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Report: Lending opportunities for Credit Unions – Dr. Ciarán Mac an Bhaird
Report: Lending opportunities for Credit Unions – Dr. Ciarán Mac an Bhaird

Report: Lending opportunities for Credit Unions – Dr. Ciarán Mac an Bhaird

A new report titled Towards 2030 which looks at the lending opportunities for Credit Unions has been prepared by Dr. Ciarán Mac an Bhaird, lecturer of Business and Management at Fiontar, DCU. The report analyses the current financial position of credit unions affiliated to the Irish League of Credit Unions in the Republic of Ireland.

The Irish credit union movement has undergone considerable change over the past five years. The number of credit unions has declined by over a quarter. There are now less than half the number of small credit unions as there were five years ago, and the number of large credit unions has doubled in this period. More importantly, the amount of assets under management by the largest group has almost doubled, and they now account for almost half the assets under management by the whole sector. This consolidation has accelerated significantly in the past two years, and this pace of change is expected to continue in the near future. The movement has thrived since the financial crisis, and the Irish public have shown great trust in credit unions, as members’ funds have increased by 18% in the past five years. Costs have declined by over 25%, and there has been a decline of over 60% in the amount of loans written off. The long term arrears ratio has fallen below 9% - a remarkable achievement when compared with the level of non-performing loans in the three main domestic banks, which is approx. 15%.

Challenges remain, however. The average loans to assets ratio has fallen to 26% so although the Irish movement has the highest market penetration of any credit union movement in the world, it is in the lowest 6% in terms of loans to assets ratios. Average return on investments has halved in five years, and credit unions need to increase return on members’ funds to ensure sustainability. A prominent feature of credit union loan books is the lack of diversification in lending, and credit unions need to increase the amount and term of loans.

The report analyses four proposed initiatives for investment by credit unions; mortgage lending, social housing investment, loans for small and medium sized firms and an expansion of the Personal Micro-Credit Scheme. Each initiative is evaluated and appraised in the context of the credit union ethos. The report concludes by suggesting appropriate steps for policy makers, the regulator, and credit unions.