BY JOHN ELLIS, FINANCIAL ADVISOR
In a groundbreaking move for the Credit Union sector, Minister for Finance Michael McGrath has kickstarted the much-anticipated Phase 1 and Phase 2 of the Credit Union Amendment Act 2023, signalling a historic transformation for credit unions in Ireland. Celebrated at a special event in the Department of Finance recently, this move promises a future of “expanded membership, increased services, and collaborative opportunities”.
Minister McGrath said: “The credit union sector is a vital cornerstone of Irish society with approximately 200 credit unions and more than 400 credit union branches across the State. This is a great opportunity for credit unions to expand, grow and develop. Both Phases 1 and 2 [of the Act], which I have signed today, will have far-reaching positive implications for the credit union sector in the years to come.
‘This development is poised to reshape our local credit unions, bringing with it exciting possibilities for both members and the community, ultimately to position credit unions to compete more effectively in the mortgage and SME lending markets through “diverse collaboration options, resource-sharing mechanisms, and the ability to generate economies of scale.”
One of the key developments introduced by the Act is the freedom for credit unions to tailor their options to the specific needs of their members. This includes the referral of members to other credit unions with broader product offerings, thus providing a wider range of financial solutions. Loan participation and syndication between credit unions can now be entered into and the Act permits the formation of corporate credit unions, presenting “a transformative opportunity for the sector”.
Credit Unions loaned approximately €200m in new mortgages in 2023. As a result of the changes it’s estimated this figure will double each year for the next number of years and lending could reach €1bn annually within three to four years which could put credit unions within the top five mortgage lenders.
And with the ability to refer applications to other credit unions, the strategy has the potential to generate an additional €2.2 billion in lending each year. Moreover, digital, and automated services will become more accessible, leading to substantial cost savings and increased efficiency for credit unions.
Flexibility around the “common bond” is another significant aspect of the amendments. The common bond is a shared characteristic that connects the members of a particular credit union. You joined a credit union based on the area where you live or work, the occupation you work in, the employer you work for, or a society or association you belong to, allowing members to save together and lend to each other at a fair and reasonable rate of interest.
With new avenues open for credit unions ,they can expand both their membership and services. It really is a game-changer, allowing credit unions to adapt and grow in response to the changing needs of their communities.
Digitalisation enhancements under the Credit Union Act are expected to simplify processes and create savings, with an estimated €75 million annually saved in postage and printing costs for annual reports. Furthermore, its anticipated that “streaming the onboarding of new business members” will potentially boost business lending by €100 million annually.
Minister McGrath stressed that these changes were just the beginning, with more enhancements to come. Future changes include the establishment of corporate credit unions and the ability for credit unions to invest in shared services, promising increased efficiency, and a broader range of lower-cost products for members.
Now is the time for the community to actively engage with their credit unions, exploring the expanded services and collaborative opportunities that lie ahead. This calls for everyone to be a part of shaping the future of our local financial institutions. Visit your nearest credit union today to find out more.
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