An "unshackling" of the €18bn sector would deliver financial and social dividends, according to credit union veteran Gerry Thompson, but instead he fears many local unions face a regulatory cliff edge as well as financial squeeze.
Mr Thompson is president of the Irish League of Credit Unions (ILCU) which has 340 members and combined lending of €4.79bn, making it the biggest representative body for Irish credit unions.
The movement, as he describes it, is trapped between two worlds: its voluntary roots and ethic and post financial crisis regulatory approaches designed to tame banks capable of bringing down the State. Volunteers who put themselves up for senior roles - such as chairing a credit union - face a formal Central Bank vetting process in the same way directors of multi-billion euro banks do.
For board members exercising so-called 'control functions' such as the chair, vetting can feel invasive relative to what in some cases is a minor enough commitment to a local community organisation, Mr Thompson says.
From the regulator's point of view though, those volunteers are overseeing management of substantial amounts of other people's money and having to meet increasingly high standards of control over issues like governance and anti-money laundering, but Mr Thompson feels the regulator's approach is more appropriate to banks and for-profit financial institutions.
"The [Central Bank] veto is anti-democratic, I dare say, when these are diverse, volunteer-led organisations rooted in the membership. It is diversity at its best," he says.
If people won't put themselves forward it can create a real difficulty because boards then fall below the regulatory numbers.
"The legislation on board sizes is prescriptive - depending on its size, a credit union must have board of seven, nine or eleven members," Mr Thompson explains. If the board numbers fall below that level a credit union can be in breach of the regulation."
"Boards face a regulatory cliff and will be unable to function if they don't have the numbers."
It's another burden on top of the challenge of making money in a market where some credit unions are having to turn away savers because their ability to lend has become so restricted, he says.
Mr Thompson himself is steeped in the credit union movement - since the 1990s he's held local, regional and national roles in the movement and his father was a founding member of his own local credit union before that.
The 62-year-old retired telecoms engineer and father-of-four from Roscommon has been president of the Irish League of Credit Unions since April 2019.
That kind of life-long commitment is changing, Mr Thompson said.
"The nature of volunteering is changing. People in the past came and they stayed. The move now is to more short-term involvement, more flexibility," he says.
He cites the example of Sean Finn, the Limerick inter-county hurler, who gained experience in areas like board oversight through a committee role at his local credit union in Bruff relevant to his professional career in finance.
"Volunteering is a challenge but the opportunities can also be really attractive. People maybe are missing a trick, We're seeing students taking the opportunity to come into the movement to build their CVs, gaining experience as volunteers that helps them in their professional life," he says.
Credit unions face other challenges which he fears will have long term consequences if not addressed.
He cites the example whereby every €1000 of savings a credit union takes in needs to be matched by €100 in a trading surplus, but the credit union can only come up with reserves if it is lending.
A "perfect storm" has been amplified over the last five months by the Covid-19 crisis, which has seen lending plummeted.
"We've got to the stage where credit union regulations means some are effectively closed to taking savings, because of the restrictions around lending."
Members' savings are becoming a cost to credit unions that they cannot afford.
He sees the answer in channelling excess cash into more profitable lending - such as mortgages and small businesses and funding lines for social housing.
But in each case the regulatory restrictions make that impractical.
An individual credit union with €90m in assets may have money it wants to lend, but under the current rules could issue no more than around 30 mortgage loans, all locally. That's too few to justify the commitment for many managers, even with some ability to centralise structures to manage application and underwriting.
Although he chafes against the restrictions, Mr Thompson blames Government rather than the Central Bank.
"Do they [regulators] get it? No. Is it their job to get it? No," he says. "The regulator is very comfortable with the legislation. They have microscopically precise round holes but we are a square peg that is not going to fit."
"I think it's Government's job to recognise the fundamental difference between voluntary, community-based credit unions and banks - and find a proper framework."
The potential benefit is huge, he thinks, and in part he believes Irish credit unions are victims of their own success, having built up significant scale and professionalism compared to a country like the UK, where credit unions are often little more than local savings clubs.
"The problem now is credit unions are treated as if we were part of the for-profit sector. We are serious enough in terms of assets we're probably seen as a threat while the system underestimates the social impact," he says.
"The future could be extremely rosy for the credit unions but the experience now is quite negative. Potential is not being realised even though people, including a significant number of young people are crying out for ethical alternatives."