A number of proposals have been made for Ireland’s credit union sector which would see it increase the number and cost of its loans, and reduce the amount held in savings accounts.
Ireland’s finance minister Paschal Donohoe says he means to continue with plans to allow credit unions increase the cost of loans from 1% a month to 2%, despite objections from his cabinet colleagues, the Irish Times has reported.
Mr Donohoe is following advice from the Credit Union Advisory Committee, which fears the lower rate discriminates against high-risk borrowers, hampering competition.
He hopes the move will help credit unions expand services after struggling to grow their loan books against competition from high cost lenders.
“The government recognises the important role played by credit unions as co-operative, not-for-profit financial services providers and as such I am strongly supportive of a strengthened and growing credit union movement,” he said in a statement.
“I would encourage credit unions to continue to develop their business models, while looking to further provide for both their members and their common bonds, and further fulfil their important role in society.”
The decision comes as a survey by The Association of Certified Chartered Accounts (ACCA) found that although Ireland’s credit unions have the capacity to increase their loan books by 50%, there is not enough demand from members.
ACCA revealed the figures after a survey of 100 credit unions at a Credit Union Managers Association event. Suggested avenues for loan expansion include green loans – financing purchases such as electric cars, solar panels and insulation – and lending to small and medium enterprises.
The low rate of borrowing has affected the amount credit unions in the country can accept from savers. Irish Times reports that thousands of members are being asked to withdraw some of their savings by credit unions, which are putting a cap on deposit accounts.
The paper found 36 credit unions imposing saving limits – some as low as €15,000 – to reduce the cost of tightened regulations and charges from the banks which hold the deposits and tightened regulations.
