Wednesday 28 September 2016

Become like GAA and you can take on banks, credit unions told

Published 23/04/2016 | 02:30

Leading management guru Dr Eddie Molloy has come up with the proposals to radically reform how credit unions operate. Photo: Declan Doherty
Leading management guru Dr Eddie Molloy has come up with the proposals to radically reform how credit unions operate. Photo: Declan Doherty

A radical shake-up to make the credit union movement more like the GAA is to be voted on by members this weekend.

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The GAA is seen as hugely successful, with a strong central governance structure.

Now credit unions are being urged to pool the assets of the movement, which amount to €13bn, and create a central organisation that would act collectively.

The report recommends that the credit unions should model themselves on the GAA, by combining strong local units that make decisions centrally.

This would allow them to take on the banks, but retain their local connections. It may finally clear the way for credit unions to offer mortgages.

Leading management guru Dr Eddie Molloy has come up with the proposals to radically reform how credit unions operate.

Delegates at the annual general meeting of the Irish League of Credit Unions will be asked this weekend in Limerick to approve a phased overhaul of how the movement operates.

The ultimate aim, over a four-year period, would be to move to a situation where credit unions form a federated system, with a strong central structure.

This is similar to the model successfully operated in Canada.

In document labelled "confidential", Dr Molloy describes the credit union movement as a "sleeping giant" with huge financial resources, a priceless reputation for integrity and democratic control. But he outlines how it is massively under-achieving and is regarded by most senior members to be in relative decline.

The document sets out in stark terms the pressures on credit unions. It says they:

  • Suffer from very poor investment and savings returns;
  • Face huge competition from banks;
  • Are subject to restrictive regulation;
  • Have too many older members;
  • Fail to keep up with technological changes;
  • Have no coherent IT strategy;
  • And now face pressure from car manufacturers and distributors offering ultra low-cost finance deals.

Threats

Dr Molloy said there was concern that some people see credit unions as "the poor man's bank", with large numbers of credit union members being inactive. This means they do not take out loans or other services.

The report says the "business model is underachieving".

Each credit union is owned by its members and operates separately. They are loosely affiliated to the league, which is a representative body, but also provides financial services to credit unions and has a rescue fund.

"The movement, because it lacks the coherence of a unified organisation, has not demonstrated agility to respond to game-changing external threats and opportunities over the past two decades," the report, called 'Re-awakening The Sleeping Giant', says.

"Rules of affiliation have been ignored and are unenforceable," the report says.

Irish Independent

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