Brendan O'Connor: We must fix credit unions – they are in our DNA
The movement is part of what we are, and many fear we will throw out the baby with the bathwater, writes Brendan O'Connor
Published 17/11/2013 | 01:00
More than 50 years ago, when the credit union movement kicked off in Ireland, we were a very different country. We were a country with high unemployment, hunger, emigration and a people in thrall to the scourge of moneylenders – okay, so it wasn't that different.
A teacher, a baker and a civil servant looked at the situation and spearheaded the setting up of the Dublin Central Co-operative Society, to encourage and found workers' co-operatives aimed at stopping the tide of emigration. With input from the ICA and their country markets movement, the Credit Union movement would grow out of this initiative, the credit unions' aim being to promote thrift and to offer credit at competitive rates, a community-oriented project where people pooled their savings and then lent to those who needed credit.
Profit was not the imperative, but to help the community.
Credit unions served those who couldn't get bank loans because they weren't the right kind of person. And you needed to be the right kind of person to get a bank loan back then. It was, for people in Dublin particularly, an alternative to the moneylenders.
Something about the credit union movement would gain a foothold in the Irish psyche. Ireland is at number nine in the world for credit union members, with nearly three million. (The US, surprisingly, is number one, with 100 million credit union members.)
In terms of the proportion of people who are credit union members, Ireland is number one in the world, with nearly three-quarters of the population being a member. Our major competition in terms of percentage of the population who are members, is, funnily enough, the Caribbean. The movement is hugely popular in Barbados, St Lucia and other islands down there.
You can see how the credit union movement chimed with the Irish psyche to the point that it became almost written into our DNA. Parishes, communities, neighbours, ordinary people looking after their own. My aunt Eileen, who was in a sense like a second mother to us and we like adopted children to her, opened my account for me, saving into it for me when she could and handing the book over to me shortly before she died on the proviso that I keep it up, which I have. In Ireland, the credit union has literally become something passed down the generations.
As much as it was alien to the Irish culture of secrets and lies to have your neighbours, who might have been volunteers, know anything about your financial situation, it became one of those things, like the GAA, that became part of the heartbeat of Ireland. It was there in communities all over the country, by local people, for local people.
Over 50 years on, we are back in a country plagued by money-lenders and emigration and an inability of ordinary people to get money from banks. And the credit union movement, needed as much now as it was when it was founded, is under attack.
Of course, part of the attack is from within. The corruption of the ideals of the credit union movement could almost be a metaphor for the corruption of the ideals of traditional Ireland. If indeed we all partied, parts of the credit union movement certainly did. Even this beloved part of the soul of that better Ireland we aspire to, an Ireland of community, thrift and help-your-neighbour, fell victim to the crack cocaine of cheap and easy credit to be gambled on what was seen as the one-way bet of property.
Of course, as we point the finger now, it's easy to forget that we all knew, to some extent, what was going on, and we all condoned it. We all knew that your friendly credit union might help you with a deposit on your house. How many people do you know who spent the first five years of their mortgage paying off a mortgage and a similar-sized sum to the credit union? And for most of them it worked out.
We all knew the credit union would bend the rules if they knew you, and if they knew you were good for it. We all knew that home improvements didn't have to mean home improvements. We all knew that the credit union, because it wasn't a bank, and because its remit was to try and help people, would try to help you when they could.
And while this was generally a good thing, and was regarded as such, we are now all shocked and horrified that this bending of the rules went overboard at times.
Like all great ideologically driven movements, the credit union, where it failed, failed because of the same thing that always screws up ideology – people. Human nature – the undoing of all great ideas. Unfortunately some of the people in the credit unions were as bad as the rest of us. Vanity, ego, ambition, competitiveness, greed and all that bad stuff. There was also that strong desire that permeated the whole country to be in the property game. So Taj Mahals were built and monies were lent to developers.
And now the regulators are moving in and many people within the movement are concerned that strong-arm tactics will throw out the baby with the bathwater.
There is a huge body of opinion now that believes that the reason the financial regulators are treating the credit unions like banks is to benefit the banks themselves. They will tell you how it is done in subtle ways, like encouraging people to pay their mortgages at all costs, essentially prioritising the banks as the favoured creditor at huge cost to the credit union, which is admittedly an unsecured creditor.
They will tell you how the regulators are making it more and more difficult for credit unions to do what they were set up to do, which is help people by lending to them. They talk about a regulatory system that ignores the specific quirks of the credit union, like the fact that most of the time, half the money people borrow is their own money that they have on deposit. Credit union people wonder why €2m was spent to manage Newbridge Credit Union over the last couple of years while still not averting disaster. They wonder why the answer was to move the whole mess into a bank, with the result that Newbridge now needs a new credit union. They wonder why the solutions for credit unions involve yet more professional fees and banks.
They wonder why, when there is a problem with getting local economies going, the credit unions are being prevented from disseminating money, even in a sensible way, in local communities. They wonder why people are being driven back into the arms of moneylenders.
We wouldn't decimate the GAA because some clubs play dirty, or because some coaches lost the run of themselves. We recognise that while the GAA will always have as its potential failing the imperfect people who make it up; as a national movement, it and the good that it does transcends that. We should be careful too that we don't crucify the whole credit union movement for problems within it that are dwarfed by the problems of the banking sector. Because while they may manage to set up a new credit union in Newbridge, if we suffocate the whole movement, it won't be that easy to replace it. Better to work with it to keep it going.