John McGuinness: It is high time that we let credit unions enter the banking game

In 2019, an analysis commissioned by the Department of Finance recommended that the government “support the Credit Union Market to deliver an Expanded Range of Community Banking Services”. Fianna Fáil TD John McGuinness asks why are we still waiting?

Credit unions, a generations-old financial institution, whose current strength is personal lending, have €16bn in un-lent reserves. They are willing to expand into mortgages, SME lending, and more in a careful manner. Why are we waiting? File photo

Banking is about power and profit, not about social responsibility, the promotion of which is simply a cynical marketing tool. Conversely, politics is about people and the first duty of government is to keep its people safe.

A lack of social responsibility is clearly evident in the housing market. Scandal after scandal, caused by people’s homes being recklessly treated as an asset class by banks, has rocked Ireland and various other countries since the sub-prime mortgage fiasco in Florida in 2008 revealed just how little social responsibility counts when irresponsible lending can be made to pay.

Keeping people safe requires governments to restrain any organisation that appears to be abusing its power for profit and ignoring its responsibilities toward the greater good of society. Our governments haven’t been much good at that and it’s time they improved.

Keeping people safe requires governments to promote and foster community-based, not-for-profit organisations that serve the public good without emptying the public purse. They are slow at doing that, but public anger is beginning to make itself felt.

Government permitted the demutualising of building societies, starting in 1989. That scrapped an important cooperative infrastructure, which had enabled young people, particularly, to buy their own homes. Members were turned into clients in what was a significant victory for power and profit over social inclusion and the general good.

We are now looking at a situation where banks and building societies dominate the housing market. They do this largely without the personal interaction, connection to location, and personal care that people need when taking one of the biggest financial decisions that they may ever face.

Algorithms don’t smile, or much care for anything that doesn’t fit a box, and humanity doesn’t much like being boxed in. If banks can’t or won’t provide what their clients need, like cash services, then the government must step in and empower those that can.

Credit Unions

The community-based organisation uniquely capable of being a third force in the mortgage market, beside banks and building societies, and providing the personal service people want when seeking a mortgage is the credit union movement.

Credit unions have no customers, only members. There are no profits, only dividends paid to members, who elect their own boards. Their entry into the mortgage market can easily be regulated by a milder version of banking regulation so that they do not stray from the sane and sensible into the more esoteric and risky areas of general banking, which has caused so much upheaval in recent years.

Community banking is the best method of ensuring that there is a source of mortgage funding that puts social responsibility and care for members first. The credit union movement is the ideal vehicle for delivering that throughout the country.

Credit unions are already under regulatory control, which, as I have said, will need to be extended, but not by much. They enjoy the support and respect of the communities that they serve, because they know their members and have a network of connections and a mine of local information that enables them assess risk in the efficient and personal manner bank managers used before antisocial algorithms arrived.

In 2018, the Department of Finance issued a report highlighting the potential of credit unions to provide community banking services. In 2019, an analysis commissioned by the Department of Finance recommended that the government “support the Credit Union Market to deliver an Expanded Range of Community Banking Services”.

What puzzles me is why the government has not energetically pushed forward its commitment in the Programme for Government to “Enable the Credit Union Movement to provide banking in this country”.

It’s true that my Fianna Fáil colleague, Sean Fleming TD, the first ever minister for credit unions, has prepared a paper on the subject, which is about to be brought to government. It is said to be comprehensive and positive and is expected to be widely welcomed. But it only rewires the status quo. It does not change the paradigm that a move on to community banking requires.

Since 2018, there has been a great sense of positive activity around this matter, which has not resulted in positive action. What’s certain is that the public is still being forced to use organisations that they don’t like, because an organisation that they trust is being prevented from entering the market. 

That is very unsatisfactory. Radical action is now necessary. 

Any lingering desire to protect our banks at the expense of our people should be firmly set aside. If banks have demonstrated anything over the last few years, it is their ability to look after themselves come what may.

We should now look after our people and enable credit unions to become the community banks that the Department of Finance and government have been saying they want since 2018.

Credit unions, a generations-old financial institution, whose current strength is personal lending, have €16bn in un-lent reserves. They are willing to expand into mortgages, SME lending, and more in a careful manner. Why are we waiting?

It astonishes me that the government has not moved faster to accommodate their ambitions. It astonishes me that a tried and trusted, community-based, countrywide, non-profit Irish organisation has to shout and shove to be allowed to deliver speedily something that the public is demanding.

What dead hand is resting on the pile of positive reports currently before the government? Why have we been waiting since 2018 for the modest legislation that will allow credit unions to deliver?

Radical action

My party, Fianna Fáil, has promises to deliver on. We have a chance to radically address the powerlessness that undermines the self-confidence of the most talented generation our country has ever produced. Instead, we are swimming with an ideological tide that is suffocating enterprise.

Where is the radicalism of Lemass or Donogh O’Malley, both of whom took radical actions that set new courses for our country? We talk of radical action, but we act out the politics of managerialism, our ambitions limited to tiny, timid, incremental steps that barely register. 

Much, much more is needed to release our people from the grip of systems serving the few at great cost to the many.

Empowering the credit union movement isn’t just about cash services and mortgages. It's about telling the country that Fianna Fáil is determined to confront power and money and limit its ability to control how people borrow and invest. 

It’s striking a blow for families, farmers, communities, and small businesses. It’s giving power to our people and sending a strong message about the worth of community-based organisations. 

Above all, it’s another step in building a fairer Ireland and keeping our people safe.

• John McGuinness is a Fianna Fáil TD for Carlow-Kilkenny and chair of the Oireachtas Finance Committee