Irish League of Credit Unions, 2012 W E L O O K A T T H I N G S D I F F E R E N T L Y Presentation...

Irish League of Credit Unions, 2012

W E L O O K A T T H I N G S D I F F E R E N T L Y


Presentation to the Joint Committee on Jobs, Enterprise & Innovation

5th June 2014

David Matthews

Irish League of Credit Unions


Presentation to the Joint Committee on Jobs, Enterprise & Innovation

5th June 2014

David Matthews

Irish League of Credit Unions



Contents

• About us– The Irish League of Credit Unions– Services to SMEs

• Roadblocks– Internal & external– Impact of lending restrictions on credit unions & SME

lending

• Possible solutions– County Enterprise Boards & Credit Unions– Investment Fund for lending to SMEs



About us• The Irish League of Credit Unions– Largest credit union trade & representative body

• 376 affiliated credit unions in the Republic of Ireland– Regulated by the Central Bank of Ireland

• 3 million members, total assets €12.6bn• Total Savings €10.6bn• Total Loans €3.8bn, average loan €6,300– Funds to lend – approximately €5bn

• Credit unions want to lend & need to lend– Viability will depend on our ability to lend



Credit Unions & SMEs• Under credit union legislation:-– SMEs can be members of credit unions• Either as individuals or firms

– SMEs can borrow from credit unions• Either as individuals or firms• About 5% of loans are to SMEs or for business purposes

• Credit union loans– Maximum interest rate 12% per annum (12.68% APR)• Average rate is 10.25%

– Flexible repayments, no charges or interest penalties



Roadblocks• Internal Roadblocks– Independence of credit unions means that service

offerings are variable– Not all may have the skills to assess business loans– Not all would want to offer them

• External Roadblocks– Loans to SMEs are higher risk than personal loans• Credit union’s “Risk Appetite” is low

– Central Bank oversight



Lending Restrictions• 60% of credit unions are subject to some form of

lending restriction• Most restrictions include a prohibition on

“commercial” lending– Can include personal loans to self-employed members

• Most restrictions include a monetary limit– Too low to provide meaningful funding to SMEs• Average limit is €25,000

– Limit would include personal loan(s) to the member



Possible solutions - #1

• Credit unions & County Enterprise Boards (CEBs) – Credit union receives a business lending proposal, does an

initial assessment & refers it to the CEB if it looks positive– CEB can:• Provide support through a financial adviser,• Assist in preparing a business plan / projections, & • Can provide mentoring services to SMEs (if required)

– Application is discussed & approved by a joint committee



Possible solutions # 1

– St Canices (Kilkenny) Credit Union & Kilkenny CEB• Credit Union set aside a fund of €2m• Loans between €10,000 & €40,000 can be considered• 55 loans totalling €1,170,500 approved to date• Current amount outstanding €439,000• Average loan is €21,000• Most perform well

– Could be extended to other credit unions, especially if some form of guarantee was available



Possible solutions # 2• Credit unions could invest in a “fund” to lend to

SME borrowers– Would require Central Bank approval– Up to (say) 10% of Reserves (€200m)– Invest in a centrally-managed fund (with

appropriate skills) for small businesses– Could get over variability of skills, services, etc.– Perhaps with some level of state guarantee?



In conclusion• Credit unions were established to provide members

with access to affordable credit• Credit unions have funds and are keen to lend• SMEs have a key role to play in the future success of the

Irish economy• SMEs need credit to survive and thrive• Credit unions can be part of a solution• We would welcome continued engagement with the

Department of Jobs Enterprise and Innovation on this matter

Irish League of Credit Unions, 2012 W E L O O K A T T H I N G S D I F F E R E N T L Y Presentation...

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