Mr. Tim Molan:

The Credit Union Managers Association, CUMA, welcomes this opportunity to address the Joint Committee on Rural and Community Development. We welcome the interest of the committee members and hope that this is the commencement of dialogue on this very important topic.

CUMA is an association of credit union professional senior managers and CEOs drawn from credit unions in the Republic of Ireland and in Northern Ireland. Our members are front-line people drawn from all types of credit unions. Our members are the people who, day-to-day, interact with the three million members of credit unions on the island of Ireland.

Credit Unions have a rich history of engaging in small business lending in Ireland. It is not new to us. Many small businesses that currently grace our communities had their inception in credit union funding and were sustained for many years by credit unions who helped in many ways, ranging from start-up funds to cashflow. Small rural and community businesses are a natural fit for credit unions. Indeed, all our credit unions are community businesses themselves. All were once small, and many are still small. After many years of adverse economic conditions, we still sustain and are resilient. There are important lessons which can be drawn from that.

Our staff are drawn from our communities, and many of our volunteer directors are drawn from small rural and community businesses, the subject matter of today’s discussion. We profess to knowing a little bit about what we are talking about. We are the largest and most successful co-operative on this island. One of the things that makes us so different from the failed, profit driven banks is that we are not-for-profit organisations. This is important in a cultural context. Not only do we operate within legislatively controlled interest rates, but, as an indicator of that not-for-profit attitude and of our culture, we give back loan interest to our member borrowers. According to Central Bank's most recent statistics, 72% of credit unions rebated an average of 10.2% of loan interest collected in financial year 2017. Have the members ever heard a bank say that? I cite this statistic to emphasise that the culture of credit unions is different, and that we look at things differently. It is therefore only natural that we would understand what we are talking about and whose interest we are addressing. It is in inherently in our interest that small businesses are resilient and that they survive and thrive. We draw savings from our local communities and we lend in those same communities. We are the original crowd funders, and were operating long before that phrase was invented.

As mentioned earlier, we have a long history of small-business lending. The economic downturn impacted this type of lending negatively. Living in our communities, we saw small local businesses fail. These failures, allied to restrictions preventing business lending placed by the Central Bank upon many credit unions, contributed to the depressed levels of business lending by credit unions. Whereas some of these restrictions were relaxed in recent years, some still prevail. The Central Bank of Ireland, which regulates credit unions, introduced additional regulations in 2016 that defined "commercial loans” and limited commercial lending to 50% of the credit union’s regulatory reserve. This is equivalent to approximately 5% of the overall assets of the credit union and depends upon whether a particular credit union holds the minimum reserve requirements. As witness to how credit unions have actually sustained and improved, only three held less than the regulatory reserve in March 2018. These have since been transferred into other credit unions. Their offices remain open in their local communities, and have seen an increase in services available.

In March of 2018, commercial loans accounted for 1.9% of the existing €4.5 billion credit unions have out on loan. This is equivalent to 0.51% of our assets. Given that we could be lending up to 5%, or more where higher regulatory reserves exist, under current regulations, there is considerable capacity in credit unions for greater levels of commercial lending in suitable circumstances. It is somewhat disappointing to note that the Central Bank now proposes to impose further impediments to credit union lending in both unsecured personal lending and in the area of lending to small businesses.

That is for discussion another day, however. Notwithstanding this consideration, credit unions are ever anxious to engage with members who own or are starting businesses locally. Not only are we based in approximately 500 locations, but decisions are made locally and in a timely manner.

It is important for rural communities that a culture of mutual sustainability prevails. Credit unions must and do support local people and local communities. Despite wholesale mergers of credit unions over the past two years, the number of credit union branches has remained constant, but local people must support and borrow from their local credit union branches. Community organisations would see a faster and more viable return from supporting credit union development than from advocating entry of another foreign bank into rural Ireland.

Presence on the part of multi-service credit union offices is important for towns and villages in rural Ireland. Not only must we be enabled to offer business lending more easily and in a less-restricted manner, but we have to be enabled to offer a wider range of face-to-face services. Such a range of services will attract more footfall to our towns and villages, with consequent spin-off for neighbouring businesses.

We are pleased that for four years in a row credit unions have been voted number one for customer experience in the CXi Ireland customer experience report. This is a tribute to the member-centric nature of credit unions and to our 4,000 staff members spread throughout urban and rural Ireland.

We see the debate at this committee to be much-needed and long overdue. We see it as a commencement. We welcome engagement with Oireachtas Members and with the community of interests in rural and, indeed, urban Ireland. I thank the committee for its time and consideration.