Put money to work in our communities

POLICY reforms to allow credit unions to expand their mortgage and business lending services and invest in community infrastructure projects should be key priorities of the new government, according to a report commissioned by the Irish League of Credit Unions (ILCU). The body, which represents 226 credit unions across the Republic of Ireland, is anxious to hold the government to commitments made in the programme for government to allow credit unions become the key provider of community banking services across Ireland.

The ILCU complains that successive governments have failed to work sufficiently with credit unions to better utilise their assets and unlock their potential to give back to the communities, which are the backbone of the credit union movement. With interest rates so low, credit unions are forced to invest their assets in EU banks, which can then end up helping to build roads in Germany, so – quite rightly – they want to see their assets used instead to develop communities in Ireland, such as through funding infrastructural projects here.

The report sets out ways in which the credit unions’ asset base – in excess of over €18 billion – can be used by the new government to fund social and community development as Ireland seeks to economically recover from the impact of Covid-19. It is a no-brainer, really, that assets should be put to work like this and, preferably, in the communities where that have accrued; in fact, during the Covid-19 lockdown, credit union savings increased and lending was reduced, which has strengthened their asset base even further.

Credit unions truly are the ‘people’s bank,’ with over three million members countrywide, and are in a position to provide up to €900 million finance for social housing and fund the retrofitting of over 500,000 older homes by 2030, as promised under the programme for government. But there is a lot more that they can do with their assets, if they get an immediate reduction in capital reserving requirements in line with international norms and are allowed become a State-regulated investment vehicle.

They need the government to allow credit unions become the key provider of community banking services across Ireland. The ILCU is calling for a new ‘Credit Union Act’ to legislate for the changes they feel are needed, as outlined in last weekend’s report which assessed their current position along with the challenges they face to remain a sustainable and growing force in Ireland’s financial landscape.

Commenting on the report, ILCU president Gerry Thompson said that, ‘to date, policymakers continue to view credit unions’ strong and growing asset base as a problem which needs ever more regulation,’ claiming: ‘They are failing to grasp the opportunity to leverage these significant funds to support the development of communities across the country; funding which is needed now more than ever.’

It does seem odd that this should be the case and the Department of Finance and the Department of Public Expenditure & Reform, who are on a borrowing spree at the moment as  the financial fall-out of the pandemic continues, should be engaging more pro-actively with  such a valuable homegrown resource as the credit unions possess.

Credit unions really do need to be allowed to expand mortgage services and to fund social housing. The latter is crucial because of the ongoing shortage of social housing that the last two Fine Gael-led governments failed to adequately address since 2011.

Credit unions feel it makes no sense having their funds tied up in EU banks, as currently is the case, when their funds could be leveraged for capital projects here in Ireland, such as social housing development and maybe some of the many infrastructural works planned under Project Ireland 2040. This view is amplified by the fact that some credit unions are being forced to introduce caps on members’ savings in order to meet current regulatory requirements – which in many of them can be as low as €15,000 to €25,000.

Mr Thompson pointed out the irony of this, as due to the need to maintain capital regulatory reserves at a level which can be higher than international norms, some are being forced to turn away members’ deposits. This is not fair on members who choose credit unions as their financial providers because they trust these not-for-profit community organisations more than commercial banks.

A scenario where a member may not be able to save, in full, with a credit union for important, but relatively modest purchases, such as a new small car, their wedding or a deposit for a first home, undermines their role as the ‘people’s bank.’ Given that credit unions are run by their members for members and are committed to giving back to the community, not expanding their role to enable more use of their considerable assets for the greater good makes no sense as we enter a few