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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Transcript of 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
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
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
Irish League of Credit Unions, 2014
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
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
Irish League of Credit Unions, 2014
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
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
Irish League of Credit Unions, 2014
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
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
Irish League of Credit Unions, 2014
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
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
Irish League of Credit Unions, 2014
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
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
Irish League of Credit Unions, 2014
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
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
Irish League of Credit Unions, 2014
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
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
Irish League of Credit Unions, 2014
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
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?
Irish League of Credit Unions, 2014
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
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