Mairéad Farrell (Galway West, Sinn Fein)
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We have received no apologies.

Is mian liom na riachtanais bhunreachtúla seo a leanas a mheabhrú do chomhaltaí agus páirt á glacadh acu i gcruinnithe poiblí. Caithfidh comhaltaí a bheith i láthair go fisiciúil laistigh de theorainneacha shuíomh Theach Laighean. Ní cheadóidh mé do chomhaltaí páirt a ghlacadh i gcruinnithe poiblí nuair nach bhfuil siad ag cloí leis an riachtanas bunreachtúil seo. Mar sin, má dhéanann aon chomhalta iarracht páirt a ghlacadh ó lasmuigh den suíomh, iarrfaidh mé orthu an cruinniú a fhágáil. Maidir leis seo, iarraim ar chomhaltaí a dheimhniú go bhfuil siad i láthair laistigh de phurlán Theach Laighean sula ndéanann siad aon ionchur sa chruinniú ar Microsoft Teams.

Fiafraítear de chomhaltaí cleachtadh parlaiminte a urramú nár chóir, más féidir, daoine nó eintiteas a cháineadh ná líomhaintí a dhéanamh ina n-aghaidh ná tuairimí a thabhairt maidir leo ina ainm, ina hainm nó ina n-ainmneacha nó ar shlí a bhféadfaí iad a aithint. Chomh maith leis sin, fiafraítear díobh gan aon rud a rá a d’fhéadfaí breathnú air mar ábhar díobhálach do dhea-chlú aon duine nó eintiteas. Mar sin, dá bhféadfadh a ráitis a bheith clúmhillteach do dhuine nó d'eintiteas aitheanta, ordóidh mé dóibh éirí as an ráiteas láithreach. Tá sé ríthábhachtach go ngéillfidís don ordú sin láithreach.

I advise members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex in order to participate in public meetings. I will not permit members to participate where they are not adhering to that constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting. In this regard, I ask members participating via Microsoft Teams to confirm, prior to making their contribution to the meeting, that they are on the grounds of the Leinster House campus.

Members are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

Today, the committee is meeting to discuss the topic of enabling the growth of the credit union movement and to consider the growth of the credit union movement as a key provider of community banking across the country. The committee welcomes this engagement with the Irish League of Credit Unions and looks forward to hearing from the witnesses. I welcome to the meeting, from the Irish League of Credit Unions, Mr. Brendan Jenkins, president; Mr. Barry Harrington, head of advocacy and regulatory affairs; Mr. David Malone, chief executive officer; and Ms Mary Slowey, head of legal.

I invite Mr. Jenkins to make his opening statement.

Mr. Brendan Jenkins:

I thank the Chair and members of the committee for the invitation to appear today. As the Chair said, I am the current president of the Irish League of Credit Unions. I am joined by Mr. David Malone, our CEO; Mr. Barry Harrington, head of advocacy; and Ms Mary Slowey, head of legal. I will make a few introductory remarks before handing over to Mr. Malone and Mr. Harrington to outline some issues to help guide the committee’s work on discussing how to enable the credit union movement to grow as a key provider of community banking in the country.

The Irish League of Credit Unions, ILCU, is the largest representative body for credit unions in Ireland. Founded in 1960 with the aim of providing representation, leadership, co-operation, support and development for credit unions in both Republic of Ireland and Northern Ireland, the ILCU today has an affiliated membership of around 230 credit unions with over 400 branches. Membership of the ILCU is open to every credit union on the island of Ireland. The credit union movement is built on an ethos of mutuality, volunteerism, self-help and a not-for-profit philosophy.

I was honoured to be elected president of the Irish League of Credit Unions in April 2025 after almost 40 years of working as a volunteer and member of staff in the movement. I spent 11 years as a director and 28 years as CEO of Clones Credit Union.

It is both an honour and a privilege to represent credit unions across Ireland at this juncture in our movement’s history. It is a source of great pride for me to be the third person from Clones Credit Union to serve as president of the Irish League of Credit Unions following Fr. Paddy Gallagher, the league’s first president in 1960, and Jim McMahon who served as president of the ILCU from 2000 to 2002.

One of the unique aspects of credit unions is the role of volunteers on the board of directors who have responsibility for the general control, direction and management of the credit union. The Irish League of Credit Unions, on behalf of credit unions across the country, is delighted to partner with Volunteer Ireland and Volunteer Now for the 2026 national volunteering campaigns. These weeks, which take place from 18 to 24 May and 1 to 7 June, respectively, are dedicated to showcasing the enormous contribution of volunteers and their impact in their communities.

I will now hand over to our CEO, David Malone.

Mr. David Malone:

We are delighted to be here today. I thank the Cathaoirleach and committee members for the invitation. The theme of today's session is very much about helping the credit union movement to grow as a key provider of community banking services. That captures something important. Credit unions are not financial institutions that happen to serve communities; they are community institutions that happen to provide financial services. That distinction matters. For over 65 years, credit unions have operated according to ten core principles, including democratic control, member ownership, return of surplus to members, social responsibility and co-operation among cooperatives. These are not soundbites. They are a covenant between credit unions and the communities they serve, as relevant today as when the first credit union opened in 1958.

The programme for Government contains seven direct commitments to the credit union sector, the most comprehensive set of Government commitments to our movement in a generation. They range from dedicated ministerial responsibility and expanded lending capacity to housing, digital resilience and, most significantly, the development of a five-year strategy for the sector. We welcome every one of those commitments. That strategy was formally initiated by the Minister of State, Deputy Troy, last week. The timing is right. The regulatory environment, particularly following the mortgage and business lending limit changes last October, has created real headroom for growth. The Credit Union Amendment Act 2023 has opened important new possibilities for the credit union sector and it provides the platform to build and become stronger than ever.

Credit unions are Ireland's most reputable organisation, the most emotionally connected brand and the most sustainable organisation. Consistently and by every independent measure we are the most trusted financial institution in the country. That trust is real, hard-earned and the foundation on which the strategy should be built. Credit unions are strongest when they work together. That is not a new idea; it is principle 9 of our operating principles, co-operation among co-operatives, which has guided our movement from the beginning. The five-year strategy is the opportunity to give that principle greater expression, so that every credit union member can access the full range of modern financial services while their local credit union retains the identity and community relationships that make it irreplaceable.

The Irish League of Credit Unions will be an active and constructive partner along with our other sectoral colleagues in the Credit Union Development Association, the Credit Union Managers Association and the National Supervisors Forum in developing this strategy, which we want to be an ambitious one. We want to see three things: genuine ambition that matches the scale of what credit unions can deliver; continued regulatory proportionality as the sector evolves; and an enabling environment that allows credit unions to invest far more in domestic Irish infrastructure. This is good for Ireland, and it is obviously good for our ethos.

The credit union movement is a living expression of the belief that people, working together, can look after their own - people helping people. That belief has endured for over 65 years. The programme for Government commitments and the five-year strategy give us the best opportunity in a generation to honour it at a scale worthy of the 3.2 million people who trust us.

I will now hand over to Mr. Harrington to provide some oversight of our current financial position in the sector.

Mr. Barry Harrington:

Gabhaim buíochas leis an gCathaoirleach as an deis cúrsaí a phlé inniu. I am head of advocacy with the Irish League of Credit Unions. I thank the committee for the invitation to discuss issues today.

To highlight the financial strength of credit unions, we are growing strongly with 8% annual loan growth to the end of September 2025 and a growing share of the mortgage and business lending market following regulatory changes applicable since 1 October. Mortgage lending in credit unions has grown by 23% in the year to the end of September 2025 and lending to businesses has increased by almost 6% annually in the year ending in September 2025 to €190 million. The figures show continued positive momentum across the sector, with the credit union loan book reaching its highest level ever and mortgage lending continuing on a strong upward but prudent trajectory.

While consolidation continues through mergers and transfers of engagement, the sector remains on an upward trajectory. At the end of December 2025, the Irish League of Credit Unions membership stood at 235 individual credit unions in both Ireland and Northern Ireland. As Mr. Malone mentioned, we serve 3.2 million members in the Republic of Ireland and 3.8 million members on the island as a whole across 500 communities. Growth in members, loans, assets and reserves demonstrates both the resilience of the sector and the trust placed in credit unions by the public.

As Mr. Malone mentioned, credit unions are much more than financial institutions. Earlier this year, we conducted an in-depth survey of the community impact of credit unions, which found that in the year ending September 2024 they provided almost €8 million across the island of Ireland to communities, bursaries, school groups and local organisations. These are tangible benefits of credit unions donated by individual credit unions through community funds, sponsorships and bursaries to members and organisations. This highlights that credit unions are an essential part of the fabric of our society alongside their day-to-day commitment to providing accessible and affordable finance to their members.

There are a number of challenges that credit unions need to be mindful of and we are planning for them. There are also opportunities to grow our lending book as we have funds available to lend. The challenges and risks stem from new challengers, new products such as buy now pay later, fraud and forthcoming regulations which will be applicable to the credit unions, such as the consumer protection code and the Digital Operational Resilience Act.

We are confident that with the great work of our 3,000 staff and 2,000 volunteers throughout the country the future is bright for credit unions, in serving our communities, maintaining our not-for-profit ethos and providing real competition to the banking sector. We thank the committee for the invitation to be here and are happy to discuss any and all issues of relevance.

Mairéad Farrell (Galway West, Sinn Fein)
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I will now open it up to members.

Shay Brennan (Dublin Rathdown, Fianna Fail)
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It is very nice to see the witnesses here and I thank them for their opening statements. I very much welcome the 23% growth in mortgage lending. Credit unions have a vital role to play in filling that gap in the retail mortgage market in this country. I would be very keen to see that accelerated. My questions relate to that. Credit unions have close to €1 billion in retail mortgages currently, which is a very small percentage of the Irish mortgage market. My understanding is, particularly given the changes since September, that current rules allow credit unions to lend up to 30% of their assets. That would put the ceiling at about €6.6 billion. That is a decoupling from the business side as well, but my understanding is that is pretty much a doubling of the ceiling that credit unions previously had. I take it that the €1 billion is after the 23% growth up from €700 million or €800 million. Even at that level, it is still a long way from €3.3 billion.

I would like to understand what the constraints are relating to that. How quickly can those constraints be removed? Obviously, credit unions are taking short-term deposits and are lending long term. They have no access to capital markets and so have no real way to adjust that. Without the centralised treasury promised under the corporate credit union, CCU, which I understand is probably some way off, credit unions will have very limited growth beyond that €1 billion level for any time over the next couple of years and perhaps even a bit longer.

Mr. David Malone:

I thank the Deputy for his questions. A really important point about mortgages is the mortgage loan book has now reached the €1 billion mark, and that is from a standing start of approximately nil approximately two or three years ago. Mortgages have really begun to grow significantly in the sector. To put that in context, almost 12% of our loan book is now in mortgages. That is from a standing start of probably nil a couple of years ago. We have effectively provided funding for 7,000 homes in the past three years of mortgages. We recognise that is small as part of the overall market context, but we think we can grow that significantly, and certainly over the next number of years we want to migrate on a phased basis to an objective of 10% of new lending in mortgages. We want to do that in a safe fashion as well, because it is a new form of lending for credit unions that we are newly involved in. We are building up our capabilities and capacity in that in particular. We see great opportunities. We recognise that the Central Bank, our regulator, is providing the capacity. It has seen a proof of concept in the sector and has therefore increased the capacity of the lending we can actually do.

The growth we have seen is phenomenal. Our mortgage loan book is going up 20 basis points, or 20% each year, which is very significant. What is driving that is the fact that our proposition is unique on the market. We hear that on the ground as well. One reason is the personalised service we offer. We offer a very personalised service and that is really important. I have some examples here from around the country which are interesting to see. The Lough Credit Union in Cork provided a mortgage to a newly engaged couple. It was their first time purchasing a home and it was a very daunting prospect for them. To give them a voice, what they felt was they were dealing with the credit union on a very personal level. There was a lot of stress taken out of the experience and, on top of that, the process was very personal. They found the credit union was talking to them at their level; it was a very personalised service. That is just an example. There are multiple examples around the country now of this type of personalised service.

The other piece as well is the stability of rate. Looking at our credit union statistics, we have funds to lend across the sector. We have €14 billion that we could lend safely in a cycled way. That is our simple model. We have member savings and we recycle them into communities. There is an opportunity in a safe way to start bringing them out into the open and funding mortgages with them.

Another piece that is very important within the credit union sector and mortgage space is the market is overly concentrated. The recent BPFI statistics have shown more than 90% of mortgage lending was with the three pillar banks. There is a unique opportunity for us in the credit union sector, particularly with the funds we have to lend, to offer a cycle where we are going to be in the market for the long term. We are not going to come in and out of this market. Some of the non-bank lenders operate in the market when interest rates are a certain level and then migrate back out of the market. We are here for the long term. We want to be in the market throughout the different cycles. We are very much a countercyclical approach to that. We are here for the long term, we have a very personalised approach and we have a quick turnaround. While we absolutely acknowledge we are coming from a small base, we feel, especially with international research that we have done this in this area, that we can definitely develop much further in the coming years, again, I emphasise, in a safe, prudent way.

Shay Brennan (Dublin Rathdown, Fianna Fail)
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It is very welcome that the Irish League of Credit Unions is taking a safe, prudent approach to this. Also very welcome by the market is the friendly, consumer-led approach to this. Those are good things.

I wish to ask about the €14 billion Mr. Malone mentioned. He said the Irish League of Credit Unions has €14 billion available to lend. Does that come in under the 30% of assets rule and is that fragmented? If we put all of this together in one big pot, I can see how it can possibly get to that level, but an individual credit union might not have that capacity. When we then take that at scale, the Irish League of Credit Unions does not really have €14 billion available to lend.

Mr. David Malone:

That is across the sector, but we would see there are good opportunities across the sector to utilise that. That is important. There is capacity across the sector. If we look at our loans to asset ratio in terms of what we lend out, we do have capacity to lend more, and that is something we want to focus on. Our loan to savings ratio is approximately 40%. There is capacity to lend more. There are individual circumstances in individual credit unions but what we are working on together is a more cohesive approach. As the Deputy mentioned, there has been a new mortgage, what we call credit union service organisation, that has been established. Seventy credit unions are participating in that, offering a standard rate of 3.85% with a cap of 4.4%. We are seeing credit unions working closer together, and that is probably something we will touch on today. We want to maintain our independence and community focus but this is also an opportunity to work more closely together, and that credit union service organisation is a great opportunity in that respect, as is, as the Deputy mentioned, the corporate credit union, in terms of liquidity management. We want to have a liquidity infrastructure in place to support the sector as well. That is looking more into the longer term. There is existing capacity in the sector to grow to the numbers we have been talking about.

Shay Brennan (Dublin Rathdown, Fianna Fail)
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For the credit union sector to truly become a third force in banking, particularly in the mortgage market, it is very important that the entire CCU-CUSO model is implemented. There is work in progress on the CUSO side of it, and Mr. Malone has alluded to it. I understand that work is around standardising the asset liability framework, and that is before the Central Bank can actually row in with regulatory approval. How much work is involved in that? How non-standardised are the assets and liabilities across the individual credit unions? How much work does the CUSO element have to do before we can move on to the next phase? We need to get that full model and to the CCU component of it, and that cannot be done because this is sequential. We are looking at quite an extended timeline here, really, are we not?

Mr. David Malone:

In terms of liquidity management, the sector already manages liquidity. Each individual credit union is managing that. There is a lot of commonality in how they do that already. What this CCU-CUSO is trying to do is effectively get more standardisation across the board. However, the sector is definitely managing its liquidity already as it is.

What we want to do, first, is standardise the policies and procedures more among the participating credit unions. It is also about managing our capacity in the sector. We have liquidity in the sector already. We have high values of liquidity and it is just about managing that more efficiently. Credit unions are already doing that in many cases, especially with a focus on the long-term lending we are now objectively seeing. Really what we are trying to do is look at the longer term in this in particular. There is definitely capacity at the moment to do the numbers I mentioned in terms of mortgages, but what we want to do is work towards a more cohesive approach, particularly when we get into mortgages being a more dominant part of our portfolio. We have seen that in other international jurisdictions such as America and Canada, where there are very sophisticated credit union sector movements. We are very much future safeguarding for the distant future with that approach.

Shay Brennan (Dublin Rathdown, Fianna Fail)
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To get the regulatory approval to move on to the CCU phase by the Central Bank, it is talking about something quite vague, which is readiness. It is difficult to understand. Has the Central Bank given any key industry benchmarks the organisation needs to achieve in order to move on? I go back to the fact that we are looking at quite an extended timeline for the overall full, centralised treasury model. I am keen to understand that the Central Bank is not in any way delaying this.

Mr. David Malone:

It is not. We a very constructive relationship with it. To give the Deputy some perception of timelines on that, the Central Bank issued its supervising regulatory outlook report earlier this year, and it has given indications in terms of the development of regulations in respect of what we call this corporate credit union. Those are going to be developed in 2028 or at the back end of 2027, so it will not be in the long term. We are working very constructively with the groups of credit unions in terms of those regulatory requirements to seek the establishment of a corporate credit union. It is not going to be in the longer term, and definitely the Central Bank sees it as a priority as well. We are working very constructively with it on that.

Ryan O'Meara (Tipperary North, Fianna Fail)
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The witnesses are very welcome here today, and I thank them for their opening statements. I am a former board member of Nenagh Credit Union and had the privilege of serving there for a number of years prior to my election to the Dáil. The only reason I am not serving on the board now is the time commitments involved, especially with being a volunteer of a credit union. However, it was a hugely rewarding process, as it is for so many volunteers across the country, and that credit union is definitely going from strength to strength under Pat Naughton as manager and Miriam MacGrath as chair of the board, but also so many board members, other members, volunteers, and an excellent staff and senior management team. I also have the unique privilege of doing quizmaster every year in Nenagh for the schools quiz, which is a very rewarding process and one I have kept up since the elections.

The opening statement reads, "Credit unions are not financial institutions that happen to serve communities; they are community institutions that happen to provide financial services." This is an excellent point. Volunteerism is key to all of that, from the board members and board oversight to the volunteers across committees. I was the secretary of a nominations committee on a number of occasions. What is the Irish League of Credit Unions outlook on trying to attract volunteers? In lots of organisations, it is very difficult to get good volunteers and dedicated volunteers who will remain as volunteers. It is so key to being locally linked and to the roots of what a credit union is in a common bond, wherever that common bond might be. I will ask all of my questions together; that first one is on volunteerism.

It was stated that credit unions are Ireland's most reputable organisation, the most emotionally connected financial brand and the most sustainable organisation and, consistently and by every independent measure, that credit unions are the most trusted financial institution in the country. Why do the witnesses think that is? Given that we have three pillar banks in this country and not as much competition as we should have, is there scope for the credit unions to look at trying to convince or market to communities, and to people in general, that their credit union institution can be their financial institution of choice or their bank of choice? I may want a slightly better term there. With the roll-out of mortgages, increased lending rates, current accounts and online banking in so many credit unions now is there work there, and maybe it is already being done, to make people believe that the credit union could be the number one place they go to first and foremost rather than a secondary option, which it probably is for some people still?

I would like a little bit more information on the scope of mortgage lending. There is absolutely a huge space there. If you talk to most people who are members of a credit union, they see it as an excellent and exciting option. It is an option that I certainly would like to see a lot more of. Mr. Malone mentioned that 12% of the loan book, and up to about 7,000 homes in about three years, is mortgages. What more can be done? Is it at national level that it needs to be done or is it more individual credit unions? Those are all of my points.

Mr. Brendan Jenkins:

I will start on the volunteer point given that I came from being a volunteer and I am back as a volunteer. Maybe we could recruit the Deputy for the RDS as next year's quizmaster.

Ryan O'Meara (Tipperary North, Fianna Fail)
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I would be delighted to.

Mr. Brendan Jenkins:

There will be 464 kids in 116 teams so that would be a challenge for the Deputy.

Ryan O'Meara (Tipperary North, Fianna Fail)
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I would do it. No bother.

Mr. Brendan Jenkins:

Getting volunteers is a challenge in every organisation. Last year, we issued a direct recruitment strategy to our movement to encourage directors. We find that credit unions do struggle because now we want competencies and different skills on boards. Overall, however, it is still achievable. Given what we stand for in our communities, it is an honour for people to be a director of a credit union. The Deputy said it himself. I felt it for the 11 years I was a director and I am now back as a director on the league board.

It is also about how we sell it and how we market it to the people. The old story of three hours a month, as we were all told when we started, does not wash any more. It is a challenge but it is a challenge that we are prepared to take on. I believe that our communities and our members are willing to ensure that credit unions maintain that volunteer aspect of what we do. Somebody else will answer the question on the trust factor. The volunteer aspect also plays a big part in that trust.

Mr. Barry Harrington:

I thank the Deputy for the questions. Mr. Jenkins spoke on the volunteer piece. Recruitment is one issue but retention is also very important. It is an honour but quite a difficult role to be a director of a credit union. As Mr. Jenkins said, we have a volunteer recruitment strategy. Part of that is to partner with the likes of Volunteer Ireland, Volunteer Now and Boardmatch to try to get the right people to sit on credit union boards and to get more diverse backgrounds onto credit union boards. It is a challenge but many of our credit unions are very proactive in this space, as members will be aware, in getting the right skill sets onto boards. It is something we are actively working on.

In terms of the trust, on the way here this afternoon I went past two credit unions. One was my own credit union which is the Public Sector Credit Union and one was the Savvi Credit Union. The Savvi Credit Union has a lovely poster in the window saying, "Borrow, Budget and Save". That really goes to the heart of what credit unions are about. How we get that message out to the wider public is vitally important. Getting more younger members involved in credit unions is vitally important too. As mentioned, we are the most trusted and reputable financial institution out there. We will continue to really use that, not just as an empty marketing slogan but as part of the fabric of who we are.

Deputy Brennan mentioned mortgage lending. We are starting from a slow base but it is very important for credit unions to build their competencies in mortgage lending. It is different because it is secured lending. A different set of rules apply to unsecured and secured lending. Having that personal touch where a person can actually physically go into a branch certainly helps there. The other part on mortgages is that recent Central Bank figures show that credit union mortgages are a lot smaller than those issued by the pillar banks. Our average mortgage is €146,000. This really highlights that it is probably more the switcher market than the first-time buyer. It shows the prudent, conservative and sensible approach being taken by credit unions. We very much see huge areas of growth for credit unions there but in a prudent and sustainable manner. Perhaps Mr. Malone will add to that.

Mr. David Malone:

They are great questions, in particular the question around the Deputy's own role as a director with a credit union. The trust factor is interrelated. They are one and the same thing. The volunteer directors, as the Deputy knows from his own role, provide such an important role in the credit union. They provide that community focus. Every strategic decision in the credit union is coming from the local community and those volunteer directors. We have some stats on this. We have looked at the hours of commitment those volunteer directors give to their credit unions. It is 200,000 hours a year. That is free and it is a pre-controlled function role, PCF. They offer a very professional service pro bono to their credit unions. The trust piece is an intrinsic element of it, as it is with the staff on the ground who provide the service itself. It is an important point.

The trust is very much around the credit union ethos and those credit union operating principles I mentioned. They are not just soundbites. We see lots of modern institutions now with customer charters but we have had the credit union operating principles for over 65 years since we were formed. When looking at trust, it is about the community impact and how we really care for the community. We launched a report at the end of February, which showed that in the last 12 months credit unions have provided community funding into their local communities of €8 million. This was community funds, bursaries and donations. That is real care for the community. It is genuine and authentic. When we looked at those surveys, the words that come out are "authentic" and "compassionate". This is something we will always have as a fundamental of our sector.

Edward Timmins (Wicklow, Fine Gael)
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I thank the witnesses for their presentation and statement. I will make just a few points and do them one by one and back and forth, if the witnesses do not mind. I am sure the witnesses know of the Sparkassen model, which is the community bank in Germany. I have some experience in that myself and it works very well. It is almost the local go-to bank in Germany if a person is getting a local mortgage. Does the Irish League of Credit Unions see itself modelling on their model?

Mr. David Malone:

We have had conversations as part of our international ongoing research. This will probably be a very important part of developing the strategic plan for the sector as well. We have spoken with the European Association of Co-operative Banks about the models that evolved there as well. There is a lot of commonality when we speak to them about where this sector is going. There are probably two elements that touch on this sector that are very relevant to the Sparkassen approach too. One is about having a wider range of products and services for our members and creating that lifetime relationship, be it the first car, the first home, a wedding or a business loan. All of that is done through the credit union. It all happens through the credit union and there is that lifetime relationship.

What has been very helpful with the new legislation, and which really builds on the potential Sparkassen approach, is the principle of credit union service organisations. Credit union service organisations are an important part of the sector and its ecosystem now. I mentioned the mortgage credit union service organisation, which will help us grow. The Deputy's question was about how we will evolve further. That credit union service organisation is very much focused on standard rates among those credit unions that participate in it, and it is focused on standing PR and engagement with the public. Likewise with agri-lending. We have credit union service organisation called Cultivate that focuses on agri-lending.

We also have our main credit union service organisation, Payac, which deals with all of the current accounts and payments for credit unions. We are very much developing that model around a standardised and collaborative approach, building on the unique independence of credit unions but also allowing them to access shared services while maintaining the member relationship on the ground and in communities.

Edward Timmins (Wicklow, Fine Gael)
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Mr Malone stated that the current mortgage loan book is about €1 billion and that it had grown by 23% as of 2024. Does he expect growth that to continue? I would almost describe it as exponential growth. In eight years, credit unions' mortgage loan book would be over €5 billion. Does Mr. Malone expect that growth to continue? Is that the level of growth he envisages?

Mr. David Malone:

Yes. The new regulations are really helpful. As Mr. Harrington mentioned, credit unions are building up their capabilities and capacity. This is a new form of secured lending. The new regulations are incredibly helpful. They are applied to individual credit unions but they have removed the barrier for entry for credit unions. Previously, the individual limit that was there for credit unions was quite low. That has been increased significantly on foot of the new Central Bank regulations, which is hugely acknowledged by us, so there is an opportunity in that.

To answer the Deputy's question, we have seen great growth. We started with a standing of zero only a couple of years ago. We have now migrated into a much more positive position of a €1 billion landmark. We will see that continue to grow. We are definitely hearing that on the ground. As I mentioned, we have unique aspects to our range of products in terms of a broadly stable rate, the personalised service and quick turnaround times. That is all unique to our offering and we have flexibility in what we do in our mortgages as well. Yes, we do see it continue to grow and over time we would like to have an objective of achieving 10% of new market lending in mortgages. So, 10% of new mortgages would be with credit unions. That is our objective over time which would see us migrate into the top four or five providers. Again, I emphasise that we want to do that in a safe, prudent way but it is a key priority for us.

Edward Timmins (Wicklow, Fine Gael)
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I will focus a minute on small businesses. I know they are really struggling in the context of the pillar banks, and it is really difficult for them. Does Mr. Malone see credit unions entering that space? I am not just talking about small builders, although they are obviously very important. How does Mr. Malone see credit unions providing services to small businesses, particularly as they are really struggling to get credit from the pillar banks?

Mr. David Malone:

We see ourselves providing a really important aspect of that. We are very conscious of the White Paper that the Department of enterprise has drawn up in terms of a statement of strategy for small businesses. We read the paper and know that there is a financing gap. We read the paper quite clearly, particularly in terms of financing for SMEs and the capacity of up to €5 million. The totality of lending to SMEs has dropped, and there needs to be more of a focus, particularly on indigenous businesses. Credit unions do have an important role to play in this area. I will touch on some of the objectives we have.

I mentioned our agri-lending business. It is very much in the SME lending space. That has grown significantly over the past number of years. A group of more than 50 credit unions in 250 locations throughout the country are offering a standard agri-lending rate: an unsecured loan of up to €100,000 and then secured lending of up to €300,000. It made great headway in terms of what those credit unions are offering to farmers. Joe Healy, a former president of the IFA, is involved in this initiative. It shows what credit unions can do. What we see in particular is that offering has issued about 7,500 loans to a value of about €180 million over the past number of years. It is great to see that cut through. At the ploughing championships, we have seen the impact it is having on farmers. There are a couple of pieces to it. There is a standardised rate among those credit unions, and the Cultivate brand is renowned within the farming sector. Importantly, I reiterate that every decision is still made locally. Also, the credit unions offering this product understand the farming industry. They understand that income flows for the farming industry are cyclical and they are able to measure those in a personalised way. That shows the platform of what we can do in the greater SME lending space as well.

Edward Timmins (Wicklow, Fine Gael)
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On the other side and the credit unions' deposits of €170 billion, the Tánaiste recently floated the idea of a savings scheme. Obviously, credit unions have a very high level of deposits compared with loans. Does Mr. Malone see a role for credit unions in that scheme? I am sure they would be interested in having an input in respect of it before it is finalised.

Mr. Barry Harrington:

I refer back to the Deputy's previous question about the SME lending. The Central Bank regulations we spoke about earlier also increased the threshold of business lending to 15%, so there is space there for credit unions to grow. We have a very small business loan book of €190 million at this stage. The average credit union business loan is €28,000, but a different type of lending and skill set are needed.

We would be very interested in the personal investment accounts. We went along to the savings and investment forum to learn more. We had a webinar with our credit unions recently, and there is a lot of interest in it. There would be a number of risks to our business model, potentially, of deposit flight, but it is something we want to really get under the skin of to see how it would work in practice. The Tánaiste stated that there will be changes to taxation in the budget. We will have to see what those are. We imagine that they potentially relate to DIRT or deemed disposal, but for credit unions to grow and develop, we want to at least be able to see what is coming down the line for us when we scan the horizon. It is very important. We want to be part of it and, potentially, to have a credit union personal investment account. It would be something we would look at, but we need much more detail on how it would work, how it might impact on our savings space and whether, as Mr. Malone mentioned, credit unions locally would want to get involved. It is something we are keeping a very close eye on. The more detail we get, the better. It is something credit unions are keeping a very close eye on.

Edward Timmins (Wicklow, Fine Gael)
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I have a couple more questions. Mr. Malone referred earlier to investment in infrastructure. Does he have anything more precise to say about that?

Mr. David Malone:

This is a particular ask we would have, and we would look at the regulations that currently apply to credit unions. We acknowledge that we have a very constructive relationship with the Central Bank. We also acknowledge the increased mortgage lending and business lending. At the moment, our regulatory capital requirement stands at 10% on all of our assets. In other words, in the context of every asset, we have we have to apply a requirement of 10%. That includes investments in Irish Government bonds. Our investment in the latter is below €1 billion of the investments we have. We would like to promote that further, and we are asking for what we call refer to as "four more words". There is a statutory instrument, I think it is No. 1 of 2016, which would basically have the impact of excluding Irish Government debt. What I mean by that is that the 10% asset requirement we speak about would exclude Irish Government debt so if a credit union invests in an Irish Government bond the 10% capital requirement would not apply to that investment. This would rank credit unions the same as banks. Banks do not have that capital requirement when it comes to Irish Government debt. What we would do in our thought leadership piece with our credit unions is to look to have further investment in Irish Government debt. That links very well with our credit union operating principles and to Irish infrastructure. We think that Irish Government investment could be used very well to invest in the roads, energy and so on that we have in the country. We see great parallels to that. That is a simple ask we have, and we wanted to put that to the committee today.

Edward Timmins (Wicklow, Fine Gael)
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My final question-----

Mairéad Farrell (Galway West, Sinn Fein)
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The Deputy is out of time and there are a lot of indications.

Edward Timmins (Wicklow, Fine Gael)
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-----relates to how this committee can help the ILCU.

Mairéad Farrell (Galway West, Sinn Fein)
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Will the witnesses be succinct in responding?

Mr. David Malone:

Just one point. One of the big initiatives is the strategic plan for the sector. We welcome the announcement by the Minister of State, Deputy Troy, on that. We will very much be involved in that from a thought leadership perspective, and we ask everyone to get behind it. We want it to be a very ambitious plan for the credit union sector at what is a critical juncture.

Mairéad Farrell (Galway West, Sinn Fein)
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I thank Mr. Malone.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Cuirim fáilte roimh na finnéithe go dtí an coiste. Tá ról an-tábhachtach ag comharthaí creidmheasa i bpobail ar fud na tíre.

The role of credit unions is really important in communities and in our banking system as well. The diversity credit unions provide is really important. Credit unions are competition for and an alternative to financial institutions whose primary motive is profit and are coming at this from a very different angle and space. That is really important in terms of the trust people have in the overall financial system as well as reducing the overall level of risk. Credit unions do really positive things in communities. If you look at what is at the heart of your typical community, credit unions are one of those things. I could list off some other key community groups as well but credit unions really are at the heart of communities. The people involved in credit unions tend to be involved in the heart of the community.

Mr. Harrington said that the average amount loaned on mortgages was €146,000 and that was mainly in the switcher area. Is that a deliberate strategy? Is that something that would be broadened out over time? What is the status of that and where is it going?

Mr. Barry Harrington:

I would not say it is a deliberate strategy. As Mr. Malone said, it is up to each individual credit union to set its strategy. However, it would be an indication that there is prudent lending. It is very much a case of crawling before you can walk. We are representative bodies, so we do not see the direct decisions by each individual credit union. We would view it as a positive that there is prudent and sustainable lending taking place. However, given the trajectory of house prices and so forth, we would expect that amount to increase. The other benefit is that there are no early repayment fees on credit union mortgages. It is a unique feature of our mortgage offering.

Mr. David Malone:

I will come in on that as well. For our future vision - I have mentioned the credit union service organisations in this space - we are not focusing on niche mortgages. Going forward, we are very much focused on first-time buyers, self-builds and the self-employed. We are going into the mainstream market now and I think that is our place. There is increasing evidence of that in the trajectory of the last year or so in terms of where we are going. We want to play a role in the main market and that is certainly our objective as a sector.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Regarding the proposed savings investment scheme, Mr. Harrington talked about credit unions' interest in being involved in that but also the potential risk of flight from deposits. Presumably, if the scheme incentivises people so much that it ends up taking a lot of money out of deposits, that will have an effect. Does Mr. Harrington think that credit unions are more exposed than the pillar banks and so forth? If the savings investment scheme incentivised too heavily, what sort of negative impacts would it have? What is the balance the witnesses think would be sustainable and would work well for credit unions?

Mr. Barry Harrington:

Ultimately, credit unions want to become a primary provider of financial services of choice, so this would fit neatly into our product offering. It is just that there is an absence of detail at the moment. There are opportunities for credit unions to do more in this space but in the absence of any detailed proposals at this stage, we welcome the focus on transparency of fees. That is something that is in the credit union DNA anyway. We have 400 locations, so we could actually use this as an opportunity to get more young members in or people who have such accounts. Again, though, in the absence of further details, I would not like to speculate too much at this stage.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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It is extraordinary that there was a forum to provide details on this and the Swedish model was put out there only for us to be told a week or two later that the Swedish model was no longer being looked at, but anyway.

The opening statement referenced the different challenges that the sector faces, such as new products like buy now, pay later loans and fraud. Are there particular things that can be done to face these challenges?

Mr. Barry Harrington:

Absolutely. One thing is quite clear, and we have asked for this for a number of years. In the retail banking review from 2022, there was one recommendation relating to the reporting threshold for the central credit register. We would like to see that implemented because it would bring data on the buy now, pay later aspect into the realm of a financial institution, like a credit union, that wanted to offer a loan that would show up on a borrower's history. We are concerned that there is no data in terms of buy now, pay later loans. We would not like to think that there is lending taking place that could be considered imprudent or anything like that. That recommendation has been around for four years now. It is recommendation 11.2. I should acknowledge that we have spoken about this issue before. I thank the Deputy for tabling a number of parliamentary questions on this issue. It is something that we would like to see implemented. We think it would be quite a small change, but it is something that would be very beneficial for credit unions.

Mr. David Malone:

To come in on that point, which Mr. Harrington outlined so well, it is around education and financial literacy education. We think that is a really important point. There is a lot of research out there, and we have looked at it ourselves, showing that there is a lack of appreciation by people at the moment of the fact that this is a form of credit. It is also now being used for impulse buying. People are building up levels of debt. We think we have a very important role in that, particularly as regards financial literacy and financial education, which is something that we and our credit unions are very passionate about. We recently launched four modules with our credit unions. A number of credit unions are participating in this. These modules are with Alison, a company that is an online platform. They are talking about very simple things like budgeting, cash management, savings and investment, and allowing people to get a feel for and understanding of how to access credit. Credit can be easily accessible now, but that does not mean the outcomes are necessarily better. That is a really important point. We feel that, as part of our role, we have a financial literacy part to play in this space.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The opening statement described opportunities, one of them being attracting more members, including younger members. There is also competition coming into the sector through the neobanks and a lot of online and digital platforms. What is the ILCU doing to address those opportunities and challenges?

Mr. David Malone:

Mr. Harrington might come in on this as well, but one piece is that we have talked about this lifetime relationship or this wider range of products and services throughout a person's life cycle. A mortgage is an essential part of that. It is a lifetime decision for everybody and we feel we have a very important role in that.

The other piece would be our digital transformation journey. If we look at our distribution channels as a sector, credit unions have three authentic distribution channels. Obviously, we have online access. Every credit union member now can join the credit union online. We have online apps and electronic payments. There is immediate telephone support. If people ring their credit union, they get an answer immediately or very quickly. They are not going through a distant shared services centre for that. The third one is in-branch. We have 400 locations around the country. That is more physical locations than the rest of the financial services sector combined. We have, therefore, that unique omnichannel offering. We have a phrase. To quote, "We're digital when you want it, but human when you need it". That sounds like a soundbite, but we actually live that day in, day out.

Another piece about digital transformation is that we are very conscious of the other competitors out there. What we want to do is ensure that the member has personalised decision-making. We are not going to migrate to a "Computer says 'No'" scenario or make decisions by an algorithm. That is not what credit unions are about and never will be.

The other piece is that our digital journey is different. We are enhancing our digital journey at all stages and are very cognisant of that. However, our digital transformation journey is different. It is unique in the financial services sector. It is not about reducing human interaction, but enhancing human interaction. We have talked about new products today like mortgages and business loans. We understand that our 3,000 staff around the country need opportunities to tailor and personalise that service for many different members of the public. That is our digital transformation journey. We will enhance our offering and our member experience by automating some of our processes, but that then frees up time for a more personalised, tailored journey for our members. We think we have a very unique offering that is very different to other competitors.

Mairéad Farrell (Galway West, Sinn Fein)
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This is the Deputy's last question.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Has Mr. Malone any sense of timelines in terms of implementation of the credit union strategy? What are his views on that?

Mr. David Malone:

We really welcome the announcement on this. It is something of which we are very supportive. We are going to discuss it at our own conference, which is coming up in May. In terms of timelines, there is a 12-month timeframe to develop the strategic plan. What we will then be doing as thought leaders in the sector with our credit unions and the other stakeholders is working towards implementation. The Deputy is right to ask that question. The implementation is key. That is something we would be very passionate about driving forward with our credit unions. It is about realising the ambition - I keep using that word "ambition" - that we have in the sector.

Joe O'Reilly (Fine Gael)
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I welcome everyone. I will be a little parochial and especially welcome Mr. Jenkins from Clones. It is good to have him here.

Mr. Brendan Jenkins:

I thank the Senator.

Joe O'Reilly (Fine Gael)
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There is one sentence in Mr. Malone's opening statement that says it all. I said informally to the CEO coming in that he would find that public representatives were very favourably disposed towards the organisation. One sentence that says it all is, "Credit unions are not financial institutions that happen to serve communities; they are community institutions that happen to provide financial services." Therein lies their ethos and everything. It is certainly all our experience of them.

To come to specific questions, I would like to ask them separately and then I ask the witnesses to answer them to allow me to get the next one in. How are credit unions militating against the tumultuous financial and geopolitical environment we find ourselves in, and how are customers being protected? I know the sector has the retrofitting thing. I am aware of that because I attended some of the seminars on that at home. I am just thinking of the unfortunate person confronted with a doubling of their kerosene costs, etc. Does the sector have any strategies for that?

Mr. David Malone:

We are passionate about measuring consumer sentiment. We partner with Austin Hughes on the consumer sentiment index, which we really wanted to be involved in because it measures exactly what the Senator speaks about. We see that the index at the moment is down at 53. It is a lot lower than the 25-year average. It has been up at 84. We are very cognisant of that. In that regard, we issue 500,000 loans every year. Some 200,000 of those are loans of less than €2,000. We are still focused on that. We are talking here about mortgages and increased lending in terms of household improvement loans, but we never turn away from what that is about, in particular that unique aspect of our offering about caring for people.

Joe O'Reilly (Fine Gael)
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Will credit unions create any new products now, maybe around heat pumps or solar panels? I know they do retrofitting. I want to move to other things then.

Mr. Barry Harrington:

A number of credit unions came together to launch a product called Greenify. That is specifically in that space of reducing the carbon footprint. We had a conference yesterday where I spoke to Capital Credit Union, which has introduced a new promotional, lower cost loan in terms of moving for electric vehicles. We see potentially more movement in that space but, ultimately, geopolitical uncertainty is never good for a financial institution.

Joe O'Reilly (Fine Gael)
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Agreed. I am delighted that the sector is looking at EVs and other devices for retrofitting, energy saving, etc. That is so important. Credit unions should specifically market those loans.

How are credit unions keeping up to date with digitalisation of their services, given the recent announcement and commencement of Zippay? How would the witnesses comment on that?

Mr. David Malone:

I refer to digital transactions in the sector. I think I mentioned the distribution channels we have. We have a live and authentic digital transaction channel. On that, all credit unions now offer online membership application and loan application. Over 50% of our loans in the past 12 months were approved and applied for online, so they were online applications. We have also seen that our digital transactions have increased significantly. They have increased fourfold since 2019. Eighty of our credit unions in 250 locations, through our credit union services organisation, now offer current accounts, involving Apple Pay, Google Pay and all that kind of online functionality. On top of that, they implemented instant payments from October. Those instant payments mean that people can now transfer funds between bank accounts 365 days a year, 24 hours a day, seven days a week. We are very much conscious of that. We have seen a huge number of transactions come through already. There have been 2.2 million instant payment transactions. About €4.4 billion has come through our accounts since October. We implemented that at the same time as the banks did.

We are very committed to Zippay as a credit union sector. We are in discussions about that at the moment. What is very helpful is that the instant payments infrastructure that has now been implemented provides a great platform to then implement Zippay as well. We expect to be in a position to implement that, talking to the credit union services organisation by the end of this calendar year.

Joe O'Reilly (Fine Gael)
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That is great news. Given that the sector is community orientated and has all the correct vision and values, how does it deal with people in financial difficulty? Does it have specific strategies there or does it have mentoring or support? I know there is MABS out there, but do credit unions have any in-house support?

Mr. David Malone:

We do, yes. There are a couple of things in that. As has been mentioned, credit unions issue low-value loans as well. We are talking about mortgages and business loans. Still, what is very much core to us as well is our low-value loan offering. We do have a particular scheme as well. It is called the personal microcredit scheme or the It Makes Sense loan scheme. What is uniquely beneficial about this is that about 95 of our credit unions in about 280 locations participate in it. In addition, if you are on social welfare, you can apply and be part of this scheme. The interest rate is 1% per month. It is a unique scheme. We acknowledge the Department of Social Protection, which has provided support to us for the scheme.

There is a great story around this, if the committee does not mind my sharing it. It brings it to life, rather than just talking about the statistics. We came across a lady, a 41-year-old single mother of three. She was dependent on social welfare payments. She had been stuck with a moneylender. They pretended they were her friend. She was accumulating a huge amount of debt. She then went to her credit union and got out a loan for €1,000 on the proviso that, obviously, the moneylender debt was paid off. She did that. Then she was able to generate income for herself and start saving, and we promote thrift. Then her eldest son also availed of the loan and he ultimately was able to do a PLC course. That brings this to life. This is changing lives. People are coming together. It was a matter of being able to give that family, the mother and the child, a lift up. That is what we are about in the credit union sector. We are very much about empowering people. It is a lovely example of what we do in the sector.

Joe O'Reilly (Fine Gael)
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My next question is completely related. It is whether the sector is maintaining its ethos. What that question and the next question involve is how the sector balances efficiency, revenue creation, having good books, etc., and, of course, Central Bank rules, with credit unions' customer-friendly, community-focused approach? How does the sector strike that balance? It is quite related to the previous question. It is so relevant because there will be no merit in improving credit union volume if we lose the sector's ethos.

Mr. Barry Harrington:

Absolutely. It is a very good point. Obviously, we have very prescriptive legislation and regulations that credit unions have to comply with. As Mr. Malone said earlier, we are human when people need that as well. There are very qualified staff trained up in every credit union to deal with any person who may run into financial difficulty. That is a core facet of what we do. Mr. Malone mentioned financial education earlier. That is very important, that our staff are able to help and have empathy for people who may find themselves in financial difficulty. Ultimately, credit unions are in the fabric of the community. We deal with members. It is a unique business model in that we do not have customers but members. That is very important in terms of-----

Joe O'Reilly (Fine Gael)
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Yes. My final question in this round is as follows. We have a housing crisis. I know credit unions are increasing their mortgage book. I am delighted about that and that they are in the mortgage lending space and, as Mr. Malone said, are not using algorithms to dictate lending policy. All of that is great and I am so happy about it and cannot see how my colleagues would differ on that. Do the witnesses think there is anything the sector could get into, as in, the voluntary housing sector or the creation of affordable housing for people? Could credit unions move into that space at all or is that fanciful?

Mr. David Malone:

We are in that space. We are gradually, slowly-----

Joe O'Reilly (Fine Gael)
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Yes. Mr. Malone might explain to me how. There are people watching this who need to know more than maybe anyone in this room.

Mr. David Malone:

We have been involved in the social housing space in particular for the past number of years. There has been €41 million invested in social housing through a centralised vehicle, which then on-lends to the approved housing bodies, and it provides homes-----

Joe O'Reilly (Fine Gael)
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The voluntary housing bodies.

Mr. David Malone:

Yes, the approved housing bodies.

Joe O'Reilly (Fine Gael)
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Not necessarily the county councils-----

Mr. David Malone:

No. These are the approved housing bodies.

Joe O'Reilly (Fine Gael)
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Like Clúid and-----

Mr. David Malone:

Clúid, exactly, and Tuath and so on. That has provided about 146 social homes to date. The president and I have visited a number of them. Granted, the investment has been fairly slow, but we have seen a 25% increase in that investment over the past year. We have had an extra €10 million invested in the past year in that. We have our own stabilisation fund. The league has invested €500,000 in it. It is a space we are interested in as a sector. We have to be cognisant that it is kind of a new space for credit unions. With the mortgage space as well, it needs to be carefully thought through for each individual credit union to consider investment in that.

It is very aligned with our principles.

Joe O'Reilly (Fine Gael)
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I come from a small farming community and I am interested in the role of credit unions in this regard. Will the witnesses speak a little about what they can do to help small farms?

Mr. David Malone:

We mentioned the cultivate loan offering. This has been in place for a number of years and it is available in 200 credit union locations throughout the country. It is offered by 50 credit unions. This involves standard rate unsecured lending up to €100,000 at 6.75% APR and a ten-year maximum term. What we have seen when we have looked at this is that the average loan is about €40,000. A lot of loans are for beef farmers, stock, working capital and farm equipment. We are there to tailor payment plans in agri-lending. It has great recognition throughout the farming community. We are there to help.

Mr. Brendan Jenkins:

To finish on a parochial note with regard to the cultivate loan, the CEO of Collaborative Finance is Therese Conway, who is from Cavan. This is another parochial element.

Joe O'Reilly (Fine Gael)
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It must be good so.

Colm Burke (Cork North-Central, Fine Gael)
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I thank the witnesses for their presentation and for the work they are doing. They touched on the issue of personal contact with customers. I can go back quite a number of years, when I acted for a large number of people buying houses. I could ring the local bank and arrange for bridging finance. Now there is a total disconnect and it is very much surrounded by paperwork rather than personal contact. In relation to the credit unions and what they have learned over the years, do the witnesses think we are losing out financially because of what has changed in the banks in how they now approach customers? I am dealing with a case for a constituent involving two financial institutions. It is five months since I sent the first email and I am still as wise as what I was then. This is after the exchange of 25 emails. I cannot talk to anyone to look for an explanation of very simple issues. How can the credit unions protect what they are doing on personal contact and use it to grow the business that they have?

Mr. Brendan Jenkins:

One of our fortes is that in every credit union we still have tellers on the desks and we answer the phones. I guarantee Deputy Burke that he would not have to send 25 emails to a credit union to get an answer. This personal service is what we can capitalise on. There is no appetite in credit unions to do away with this. Even in the amalgamation of credit unions, branches have been kept open for exactly this reason, so there is contact and there are people to meet with members coming in to do business. We should capitalise on this and we are doing so.

Mr. David Malone:

The member voice is so important. What the members of credit unions say is very important. There is a lovely example in Carlow credit union. A couple in their mid-30s were wondering whether they could get on the property ladder. They were finding it difficult with banks because they felt they were dealing with robots. This is the language they used. What they wanted was that personal touch, particularly with regard to application forms, which are very daunting. Both members of this couple are working full-time and they found that Carlow credit union had this personal touch. It is exactly as Deputy Burke mentioned. They were able to speak to the person who was going to give the loan, take them through the application form and get the loan that worked for their needs. It is a lovely example of where the credit union sector is quite different from other financial services.

Colm Burke (Cork North-Central, Fine Gael)
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It is sad how the banking sector is going. Previously as a solicitor I was able to ring a bank and speak about what the customer needed. I was able to send the customer to them and they would engage with that customer. I cannot do this any more. A big complaint coming back to me from people who work in the legal profession is this lack of connectivity.

A lot of the issues I want to raise have already been discussed but there is another issue I want to touch on. There is €14 billion available for investment in real terms. How can this be more effectively used while, at the same time, protecting it? Has there been engagement with Departments in respect of this issue regarding State investment or State lending? How can it be progressed? It is a lot of money. I met someone involved in the credit union in Gurranabraher in Cork recently who told me it had €100 million on deposit. This is a huge amount of money for a credit union in an area with a lot of people who are retired. At the same time, it is just sitting there. What are the plans to deal with this issue over the next five years?

Mr. David Malone:

There are two aspects to this. One is very much around lending. We are credit unions and we want to lend. What is very exciting is that we have the leading market share in the personal lending unsecured market at almost 50%. We have done really well there and it really helps us. As we mentioned earlier, what we want to do now is to grow our footprint in mortgages and business lending. We will do this on a phased basis. To go back to our model, it is that we take in member savings, we use them to lend out to the public, and we do this in a safe way. Our arrears are the lowest in the financial services sector at less than 2.3%. We definitely want to use some of these funds to lend safely in terms of mortgages, business loans and agri-lending as we have mentioned.

The second element is our request on Irish Government bonds. We have spoken to water and electricity utilities. There is a huge infrastructure need in Ireland and we think there is an opportunity there. Our request, what I describe as the "four more words", is to remove the 10% capital requirement from investment in Irish Government bonds. This would give us an opportunity to recycle more of these funds and support Irish infrastructure via Irish Government bonds.

Colm Burke (Cork North-Central, Fine Gael)
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Does Mr. Malone see this happening over the next five years?

Mr. David Malone:

Absolutely and we want to have a much bigger footprint in mortgages and business lending as part of our offering. We want a much more holistic offering, which we are already doing and we want to grow it even further. We would love to see our request being taken on board and if this could be done we would see further investment in Irish Government bonds.

Colm Burke (Cork North-Central, Fine Gael)
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Are the witnesses satisfied the credit unions have the expertise to protect the funds in them?

Mr. David Malone:

If we take the principle that the credit unions-----

Colm Burke (Cork North-Central, Fine Gael)
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Going back to the mid-2000s, the banks thought they had the expertise as well.

Mr. David Malone:

There are a couple of ways to answer this. We are intensively supervised and regulated by the Central Bank, which we welcome. On top of this, we are using expertise. I have mentioned credit union service organisations. These are very much about creating expertise through a shared service approach in a credit union service organisation, particularly in terms of mortgages and business lending. What we will always do in the sector is act in a very safe and prudent way. Members' savings are paramount to us and the protection of their savings is our number one objective. The strategy we are talking about developing, the onset of credit union service organisations, and the corporate credit unions we have mentioned, will put us in a stronger position, with a very risk-averse approach, to develop our model further. We will do it in a very safe way.

Alice-Mary Higgins (Independent)
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I am a very strong supporter of the credit union movement and I am very happy to be a credit union member myself. It has been mentioned but I also want to acknowledge the many projects that put back into communities. I have had the opportunity in the past to launch a number of projects in Galway that were supported by the credit union there, which is where I was a member as a child. It is very interesting to see this is not simply a charitable perspective; it is about building the strength, resilience and health of communities. It is about investment that might not have an immediate monetary return but some of the projects are about inclusion, the arts and mental health. There is also the element of businesses such as cafes and others. I want to touch on this because it is an example not of a charitable element of investment but of community wealth building.

It is not just giving back to the community, but building a different economic approach. I am passionate about pushing for public procurement to do more to support initiatives, including local initiatives, start-ups and SMEs, and creating the kinds of criteria that can reward best practice, environmental and social standards and returns. On community wealth-building and a more resilient economy, it is appropriate to ask in an insecure-feeling economic time, while the credit unions have to take the proper supervisory steps to protect themselves against that, how credit unions can contribute to the local resilience and sustainability, and a different picture of what a thriving local economy could look like. I think it was the Community Credit Union or maybe Phoenix credit union that is involved with community wealth-building schemes specifically. Will the witnesses take that and point to how they see the credit unions contributing not just to the community but to a better economy?

Mr. David Malone:

A unique aspect of credit unions, as the Senator said, is that we have 400 locations around the country. We are in all those towns and villages. Often, we are not only the only financial service institution left in that town or village, but we might be one of the few community organisations left in the town or village. I think it was picked up by a number of the Senator's colleagues earlier that we are a community organisation which provides financial services. We have done a lot of studies on this. We have found that when we provide loans through a local credit union, whether to individuals, business owners, small or medium enterprises, or sole traders, there is a trickle-down impact on the community. We have done studies that show that for €1 loaned, there can be a multiplier effect on the community. Some studies have shown that it is eight to ten times, so the credit union is very much part of the community.

There is probably no better example than if I answer the Senator's question about sustainable energy communities. This is a project that is being undertaken by a number of credit unions. There is one in Galway called Naomh Breandan and one in Dublin called Donore. Sustainable energy communities is run with the Sustainable Energy Authority of Ireland, SEAI, but it is about the community looking at how it can make itself more sustainable. The credit union used the approach of empowerment. It initially established this community organisation and then, over time, something really positive happened, which is that the community then ran it itself, and the credit union more facilitated it. That has had an impact on those communities, particularly from the point of view of sustainability and the investment that has gone into those communities. That is what we are seeing at the local level.

The Senator mentioned the report which we launched in February. A sum of €8 million was given, although I do not think it was given necessarily. We say there were sponsorships, donations and bursaries. I will give a lovely example. I was in Bantry Credit Union in Cork two years ago and there was a 21st anniversary of bursaries it provided to 21 students over the years. They are all local people who may be doctors now, who maybe worked in the local community or in local government circles, or who are nurses or accountants. It was beautiful to see the impact that had. Bantry Credit Union had provided a bursary that provided those people with the opportunity to get an education and they were then able to provide that service in their local communities. What better example is there than that? We are very much about empowerment rather than handouts.

Alice-Mary Higgins (Independent)
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On the community wealth-building and the money that it generates, as a follow-up on that, I refer to the experience of people of the credit union being what unlocks access to other funding. For example, it puts organisations in a position where they can access European funding or other strands of funding which, without that initial money from the credit union, they would not be in a position to access. That is one positive question.

On a more negative side, a concern I am seeing is the almost gamification of investment and stock-trading, where there are pop-up ads telling everybody that they are a stock-trader and they will make money. It is almost encouraging people with extremely small resources, the kind of people who are potential credit union customers. That is why I was struck by the witnesses' financial literacy piece. Is there a piece to give people protection against speculating in cryptocurrency or the idea that they will earn from trading? There is an appeal to that, particularly if people are in a situation where mainstream banking might feel out of reach for them. Is there something credit unions can do to reach persons who are vulnerable to that particular targeting of what is often very high risk and effectively gambling?

Mr. Brendan Jenkins:

On community funding, my community in Clones, albeit it was a good number of years ago, set up the Clones community forum. The problem was getting money to get matching funding. This was back when money was money. Our credit union donated €100,000 to the fund by way of reducing our dividend over a period of five years. That €100,000 kicked off a mass of funding to come into our community and the town is still reaping the benefits 30 years later. It worked very well.

Ms Mary Slowey:

On the point about gambling, I know the Senator was talking about cryptocurrency and financial literacy. The credit unions have worked with their members for many years on financial literacy, budgeting, and so on. Gambling is a problem in Ireland across all financial institutions and all of society. Credit unions have been working with our members, the Money Advice and Budgeting Service, MABS, Gambling Care, and different organisations. We have worked with the Irish Banking Culture Board to see what the banks have done, including putting blocks on card payments and so on. Credit unions are aware of vulnerable members and members in vulnerable circumstances. There is definitely a strategy to try to assist across communities to tackle that.

Alice-Mary Higgins (Independent)
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There is also the question of the opposite of the credit union, which is high-stakes trading, and its audience, especially younger people.

Mr. David Malone:

I will go back to the Senator's previous question for a moment. She asked a great question about financial empowerment and community wealth funding, which is really important. We do that as well, and internationally. I will share this, if that is okay. The Irish League of Credit Unions has a company, a registered charity, called a foundation. Our Irish credit unions provide funding to that foundation every year. We also get funding from Irish Aid, which we recognise. Our president might share because he has travelled. We go to countries like Ethiopia and Sierra Leone. It is about empowering people in those countries to set up credit union systems that can provide responsible finance to those people. We have lovely stories about people who became farmers and were able to support their families. A multitude of great stories are coming out of that foundation about the great work that it does. We are not always just Irish-centric in the credit union sector. We have migrated into Africa too and there are some really great stories. Our president has visited there too.

Alice-Mary Higgins (Independent)
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If there is a chance to address the speculative investment issue later, that would be good. I have a quick follow-up on Mr. Malone's reply. These are the unsecured loans. In international development, micro-banking was giving small loans, which was successful, but then there was an opportunistic version of it where people were putting up land titles for tiny loans, for example. Can I check that the international development part is not about people having to put up high stakes?

Mr. David Malone:

No. The international space is where we have teams go to those countries, including Sierra Leone and Ethiopia, volunteer to train directors and staff, and help those countries to set up a credit union system.

Alice-Mary Higgins (Independent)
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Similar to the one we have here.

Mr. David Malone:

It is very much empowerment. It is a great example of this in practice and in action.

David Maxwell (Cavan-Monaghan, Fine Gael)
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I am not a member of this committee but I have a great interest in the credit unions. I served under Mr. Jenkins as chairman on another committee for five years. The credit union movement is an important part of Ireland. I have been a member since I was able to join my local credit union in Monaghan. It is great to see that credit unions can offer business loans and mortgages, which is needed for credit unions to grow. As Senator O'Reilly said, it is the community at heart and it is the members' money.

I have mentioned something else to Mr. Jenkins and others before. Back in the day, when you were looking at a small loan, you could walk into the credit union and it was all about your seed and breed. I find that has changed. I know we have to be very prudent and make sure of things, but let us take a car loan as an example of what we see now. I mentioned this to Mr. Jenkins. If we go to a car showroom today to look at a car, five questions will be asked and there will be a reply in an hour or two to say a finance application has been granted. In the credit union, we could be waiting a week. I know those are the regulator's rules and regulations, but is it found that this is a bit of a hindrance? It can put people off. The hoops people have to go through in their local credit union are much different. The witnesses might come back to say the finance company uses a different financial model in respect of a car purchase, and this has been said, but I think this situation in respect of the credit unions is a wee hindrance on those smaller loans. I understand that mortgage and business loans are different. I am just talking about the smaller loans, the bread and butter of Irish country life.

Mr. Brendan Jenkins:

Deputy Maxwell and I have debated this issue on a number of occasions. The situation is improving. There is the prudent lending end of it that we have to adhere to, but there are so many credit unions now turning loans around, and I will not say on the day, but there are metrics and systems built in that are helping us to make those decisions an awful lot quicker. As the Deputy said, we have to be aware of the situation where people are walking in, answering the five questions and getting the car.

Even in the 12 months since we last spoke about this issue, the situation in credit unions has improved greatly. Credit unions are very aware that the competition out there is instant, in the same way as Zippay was mentioned earlier. This means we have to be up there in the marketplace. It is still down to each individual credit union and its policy on lending, however.

Mr. Barry Harrington:

I will come in on this issue as well. I thank the Deputy very much for his question. Creditworthiness assessments and the ability to repay are the key criteria. Ultimately, it is about the protection of members’ savings.

The personal contract plans, PCPs, are very different from credit union loans. If a credit union car loan is taken out, the car will be owned from day one, whereas the personal contract plan is a hire-purchase agreement. We are one of the largest providers of car loans in the State and credit unions are turning around decisions on loans a lot quicker as well. The personal car plan and the credit union loan are different products, with the loan meaning a person owns the car from day one.

David Maxwell (Cavan-Monaghan, Fine Gael)
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I am talking about the personal loan for the car and not the PCP.

Monaghan Credit Union does the green deal and I have availed of it in the past month. I would rather support my local credit union than a bank or another lending institution. It is very important. It was always there in respect of any business. As was said, people could go in and the credit union brought them through.

Well done to the credit unions. The changes to mortgages and business loans will help the credit unions in future. We want to see the credit unions being there in ten, 20 and 30 years and these decisions now will change that prospect. There is no point waiting until credit unions are closed and then amalgamating them. If we react that way, there will be far fewer of them in the country. I congratulate Mr. Jenkins and wish him well in his post. Well done on having a great organisation and I wish it many more years.

Mr. Brendan Jenkins:

I thank Deputy Maxwell. I thank him for coming in to see us when he is not on the committee. I appreciate it.

Mairéad Farrell (Galway West, Sinn Fein)
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I will go next. Other members are indicating for second rounds, so if they do want to, they should feel free to do so. I was just being tight on time beforehand because I knew people were waiting and I could see the unhappiness of members.

It has been a very interesting committee meeting. Obviously, credit unions are just so central to so many of our communities. The credit union can really be the heart of the community. I am living in a place called Mervue and our credit union is really the heart of so much, especially when there is the lighting of the Christmas tree and things like that, which is a fabulous event. On a more serious note, it does play a serious role for so many people within our community. I had a keen interest in it when I was doing my master’s degree. I did it on credit unions.

I want to pick up on some of the issues raised. The challenge of attracting younger members was mentioned in the opening statement. Given the way banking has shifted and all those kinds of things, I can understand this. When we were all children, we were, of course, brought to the local credit union to open an account and learn, and we have been members of the credit union ever since. One thing that stood out for me was that Mr. Malone said that €4.5 billion was put through in instant payments. Did I pick that up right?

Mr. David Malone:

That is right, yes. There were 2.2 million transactions.

Mairéad Farrell (Galway West, Sinn Fein)
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There has been €4.5 billion in instant payments since October.

Mr. David Malone:

Yes.

Mairéad Farrell (Galway West, Sinn Fein)
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That is incredible. To ask a broader question, how will the credit unions be able to compete with the traditional banks and new online banks when it comes to attracting younger members? I think this is probably key to a lot of it.

Mr. David Malone:

It absolutely is. We are very conscious that we have a great trust, heritage and reputation, but we are also cognisant that that is not sufficient for the future. We want to build on that. It is about digital offerings in particular, and ensuring they are best in class. As I mentioned, we have seen a real increase in digital transactions. One of the big statistics is that over 50% of our loan applications are now online.

Mairéad Farrell (Galway West, Sinn Fein)
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Wow.

Mr. David Malone:

People can apply for their credit union loan online from the comfort of their sofa on a Saturday evening. That is also great in terms of credit unions having that authentic offering, that only channel offering, which means that people can get that digital side, but if they have a question, a challenge, a problem, if the rubber hits the road and there is a question - and I think this is where we are different from these digital banks - they want to be able to get an answer quickly. With the credit union, people get that response. I have experienced it myself. I am a current account holder with the credit union. It is my daily current account. You ring and you get through. You get immediate and great support. You also get a very good current account offering and a good digital offering. If you need it, you can also go into the branch. That is our unique offering here.

We have seen statistics showing that over 70% of decisions made by younger generations, particularly Gen Z, are very much focused on the environmental, social and governance, ESG, credentials of the organisation itself. We have mentioned all the community impact provided by credit unions.

Mairéad Farrell (Galway West, Sinn Fein)
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Okay.

Mr. David Malone:

Even in Galway, I think new defibrillators have been installed in Galway city itself. Every defibrillator is now within a four-minute zone.

Mairéad Farrell (Galway West, Sinn Fein)
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I have one outside my office as well. It is a four-minute zone.

Mr. David Malone:

What is also great to see about this is that we realise from this report that we could be the major supplier of financing for defibrillators around the country. This shows real community focus. As Mr. Harrington mentioned as well, and as was mentioned by a committee member earlier too, there is a huge opportunity to be a director of a credit union and to be involved in a credit union. It is definitely a role that is onerous, but it is also very rewarding. The heart of it goes back to this aspect. People have a role to play in their credit union. There are no corporate shareholders in the credit union. We do not have that. We have members, and when people are members of a credit union, they are much more than a customer. They are actually a member of that credit union and have a lifetime, long-term relationship with the credit union.

Mairéad Farrell (Galway West, Sinn Fein)
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What is the demographic of the credit union’s membership? Is there a percentage for how many people under 35 are members of credit unions?

Mr. David Malone:

I do not think we have that statistic to hand. We could certainly look into it and come back to the committee. We do not have it to hand here with us.

Mairéad Farrell (Galway West, Sinn Fein)
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No, that is okay. It is just an interesting aspect, and I do not mean that in a negative way. I just mean it is an interesting perspective to allow us to see how banking is developing.

Another thing discussed, by either Deputy Brennan or Deputy Burke, was when people are in financial difficulties. Take for example, when somebody cannot make loan repayments. What is the protocol there?

Mr. David Malone:

One piece we mentioned was creditworthy assessments monitoring. We monitor our loans that we give out. As a credit union sector, we want to put loans in place that make sense for the member to repay. We do not want to be giving out loans like the buy now, pay later lenders.

Mairéad Farrell (Galway West, Sinn Fein)
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Yes, of course.

Mr. David Malone:

We are very interested in our members. We want to ensure we put a loan in place they can repay. If there are difficulties, the great thing that is different here is that people are not going off to a faceless centre and having to engage there.

The person can actually talk to their local credit union. We are there to listen and to help. In many cases, we will put a repayment plan in place that meets the member's needs. We talk about record-breaking lending and we have seen our lending increase 50% in the last ten years. It is huge. Our loan book is now the highest ever. The trajectory is there. It is also very significant that our loan arrears are the lowest ever as well. That is because we know the members. We know who we are lending to.

Mairéad Farrell (Galway West, Sinn Fein)
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One thing that was mentioned to me was a lady who had missed a payment and within a month she had got a solicitor's letter. Would that be common or is that based on-----

Mr. Brendan Jenkins:

That would be very unusual.

Mairéad Farrell (Galway West, Sinn Fein)
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Unusual. I thought that.

Mr. Brendan Jenkins:

I would even question that, to be honest.

Mairéad Farrell (Galway West, Sinn Fein)
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It seemed quite reputable, to be honest, from the-----

Mr. Brendan Jenkins:

The last thing I believe any credit union would do is send a solicitor's letter, to be honest. It is at the end of the line. To follow up on Mr. Malone's points, early engagement is where we score. If somebody misses payments, it is not a solicitor's letter. We have a polite letter.

Mairéad Farrell (Galway West, Sinn Fein)
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Yes, I know. I am just interested.

Mr. Brendan Jenkins:

In all our literature and in all we do, we highlight to people that if they have an issue they should come and talk to us. That feeds back to what we are saying all day - there are people to talk to. You can lift the phone and speak to people. Coming back to the community side of it, there are a few members of our staff in credit unions, so if somebody is not comfortable they can speak to the staff member they know better than the others. That all works in our favour.

Mairéad Farrell (Galway West, Sinn Fein)
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Is that what is going to be the big impact in rural areas where the credit union will be able to replace the retail banks that have closed?

Mr. David Malone:

Absolutely. We go around the country. Mr. Jenkins and I have made lots of visits. In many cases, credit unions are not just the one financial service institution left in the town or village, they are also the sole community organisation as well. That community piece is where it is different. That is something we will be talking about at the sectoral strategy. We want to ensure that a community focus is retained. That is a line that was picked up a number of times in our opening statement and is so important. We are not a financial service provider that is based in communities; we are a community organisation that provides financial services. That is such an important distinction.

Our credit union operating principles, which we mentioned a number of times today, are really fundamental to everything we do. We have had them in place and we will keep them in place. That does not mean we cannot modernise as well. We are very cognisant that credit unions have always been where people are. We have always wanted to meet where people are. We were set up over 65 years ago. It was a very poor time in Ireland in the 1950s. We were there where people needed us. That was physically. Now, people do not always need to see us physically and some people want to see us online and digitally. We are evolving our proposition. We are not changing but we are evolving it to meet the needs people have now. We want that overall-----

Mr. Brendan Jenkins:

There is the ATM network we are developing as an organisation, probably unwillingly, because our communities need it. When the last bank in our town closed, the local council wrote asking whether we would consider putting in an ATM for the town. It is the first thing we did. It is what we do.

Mairéad Farrell (Galway West, Sinn Fein)
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That is excellent. I thank the witnesses. Deputy Brennan has some additional questions.

Shay Brennan (Dublin Rathdown, Fianna Fail)
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I will follow up on what I talked about earlier - the retail mortgage market. A figure in the region of €140,000 or €170,000 was mentioned as being the average loan. I imagine these are very low loan-to-value loans and not first-time buyer loans. That is a segment of the market any bank would be happy to get into and would fall over themselves to make those loans. I welcome the growth in the credit union's loan book, but I do not think those loans are necessarily adding anything to the Irish retail mortgage market, certainly not in the space we need it to be.

I am conscious I have even less time on this round. The second point I will follow up on is something Mr. Malone mentioned when we talked about retail mortgages. He said there is a capacity to lend €14 billion. I do not fully follow that because 30% of the assets of €22-odd billion, which is what is permitted, gives about €6.5 billion. Even that is fragmented until the organisation establishes the full, centralised treasury, meaning full credit union services organisation, CUSO, and combined central treasury, CCT. At the current rate that will not be until about 2030. We are long way from even the €6.6 billion ceiling. What is the actual strategy in the credit union space to properly enter the mortgage market, compete and operate at a scale that would be another banking force in that market?

Mr. David Malone:

I thank the Deputy for the questions. It is a really important point to delve into the mortgage piece. The €14 billion I mentioned is not all for mortgages. The Deputy is absolutely right in the mathematics he has done there. The 30% of our assets is an amount of €6.6 billion or the total quantum we could lend. That €14 billion is the rest of our assets as well that could be lent out. That is to clarify that.

In terms of where we are going, if I look at the profile of the mortgages over the last number of years, Mr. Harrington is right that our average mortgage has increased. We are seeing an increasing footprint now into first-time buyers. That is our vision. Our vision is to be in the mainstream market. However, we know we are starting from a small base. Three or four years ago we were negligible. We had very little. We have now seen this mortgage book start to increase. We will do that on a phased basis. Over time, we want to make it to getting 10% of new mortgage lending but that will take time. We are realistic about that but we think there is a huge opportunity there for all the reasons we mentioned. We have a very unique offering to do that, but we are measured in what we are saying as well. That is important. The maximum is €6.6 billion. That is not a target for us; it is something we want to do on a phased basis. We are building capacity, we are building knowledge of the sector and we are using the credit union services organisation approach. That is the way we will approach that.

Edward Timmins (Wicklow, Fine Gael)
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On the financial literacy aspect, I want to put huge emphasis on that. I brought it up in the Dáil about how transition year students should be taught it. I welcome that the representatives recognise that. That is a huge issue in this country. Unfortunately, we are poor in terms of financial literacy as a population. Maybe other countries are the same. I welcome anything the credit unions are doing in that space.

Mr. David Malone:

There is a multitude of examples of that around the country. Lots of credit unions in primary schools and secondary schools are driving that message out there. There is a credit union in Cork called Elevate that issued a cartoon booklet like a comic. It takes the reader through lots of different financial decisions. It issued 100 of those printed copies free to students in schools all around Cork. It has gone down really well. There is a digital version too. That is just one example but there are hundreds of others around the country. One of our operating principles is financial education. Credit unions are very much in that space. It is something we would like to progress even further into as well.

Mr. Barry Harrington:

We welcome the Department of Finance's national financial literacy strategy. We are on the steering committee for that. The need for financial literacy and ongoing financial education is something we feel very passionate about.

Mr. Brendan Jenkins:

My niece said to me when she was went into the real world and was asking about finance that she did not learn that in school. To the Deputy's point, that is where it should be taught.

Edward Timmins (Wicklow, Fine Gael)
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Life experience.

Mairéad Farrell (Galway West, Sinn Fein)
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Iontach. Go raibh míle maith agaibh. I thank you all for coming before the committee. That was a really good and enjoyable discussion.