Friday 14 December 2018

Credit Unions deserve support


CREDIT UNIONS are not responsible for our current economic crisis, but unfortunately it looks like some of them may end up paying a high price for the failure of others – bankers, regulators, speculators and politicians – at both national and EU level.

You might well ask, how could this happen? Yes, some Credit Unions are in trouble but the vast majority are not. Most of their problems arise because some of their borrowers are unable to repay loans on time because of mortgage repayments, unemployment, higher charges, cutbacks and other symptoms of the current economic climate.

So what might that price be? Consolidation is on the cards. Unfortunately, this is nothing more than a fancy word for closing down Credit Unions. While in theory consolidation is voluntary, those in charge see it as inevitable. That state of mind – that bigger is always better – has forever eluded me, indeed it is financial institutions that were "too big to fail" that brought us to our knees in the first place.

Yes it is sensible, it is reasonable to pool resources, to share ICT services, to consolidate or centralise certain operations: that is efficient and cost-effective management. However, one of the main strengths of the Credit Union movement is that it is local. That allows local volunteers to run, manage, and coordinate the services. While banks, Post Offices and Garda Stations are closing down, your Credit Union wants to remain a vibrant, viable part of your community.

So the solution seems clear: consolidate certain functions, but keep the individual Credit Unions in place.

The movement in Ireland that has over three million members; 40,000 new members joined last year. In Ireland in 2012, Credit Union savings remained stable at €11.53bn. Credit Unions are owned by their members, operating on the principle of one member one vote. As they are not for profit, that means no huge bonuses for bosses, and any surplus income is returned to their members, with no transaction charges on loans or savings accounts. Credit Unions exist solely to meet the needs of their members. In a nutshell, that's the kind of organisation most of us would like to support and be happy to belong to. And we do – over three million of us.

Right now, legislation before Dáil Éireann will make it very difficult for volunteers to join a Credit Union board. For example, if you volunteer to help out your local Credit Union, you will be prevented from joining its board, as will your children, spouse, partner, brothers and sisters. This will mean that smaller Credit Unions in particular will struggle to attract volunteers, and it's an extraordinary contradiction that we have proposals to impose draconian restrictions on who can be a director for a Credit Union while no similar proposals exist for other financial institutions.

If we combine these top-heavy restrictions on volunteers with the proposals to consolidate, i.e. close down, many Credit Unions, then it is likely that a Credit Union near you will close. Maybe I'm wrong, maybe I'm naive, but surely over three million members simply won't allow that to happen.