CREDIT unions have accused successive governments of allowing a "policy vacuum" to emerge for the sector.
They claim this has led to a "perfect storm" where they are struggling to get people to take out loans with them, despite having billions of euro in assets.
And they say they have up to €900m that can be used immediately to build social housing and fund the retrofitting of 500,000 homes.
Credit unions want policy reforms to allow them to expand their mortgage and business lending.
A new report issued by their representative body, the Irish League of Credit Unions (ILCU), says the sector overall has €18bn in assets.
This could be used to massively increase support to communities, the league says.
According to the report, credit unions are uniquely positioned to support local development.
But proactive and responsive Government policy is needed to shape the future of what the league calls a "3.1 million-member people's bank".
The ILCU claims that successive governments have failed to work with credit unions to better utilise their assets.
They want a Credit Union Act, an immediate reduction in capital reserving requirements in line with international norms, and a State-regulated investment vehicle.
ILCU president Gerry Thompson said: "A perfect storm of increasing savings and reduced lending has strengthened credit unions' asset base further during Covid-19."
He said policymakers continue to view this strength as a problem which needs ever more regulation.
The ILCU represents 226 credit unions across the State out of a total of at least 241.
Regulatory rules mean that credit union funds are typically placed on deposit in European Union banks where they are often used by domestic EU governments to fund infrastructure projects such as roads.
Credit unions argue that this makes no sense when their funds could be leveraged for capital projects, such as social housing development in Ireland.
Mr Thompson said: "Credit unions want to see their assets used to develop communities in Ireland, such as through funding social housing, rather than being invested to build roads in Germany, as currently happens."
He added that there has been a surge in member savings in recent months in response to the economic uncertainty which Covid-19 has created.
This has happened in parallel with reduced demand for lending.
Mr Thompson said this is problematic for credit unions.
Every €100 in savings taken in by a credit union requires €10 to be put into reserves.
Muted lending combined with having to put large amounts of money into reserves is causing many credit unions to struggle.