Jan O'Sullivan (Limerick City, Labour)
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45. To ask the Minister for Finance the progress being made in matching the capacity of credit unions to lend to small businesses with the needs of those businesses to obtain credit in the context of the proposal on lending to SMEs from the Irish League of Credit Unions in 2016 and the report on public banking; and if he will make a statement on the matter. [50416/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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This Government recognises the important role of credit unions as a volunteer co-operative movement. The Government is also committed to encouraging greater competition in the banking sector and supporting better access to banking and financial services across the country.

As the Deputy will be aware, in line with Programme for a Partnership Government commitments my Department and the Department of Rural and Community Development published a joint report on “Local Public Banking in Ireland” in July of last year. While the Report concluded that, for a number of reasons, there is not a compelling case for the State to establish a new local public banking system in Ireland, as proposed, the Government does recognise a number of positive aspects underlying the concept of community banking generally, including access to finance for SMEs and supporting local communities and economies.

Indeed, many of the objectives of community banking align with Government policy and supports that have already been put in place. Additionally the network infrastructure, ethos and many of the objectives envisaged by community banking are already represented by the Credit Union sector in Ireland and I believe that Credit Unions are well placed to develop to meet any local public banking needs not currently being provided.

One of the areas which Credit Unions need to develop, if they are to fulfil the full role envisaged by community banking, does indeed relate to SME financing. Credit Unions currently have ample capacity to engage in more SME lending. While Credit Union lending to SMEs grew from €77 million as of September 2017 to €93 million as of September 2018 – a 20% increase year on year – the current lending regulations allow capacity for SME lending of up to c.€900 million.

Separately, following on from the Local Public Banking Report my Department has arranged for an independent evaluation to be carried out in order to consider how the objectives of community banking and how the local provision of banking and financial services could be furthered in Ireland through other delivery mechanisms. One of these potential delivery mechanisms is the credit union sector. Following a competitive tender process, I can confirm that Indecon has been appointed as the consultants to carry out the independent evaluation. They will also establish and conduct a stakeholder forum on community banking and the local provision of banking and financial services.

Credit union stakeholders were consulted in advance in relation to the Local Public Banking Report. Credit unions have also been consulted by the Central Bank in relation to changes to credit union lending regulations, including changes related to SME lending, which will be completed during 2019 and the investment regulations which were amended in 2018.

I hosted a Credit Union event last week, which was attended by Credit Union stakeholders including the representative bodies, at which I outlined my support for, and belief in, the Credit Union sector's potential to meet any community banking needs. Achieving this potential will require credit unions to develop their capacity and to collaborate effectively though shared service structures to ensure they can deliver services in a timely and cost effective manner. In this regard I welcome the initiatives currently underway.