Mr. Ed Farrell:

I thank the Chairman for her invitation to appear before the Joint Committee on Business, Enterprise and Innovation. The Irish League of Credit Unions, ILCU, represents 260 credit unions in the Republic of Ireland which have more than 3 million members. For the ILCU this engagement today is timely and important. Under existing legislation and regulations credit unions can lend to SMEs and many credit unions already provide such credit. Increased levels of business lending, together with more lending for home loans and investing in social housing was the essential new direction we determined to embark upon in 2015. They were among the very short list of key specifics we spelled out in our Six Strategic Steps policy document before the last election. That document was and is our platform for policy and regulatory change.

On lending to SMEs, and because of the priority the league attaches to the sector, we developed a detailed SME Lending Proposal, published in 2016. We are here today with that thought-out plan, and with the ambition to deliver on it. Our policy proposal is based on the fact that credit unions have a footprint across the country. We have members’ funds on deposit available for new forms of lending. Our vision for credit unions, as banks retreat from a physical presence in communities and as key decision makers become ever harder to access in person, is for a democratic, volunteer-led, community-based, highly professional and financially prudent credit union movement. It is one where you can meet face to face with the person you need to see. It is a dynamic resource for development in local communities. Credit unions are there for people and provide the very smallest loans for the neediest, home loans for the house one's family will live in and business loans for the enterprise people make their living from.

Credit unions are not a separate enterprise that has an office in the community. We are a community who save and borrow together. Our money does not come from the markets but it is loaned on trust from one to another. That common bond, which defines each credit union community, is our essential characteristic and our underlying discipline. It is also our essential legal framework. Our proposal on small and medium enterprise, SME, lending reflects that. We are very encouraged that the committee members' colleagues on the Oireachtas Joint Committee on Finance, Public Expenditure and Reform and Taoiseach in their report on the review of the credit union sector last October strongly supported the common bond. As credit unions we are determined to change our business model but we are also determined to keep our credit union values.

Our proposition is that credit unions, regardless of size, would participate in a State-backed vehicle that would enable a national network of credit unions to act as an efficient distribution network to originate SME loan applications. It would enable credit unions to invest in a funding facility that will lend to SMEs across Ireland. This would marry the local network and the local knowledge of credit unions with the expertise needed for business lending on any scale. It would ensure access locally and it would ensure prudential lending. It would ensure that this expertise would be available through a State-backed investment vehicle to all credit unions, regardless of their size. Our submission to the recent Central Bank consultation paper on credit union investments included this proposed model. Credit unions are community-based and this model is pro-community and pro-business. To ensure that a start is made, we also propose that this scheme could be piloted with a small pool of well-capitalised and large credit unions at the outset. We are principled about what we want to do and we are practical about how we go about delivering it. Our vision for SME lending also includes agri-lending.

Given the economic importance of SMEs to the overall well-being of the economy, credit unions have a strategic interest in supporting the sector. Commercial lending is by nature more risky than personal lending so the formation of a centralised vehicle to lend to the SME sector would enable a stronger centralised risk management capability. It would be the means whereby dedicated and skilled resources to identify, access, measure and manage credit and operational risks could be brought to bear in a cost-effective way. It would facilitate credit unions supporting the commercial loans market and it would do so in a manner that provides robust mitigation against risk and, above all, protects members' funds effectively. This proposal would enhance competition in the market and deliver on this committee’s objective of addressing "the cost of doing business". It was sent to all Oireachtas Members and relevant Departments; the challenge now, and it is a political challenge, is to move on from support in principle to concerted action.