Jennifer Murnane O'Connor
Question:64. Deputy Jennifer Murnane O'Connor asked the Minister for Finance the initiatives he is undertaking to boost credit unions; and if he will make a statement on the matter. [31764/21]
View answerTuesday, 15 June 2021
Questions (64)
Oral answers (6 contributions)
I thank the Acting Chairman. I want to ask the Minister of State what initiatives he has undertaken to boost the credit union sector.
I thank the Deputy for raising this issue. We are aware of the important role played by credit unions throughout society. It is one of the most trusted brands by the people when it comes to dealing with their financial affairs.
A number of commitments are set out in the programme for Government, including a review of the policy framework in which credit unions operate. As part of the review, the Department has held extensive engagement with the credit union representative bodies since September 2020 to seek feedback on their key priorities for the sector. I met with representatives of the sector and with different groups who made proposals. I am examining each and every one of the proposals, with staff in the Department of Finance.
On supporting and enabling the sector to grow, I will outline some recent developments in lending and investment regulations, SME, lending, access to finance for retrofit, current accounts and investment in approved housing bodies. The Central Bank has in recent years completed reviews of both the lending and investment frameworks. Since January 2020, credit unions have a combined capacity to provide up to €1.1 billion in SME and mortgage loans, with additional lending capacity available for those that can comply with certain conditions, or on approval by the Central Bank. As at December 2020, credit unions had combined mortgage and SME loans of €344 million, an increase of 12% on the previous year. There is tremendous scope for them to continue doing that.
I welcome the announcements that 19 credit unions, supported by Irish League of Credit Unions, the Credit Union Development Association and Metamo, have been approved by the Department of Enterprise, Trade and Employment for participation in the Covid-19 credit guarantee scheme. This is a tremendous opportunity for credit unions to obtain finance at low cost where the State guarantees 80% of the actual loan and the risk to the credit union is low. They can give out unsecured loans up to €200,000. It is a fabulous scheme and I encourage as many credit unions as possible to take this up and participate in the scheme as quickly as possible.
The Minister of State will be aware that I am a big fan of credit unions. In my area in Carlow they do so much good work. I must, however, ask him about the levies on the credit unions, which is a concern. Covid has been hard for people and they are trying to save an extra few euro. The credit union now has funding. It is important that the Minister of State would look at mortgages across all of the credit unions. Some credit unions are able to give out mortgages, but others are not, which is a concern. It is my understanding that 18 months ago the Government changed some of the loan criteria. Originally, in Carlow the credit union had a loan term of 25 years. This has now changed to ten years. A person can borrow up to €100,000 over ten years, not 25 years. I also have concerns about this. Even though we all know the great work done by the credit unions I ask the Minister and the Minister of State to examine these issues. People depend very much on credit unions, which are very much community-based. I ask that these issues be looked at.
I thank the Deputy for pursuing the issue on behalf of credit unions. She also mentioned the credit union in her own home town. It is important to note that 51 credit unions, representing some 50% of the sector in financial terms, currently have approval to provide current accounts and debit cards. This is the way forward. They must be able to meet the modern day requirements. I encourage the other credit unions in the sector to move into that area. Some credit unions offer a current account and cards but only allow a credit union member to withdraw cash from certain ATMs. I would like the credit union movement to have cards that can be used in any ATM of any financial institution. Getting more people using credit union facilities will help them to grow. I want to see the credit union system lending more money. Credit unions have a surplus of savings and deposits. It is important that they lend so they can earn a good rate on the loans, and earn income into the future.
As the Minister of State said, it is important that we in government encourage credit unions to give out loans. The funding is there. This must be looked at. More than ever we are now seeing the housing crisis, and there are more people investing in their homes during Covid by decorating and so on. This is what it is all about and this is what we need to encourage. I ask that we would work with the credit unions a bit more on what we could do to give out more loans, and on what the criteria are, in particular the criteria under which they can invest and what they can invest in. This needs to be looked at. Even though I welcome the good work being done on all sides, there are issues that need to be addressed. We are all blessed with the number of credit unions in the State. They do an excellent job but they have money and we must make sure that this money gets out to the communities. We cannot have any barriers. I ask that no barriers are put in front of any credit union.
I agree wholeheartedly with the Deputy's comments on the strength of the credit union movement in the State. They are definitely held in very high esteem. She referred to levies earlier. Last year the Minister signed an order that dramatically reduced the levies payable by credit unions from this year onwards. It was one of the biggest single reductions they have ever achieved. We have assisted the credit union sector with legislation to allow them to hold their AGMs virtually, which had not been provided for in legislation up to now. Practically every credit union in the State has now held its AGM in a virtual manner, which had never happened previously.
Following the closure of Bank of Ireland branches and Ulster Bank, the only financial institution left standing in many towns throughout the State will be the credit union. There is a tremendous opportunity for them to increase their volume of business in the local communities now that other banks are closing their branches. There is also a tremendous opportunity for them to meet with business people, especially from the SME and retail sector, to provide loans, which they need to do to earn interest and to continue to grow and prosper.