The finding by the Financial Services Ombudsman that Enfield credit union was mis-sold perpetual bonds by Davy - a decision the stockbroker is challenging through the courts - raised the question of whether credit unions have sufficient expertise to be tinkering about with complex investment instruments.

In his ruling, ombudsman Joe Meade dismissed Davy's claim that the credit union in question was a sophisticated and professional investor.

"Having dealt with credit unions since I became Financial Services Ombudsman . . . I am aware that they are ordinary people, intelligent, conscientious and considerate, but generally they are not experts in the finer points of financial investments," he said.

He continued: "The credit union does not accept . . . that it was a sophisticated and professional investor, and neither do I."

The case has done little to inspire confidence that the movement has the necessary expertise to manage the increasingly broad range of products and services on offer to its members.

The chief executive of the Irish Financial Services Regulatory Authority, Patrick Neary, has spoken out on this issue, explaining that many credit unions have evolved from the traditional, uncomplicated niche service of providing small savings and loan facilities to a point where they are now attracting savers with large deposits and providing larger and more complex types of loans to a diverse range of borrowers. He has stressed that this development requires additional expertise and more specialist skills.

In addition, the registrar of credit unions, Brendan Logue, has called for a greater sense of urgency among credit unions for the process of modernisation to be speeded up, and has also referred to the inadequacy of the IT systems of many credit unions. "Although individual credit unions have made considerable progress in this regard, the ideal of a uniform interactive technology platform in the movement still seems like a distant reality," he said last year.

Can the volunteer-based credit union movement step up the challenge of modernisation and upskilling?

According to John O'Halloran, chief executive of the Irish League of Credit Unions, a recent survey showed that, while there are between 9,500 and 10,000 volunteers in the credit union movement, there are now approximately 4,500 employees. "It's not just run by volunteers," he says.

Credit unions are hiring in expertise in the form of managers and other staff with financial services knowledge. "There is definitely an upskilling in the credit union movement," O'Halloran says.

As credit unions roll out new products - such as insurance and mortgages - they are subject to the same minimum competency skills as any other financial services provider, he says. So, as they broaden their range of services, credit unions hire in people with the relevant skills. There is also a "big movement" towards training volunteers and employees.

Is any progress being made in improving the technology situation - a sensitive point after the plug was pulled in 2001 on the bungled €34 million attempt at a sector-wide computer programme, Isis? "We're always looking at the improvement of IT systems in order to provide better service," he says. But at the moment, it is still up to each credit union to operate its own computer system.

Billy Doyle, chief executive of the Credit Union Development Association (Cuda), says the main focus of his association's members is to develop their core savings and loan business.

"However, a number of our credit unions offer various insurance and related products in association with our insurance partner, Cuna Mutual Group. From an income diversification and member service perspective, this is an area of potential growth and development for credit unions as members are increasingly seeking a broader range of financial services."

However, he acknowledges that, in order to prosper in the future, credit unions will have to adopt more sophisticated approaches in terms of corporate governance, day-to-day operations and financial management. He believes there will be a need for more enhanced collaboration between credit unions.

Whether Davy wins its legal challenge against the ombudsman or not, one thing is certain - credit unions cannot afford to stand still. They must move with the times and take responsibility for managing the risks involved in their increasingly complex activities.