Friday 22 September 2017

Number of credit union loans taken out plunges amid tight lending rules

Kieron Brennan, CEO, Irish League of Credit Unions.
Kieron Brennan, CEO, Irish League of Credit Unions.

Charlie Weston Personal Finance Editor

THERE has been a sharp fall in the number of loans being taken out by members of credit unions.

Restrictions imposed by the Central Bank on the value of loans that can be given out have been blamed for the fall in demand for loans.

More than half of the State's 392 credit unions have been ordered by regulators to cap the value of borrowings they can grant, in a move that is squeezing the income of the community lenders.

A total of €1.6bn in loans was taken out by credit union members in the year to the end of September.

But this was down almost €500,000 on the total for last year, according to the League of Credit Unions, which represents most of the lenders.

Low demand from members for loans among the movement's 2.8 million members, because they are afraid they will not be able to meet the repayments, has also hit credit unions.

Lending is the main way that credit unions have of making money for the members who own them.

Head of the league Kieron Brennan said: "The loan book is down 10.5pc year on year as a lack of demand and continued restrictions on lending are impacting credit union loan books."

He said the poor demand for loans was restricting the ability of the movement to generate income.

LIMITS

Central Bank regulators have set limits on the amount of money that can be loaned out in an attempt to free up more funds to be put aside to cover loans that are not being repaid.

But credit unions complain that the restrictions are leaving them unable to help people who are financially stretched, pushing more people to resort to moneylenders.

The overall loan book of the 380 credit unions in the league now totals €3.9bn, down from €4.4bn last year.

There has been a fall in the value arrears on the loan books to €725m, a fall of €122m from 2012. The arrears represent 18.5pc of the value of the loan books. Some €125m of loans has had to be written off as these borrowings are not expected to be recovered.

Mr Brennan insisted that the movement had a very high level of provisions for bad debts, especially when compared with the domestic banks.

League credit unions have €2.6bn in capital and provisions, out of a total loan book of €3.9bn.

The league said that 32 unnamed credit unions had to get a bailout from a fund operated by it.

Meanwhile, a survey has revealed that seven out of 10 people have lent money at some point and never got it back.

The survey by O2 Money, a payment card operated by the mobile phone company, found that despite the fact so many have ended up out of pocket, most people still regularly lend or give money.

Irish Independent

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