Institutions are still strong despite alarming figures
Published 30/09/2010 | 05:00
THE main credit union representative body unleashed a torrent of figures yesterday, and some of them were quite frightening.
Arrears have shot up, thousands of members are having to go into their local credit unions to plead for more time to repay their loans, and credit unions have had to put aside half a billion euro in provisions in case large numbers of loans are not repaid.
The situation is bad and closely mirrors the mess that is our economy, with high levels of unemployment and pressure on household budgets even where jobs have not been lost.
This newspaper has reported recently on two credit unions that have had to make large bad debt provisions. Roscrea had to put aside €9.3m to cover bad debts last year, while Charleville had to set aside €6.4m.
So is the credit union movement in trouble? Are these locally-run savings and loans institutions going the way of our bust banks?
Some credit unions are undoubtedly struggling at the moment, as members find it hard to repay their loans. Around six credit unions have solvency issues -- the value of their assets (mainly loans) have slipped below the value of their liabilities, according to the League of Credit Unions.
These six are among an estimated 60 credit unions that will not be paying a dividend to members this year.
The financial year end for credit unions is today. Many of those that will decide not to pay a dividend will do so for prudent reasons -- they want a good buffer by putting aside a decent level of provisions in case some of their loans are not repaid.
Most credit unions have now put aside 10pc of their assets into reserves as provisions. The league stressed yesterday that some of the money put aside as provisions will eventually be recovered.
There are 2.6 million members of credit unions and most are fiercely loyal to the movement. Moreover, just half of the assets of the credit union movement are loaned out. This compares with a post-crash 130pc for our banks.
The average loan is just €9,000. And credit unions collectively have about €3.5bn to loan out. Overall, the movement is strong, with assets of €13bn, and savings of €11bn in the Republic.