Ireland’s credit unions are about to become an even greater financial force

These aren’t bad times to be a credit union. The movement which celebrates its 60th birthday this year was recently crowned Ireland’s customer care champion for the ninth year in a row.

Not only was it number one but it actually saw the gap between it and the also-rans widen when it came to the provision of customer experience.

The citation in the report from the CX Company said that the key to its long-running success was “staff who treat members with the highest respect [and] with genuine ‘We know you’ personalisation.”

According to the report, when someone joins a credit union, “they are not simply joining a banking service, rather they join a caring group fixated with providing relevant services to people they know in local communities. When you walk into a bank you get an interview, when your walk into a credit union you get a hug.”

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The effusiveness continued. “Credit unions get to know their members like their own family. They listen brilliantly to understand members needs around their life stages and customise solutions accordingly. Credit unions’ values and ethos are not simply words hanging on a reception wall. They are put into action every day by their member focused staff.”

“The credit union social ethos allows us to focus solely on how to best deliver for our existing and potential new member,” said the head of the Irish League of Credit Unions David Malone when the report was published.

It is hard to top that but this week the news got even better for credit unions with legislation aimed at making them an even greater financial force and allowing for greater co-operation within the sector passing a key stage.

The committee stage – or third of a five-stage legislative process – of the Credit Union (Amendment) Bill saw the adoption of two amendments.

It will allow credit unions to pass on members to other credit unions for services, even if they do not provide the service themselves and will allow credit unions to club together to provide loans, either through loan participation or syndication constructs.

Announcing details of the legislative progress, the Minister of State with responsibility for financial services Jennifer Carroll MacNeill said credit unions are at “an inflection point”.

“I believe all credit union members, irrespective of where they live, should have access to the full services of community banking,” Ms McNeill said. “All members should, for example, be able to open a credit union current account, apply for a business loan and should be able to access a mortgage product.”

The Credit Union Development Association estimates that credit unions’ mortgage lending volumes, which are set to amount to €200 million this year, will double each year “for the next couple of years” at least as a result of the legislative overhaul.

“For local community organisations seeking larger loans, there will be more access to affordable finance options as their local credit union will be allowed to co-lend and share loans with other credit unions.”

According to the Central Bank, which relaxed its lending restrictions in early 2020 to allow credit unions to engage in more longer-term lending, including home mortgages and business lending, credit unions have unused capacity to provide as much as €2.1 billion of mortgages and business loans.

The latest annual report from the regulator on the financial conditions of credit unions shows the sector had €28.40 out on loan for every €100 of assets as of September 2022. The ratio is down from 49 per cent in 2007. The optimal loan-to-assets ratio is widely viewed to be about 50 per cent.

Credit unions affiliated to the Irish League of Credit Unions held €17.9 billion in assets at the end of June, a figure that has more than doubled over the last 20 years. Membership also continues to increase and is currently 3.2 million and increasing steadily at a rate of 1,000 per week.

The credit union loan book is up to €5.1 billion, up 40 per cent over the last 10 years and it has over 40 per cent of the unsecured personal loan market.

Around 400,000 loans were issued in the last 12 months totalling €2.5 billion. This is the highest level of annual lending ever.

Credit union current account growth also continues with one in every 10 current accounts opened now with a credit union with a best-in-class app, Google Pay and Apple Pay functionality as well as an internationally recognised debit card.

Ms Carroll MacNeill said she hopes that the Bill will be enacted by the end of this year and that the Central Bank “would be well prepared” to push through follow-on regulations “quickly”.

And according to Cathy Summers of the CX Company, the main reason credit unions have proved so successful at delivering customer experience excellence on a consistent basis was that they are embedded in the community and focus on driving change to meet customer needs rather than to make their organisation more efficient.

She added that their CX record means the larger credit unions are well placed to compete with the banks for more complex products like mortgages. “Drawing down a mortgage for a new home is a highly emotive purchase and credit unions have been very good at recognising the importance of that.”

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