Mr. Ed Farrell:

I thank the Chairman for inviting the Irish League of Credit Unions to attend. We are a volunteer-led, democratic, all-island co-operative movement. We represent 250 credit unions located in 500 different, separate communities in the Republic. As a result of the fact that our organisation is membership-based, we are of the community; because we are democratic, we represent the community; and because we are local and because each credit union is a co-operative of savers and borrowers bound in a common bond, decisions are made in the community by members who know and understand their own needs.

What makes credit unions fundamentally different is our ethos. We have a holistic view of community. Banks look out on the world and see market segments. They seek to make profits and to enrich shareholders. We come from the community, we see the needs around us and we understand that one need is joined up with another. Sustaining small rural and community business is part of being able to sustain small communities for the future. There is no community without business, without jobs, and without the services and opportunity that comes with a strong, sustainable economic life locally. Credit unions are not for profit. We are financially strong and we are prudent. The return we seek is stronger communities and our members' well-being. That obviously includes small and medium businesses locally.

In a world of globalisation and homogenisation there is consolidation among credit unions. There is also a continued enhanced level of service provided by credit unions in the more than 500 separate communities I spoke of. Due to the fact that we are membership-based and co-operative, we have values that banks do not. As a result of our common bond, we are a real community of members saving together and lending to one another. A mark of our values is that for the fourth year in a row Irish credit unions have taken first place in the annual CXi customer experience awards, which were announced on 16 October. Customer experience is measured by how customers perceive an organisation’s brand through their interactions with its employees. The fact that credit unions are the only organisation in the world to win this accolade in four consecutive years speaks for itself. We have values of excellence that enable us relate to the community at every level, from the smallest personal micro-loan to lending to business.

The economic facts relating to SMEs speak for themselves. Data from the Central Statistics Office, CSO, show that there were approximately 250,000 active enterprises in Ireland in 2016. As our colleagues from Irish Rural Link said earlier, more than 90% of these had fewer than ten employees. These are our so-called microenterprises. Just under 7% had between ten and 49 employees. These are the small enterprises in SME terms. Some 1.2% had between 50 and 249 employees and are medium-sized enterprises, while only 0.2% are large enterprises with 250 or more employees. Small enterprises or microenterprises account for a huge proportion of Irish businesses.

Credit unions know these people because they are our members. We have 3 million members. We provide for their personal loans and we want to do more to provide for business lending too. That is why we published the league’s SME funding proposal, which was forwarded to the committee. Lending to business is not simply an issue we are speaking of here today. It is an issue we have prioritised for some time. It is intrinsic to the range of services credit unions seek to offer. The league’s proposal is predicated on credit unions having a real concern to assist small business and micro-business. I understand that this committee fully shares that community perspective because that is its remit. Although we are talking primarily about rural communities today, it is important that the remit of the committee and that of credit unions fully includes urban communities as well.

Our proposal is essentially that credit unions would participate in a State-backed vehicle that would enable individual 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 would then lend to SMEs. Our proposition is that this structure be formed on a collective basis. We believe that this should be piloted with a small pool of well-capitalised, large credit unions. The key benefit of our proposal is that it would enable credit unions to put a portion of the members’ excess funds of approximately €10 billion, currently held in short-term and low-yield investments, to a more productive and economically rewarding purpose. It would also enable credit unions to offer members a more diversified and dynamic product offering. If an SME approached a credit union for a commercial loan, while that credit union might not offer the loan or take direct risk on the loan, it could direct the application to a entity associated with the credit union which could consider the credit and potentially offer the loan to the SME borrower.

Providing the SME sector with necessary supports to foster a culture of growth is an essential public policy focus. Our proposal would enable the sector to access, on a community basis, a strong sustainable, well-capitalised and domestically managed funding source. In addition, this proposal would open up the credit union infrastructure as a key SME loan distributor. Credit unions could act as a new conduit for the State to stimulate borrowing in the SME market and support it with competitive loans in a speedy and effective manner using the credit unions pre-existing and mature infrastructure.

We are also meeting today in a specific political context. The confidence and supply agreement has concluded. The Credit Union Advisory Committee, CUAC, review process is concluding and credit unions are now looking for a move onward from aspiration to action. The commitment to “develop a strategy for the growth and development of the credit union sector” in the confidence and supply agreement is long in gestation. The challenge now, which is essentially political, is to translate kind words of reassurance into political prioritisation. The challenge credit unions face in terms of the development of more localised banking and financial services, which we are ambitious to lead, is not the result of any lack of good will. It is down to the much scarcer commodity of determined prioritisation.

Credit unions have been moving on.

For example, among other things, credit unions now process electronic payments and issue mortgages. With regard to the provision of microcredit, the "It Makes Sense" loan was launched two years ago and we welcome the report published this morning seeking an interest rate cap on moneylenders. There are more than 6,000 live loans in 110 credit unions in 260 locations. These are significant and welcome developments but the scale of what we can do is severely restricted by regulation. Our aim is to deliver current accounts and debit cards, and support our members with the full range of services they need on a day-to-day basis.

All of these pending issues impact on our capacity to meet the needs of businesses locally and, more generally, the needs of the communities we come from. We are ambitious to deliver more lending for SMEs and family farms. We are ready to invest in social housing as asked by Government. We are delivering in partnership with the Government on an effective microlending scheme. We are ready with a detailed proposal on how credit unions can better deliver for SMEs. There is, however, a gap politically between aspiration and engagement. We do not look at communities and see market segments but, in turn, we need holistic engagement on policy that is backed up by joined-up regulation to deliver a step change for credit unions. This step change is not about us as a movement. Credit unions are an instrument of change, not its objective. Instead, we see the communities we come from, we see the more we can do and we are ambitious to do it. I thank committee members for their time and we look forward to answering their questions.