Credit Union Act that creates a legislative basis for credit unions to achieve their vision of becoming a stronger community banking force.
Simultaneously, new state-regulated mechanisms must be put in place that allow the Credit Union to invest in local, rather than EU, infrastructural projects.
By engaging with the Credit Union and removing these barriers to progress, policymakers can help meet local communities’ needs and better secure Ireland’s post-Covid-19 recovery.