CREDIT unions and post offices are forging an alliance which will help secure their futures and present a viable alternative to banks in local communities.
The plan has the potential to revitalise both organisations and could breathe new life into smaller towns and villages around the country.
A trial in Limerick will see post offices and credit unions jointly offer small loans for the first time. The funds will be provided by credit unions with money available through post offices.
If the initiative gets rolled out nationally, it will be the first step towards a stronger alliance, with plans for a wider pooling of services nationwide.
The deal could lead to the possibility of credit unions taking over post offices in rural towns.
Such a third force would help offset the effect on communities of bank branch closures, emigration and the closure of hundreds of pubs and shops that were once the heart of village life.
An Post, the Irish League of Credit Unions and the Irish Postmasters' Union all said they were in favour of the coming together of credit unions and the State post office network to offer financial services.
Such a move would counter the contraction of banks' branch networks, and provide a boost to credit unions and post offices, as both bodies are under pressure in rural areas.
Banking expert Professor Ray Kinsella told an Irish Postmasters' Union conference recently that an alliance between the post office network and the credit unions could provide a radical new model for delivering financial services.
"Together they could provide social and community-focused banking, greater competition and also strengthen a domestic banking sector that is still in crisis," he said.
The Irish Independent has learned that six credit unions and 15 post offices in Limerick are seeking permission to launch a trial to offer loans of up to €1,000 to jobseekers.
The aim of this plan is to steer low-income groups away from moneylenders.
A spokesman for the Irish League of Credit Unions said the initiative was at an early stage. But he stressed other areas where the two bodies can pool their offerings are being explored.
"The participating credit unions in Limerick and An Post are also examining whether there may be common ground to explore other methods of cooperation, which would offer mutual benefit."
The spokesman added that credit unions were now looking at a number of other areas where co-operation can be fostered nationwide. The proposals include:
Credit unions using An Post's Post Point terminals to offer members a range of bill-paying services.
An Post accepting cash lodgements and loan repayments from credit unions members.
Seeing if post offices could be housed in credit unions, and vice versa, in certain circumstances.
Loans offered from cash-rich credit unions via post offices.
The proposals would be implemented on a phased basis over the next year, following pilot projects. There are 386 credit unions in the State but they are under pressure due to low demand for loans, despite being flush with cash, and strict new regulatory rules.
They are also grappling with loan arrears and they are under pressure to perform mass mergers across the sector in order to bulk them up.
There are 1,100 post offices, but they are overly-dependent on processing social welfare payments to make an income.
The planned link-up between six credit unions and 15 post offices in Limerick involves allowing people on social welfare access to loans worth up to €1,000 each.
The funds would be provided by the credit unions, but loans would be granted through the post offices.
To get a loan people would have to sign up to An Post's household budget scheme, and make repayments weekly.
This scheme allows people to pay regular amounts towards household bills, deducted from social welfare payments.
The idea is to give families on low incomes cheap access to small amounts of credit for the likes of Christmas and communions.
The Department of Social Protection told the Irish Independent it was happy to consider any proposal that progresses financial inclusion.
"Such a proposal would also have to be examined for compatibility with the existing legislation that governs the household budgeting scheme and any implications for modification thereto considered."