Irish League of Credit Unions, 2012 W E L O O K A T T H I N G S D I F F E R E N T L Y Presentation to the Joint Committee on Jobs, Enterprise & Innovation 5 th June 2014 David Matthews Irish League of Credit Unions W E L O O K A T T H I N G S D I F F E R E N T L Y Presentation to the Joint Committee on Jobs, Enterprise & Innovation 5 th June 2014 David Matthews Irish League of Credit Unions

Irish League of Credit Unions, 2014 W E L O O K A T T H I N G S D I F F E R E N T L Y Contents About us – The Irish League of Credit Unions – Services to SMEs Roadblocks – Internal & external – Impact of lending restrictions on credit unions & SME lending Possible solutions – County Enterprise Boards & Credit Unions – Investment Fund for lending to SMEs

Irish League of Credit Unions, 2014 W E L O O K A T T H I N G S D I F F E R E N T L Y About us The Irish League of Credit Unions – Largest credit union trade & representative body 376 affiliated credit unions in the Republic of Ireland – Regulated by the Central Bank of Ireland 3 million members, total assets €12.6bn Total Savings €10.6bn Total Loans €3.8bn, average loan €6,300 – Funds to lend – approximately €5bn Credit unions want to lend & need to lend – Viability will depend on our ability to lend

Irish League of Credit Unions, 2014 W E L O O K A T T H I N G S D I F F E R E N T L Y Credit Unions & SMEs Under credit union legislation:- – SMEs can be members of credit unions Either as individuals or firms – SMEs can borrow from credit unions Either as individuals or firms About 5% of loans are to SMEs or for business purposes Credit union loans – Maximum interest rate 12% per annum (12.68% APR) Average rate is 10.25% – Flexible repayments, no charges or interest penalties

Irish League of Credit Unions, 2014 W E L O O K A T T H I N G S D I F F E R E N T L Y Roadblocks Internal Roadblocks – Independence of credit unions means that service offerings are variable – Not all may have the skills to assess business loans – Not all would want to offer them External Roadblocks – Loans to SMEs are higher risk than personal loans Credit union’s “Risk Appetite” is low – Central Bank oversight

Irish League of Credit Unions, 2014 W E L O O K A T T H I N G S D I F F E R E N T L Y Lending Restrictions 60% of credit unions are subject to some form of lending restriction Most restrictions include a prohibition on “commercial” lending – Can include personal loans to self-employed members Most restrictions include a monetary limit – Too low to provide meaningful funding to SMEs Average limit is €25,000 – Limit would include personal loan(s) to the member

Irish League of Credit Unions, 2014 W E L O O K A T T H I N G S D I F F E R E N T L Y Possible solutions - #1 Credit unions & County Enterprise Boards (CEBs) – Credit union receives a business lending proposal, does an initial assessment & refers it to the CEB if it looks positive – CEB can: Provide support through a financial adviser, Assist in preparing a business plan / projections, & Can provide mentoring services to SMEs (if required) – Application is discussed & approved by a joint committee

Irish League of Credit Unions, 2014 W E L O O K A T T H I N G S D I F F E R E N T L Y Possible solutions # 1 – St Canices (Kilkenny) Credit Union & Kilkenny CEB Credit Union set aside a fund of €2m Loans between €10,000 & €40,000 can be considered 55 loans totalling €1,170,500 approved to date Current amount outstanding €439,000 Average loan is €21,000 Most perform well – Could be extended to other credit unions, especially if some form of guarantee was available

Irish League of Credit Unions, 2014 W E L O O K A T T H I N G S D I F F E R E N T L Y Possible solutions # 2 Credit unions could invest in a “fund” to lend to SME borrowers – Would require Central Bank approval – Up to (say) 10% of Reserves (€200m) – Invest in a centrally-managed fund (with appropriate skills) for small businesses – Could get over variability of skills, services, etc. – Perhaps with some level of state guarantee?

Irish League of Credit Unions, 2014 W E L O O K A T T H I N G S D I F F E R E N T L Y In conclusion Credit unions were established to provide members with access to affordable credit Credit unions have funds and are keen to lend SMEs have a key role to play in the future success of the Irish economy SMEs need credit to survive and thrive Credit unions can be part of a solution We would welcome continued engagement with the Department of Jobs Enterprise and Innovation on this matter