With corporate social responsibility back in vogue, have credit unions somehow tapped into the zeitgeist of the Noughties, just as they did in the Fifties? asks Caroline Madden

When Ireland's first credit union was founded 49 years ago on Dublin's Donore Avenue, it threw a financial lifeline to ordinary people in the surrounding community. This was the 1950s, a time when banks kept a very tight hold of their purse strings, only extending credit to well-heeled professional types.

Ordinary working-class folk who didn't have savings to cover expensive items had no choice but to fund such outlays through hire purchase at a very high interest rate, or borrow from a moneylender, usually at an even higher rate.

Therefore the formation of a co-operative credit institution, which enabled the community to save together and lend to each other at a reasonable rate of interest, answered the prayers of many people in financial straits.

The movement rapidly gathered momentum and credit unions mushroomed, to such an extent that there is a now a greater penetration level in Ireland than in any other country in the world. Half the population of the Ireland, North and South, are members of a credit union, of which there are well over 500.

Their not-for-profit "people power" ethos still sets credit unions apart from the relentless focus on the bottom line that typifies the modern banking fraternity.

Nevertheless, times have moved on since the credit union model was pioneered on Donore Avenue. Accessing cheap credit has never been easier. Unsolicited loans are regularly pushed on consumers, and multiple credit cards are de rigeur.

In these times of easy money, is the credit union movement simply a quaint, outmoded relic from the 1950s, or does it still have something to offer today's sophisticated consumer?

Naturally the Irish League of Credit Unions, which represents 525 credit unions, is staunchly of the latter opinion.

"Credit unions are clearly recognised as the friendly face of financial services in Ireland," says Liam O'Dwyer, the league's chief executive.

O'Dwyer also feels that the sense of ownership provided by the co-operative nature of credit unions remains a unique selling point. "It's very clearly there in the consumers' interest," he says. "It has to be, because the consumers own it."

The principal aim of credit unions is to improve the economic and social wellbeing of members, rather than maximising surpluses. This attitude is refreshing, given the overcharging scandals that have rocked the banking sector in recent years and that are still fresh in consumers' memories.

Credit unions also offer a respite from the aggressive marketing tactics of banks, as they are oriented primarily towards service rather than sales.

"It's also about the community," O'Dwyer says. "So while the banks have moved out of disadvantaged communities and rural communities, credit unions have not only remained but have opened sub-offices."

An added bonus of the ownership nature of credit union membership is that any surplus that arises may be distributed among members. Normally the focus is on giving the dividend to savers, O'Leary says.

However, quite a few credit unions split the surplus between savers and borrowers, so that those who have taken out loans effectively receive an interest rebate.

A further advantage offered to members is the automatic and free provision of life assurance on all loans and savings.

One credit union that is experiencing phenomenal growth is Balbriggan. Its membership has been hugely bolstered by foreign nationals moving to the area. What is it that prompts them to join a credit union?

Balbriggan Credit Union ran some surveys last year to try and gauge members' perceptions and made some interesting discoveries.

"One of the huge things that came back, particularly from the foreign nationals, was that they felt they were treated as equals here and not in other institutions, and they said that was one of the reasons why they like it so much," says Martin Mullen, manager of Balbriggan Credit Union.

For all its advantages, though, the credit union model isn't perfect, and in quite a few areas lags behind the advances that customers of financial services providers tend to take for granted these days.

Only 10 credit unions affiliated with the Irish League of Credit Unions offer full ATM, debit card and electronic fund transfer services, although many offer partial services. However, work is under way to extend the level of coverage.

In terms of products, credit unions are still not "one-stop shops". Wealth-management services are not offered, as very few members would have very large deposits. Mortgages are generally not available through credit unions, although a number, such as Balbriggan, have tied up with IIB Homeloans and will now be acting as mortgage intermediaries.

Then there are the question marks hanging over the bad debt levels in some credit unions of late. O'Dwyer dismisses these concerns. "The reality is that credit unions have expanded their loan books by 7 per cent last year while the for-profit banking sector saw loan book expansion of over 26 per cent."

As well as being a reflection of intense competition from other service providers, he says that this is a result of the "restrictive nature of credit union legislation" and "a more prudent approach by credit unions".

Last year, the rate of bad debt write-offs was 0.53 per cent of the total loan book across 525 credit unions, which, O'Dwyer says, is "indicative of sensible lending".

One of the key tenets of the the credit union model is value for money. As each credit union is autonomous and sets its own interest rates, it is difficult to get an accurate picture of exactly how much value for money borrowers are getting. However, the average APR (annual percentage rate) on personal loans is in the region of 8.8 per cent, which is relatively competitive.

The current motor loan offered by credit unions at 6.99 per cent APR is one of the best deals around.

As Ireland's largest provider of social finance - some €750 million is currently lent out as microfinance or to fund community enterprise projects, and to low-income borrowers or individuals struggling with debt - the movement is right on trend given that "corporate social responsibility" is now in vogue. With their welcome to immigrants and a fashionable social conscience, have credit unions somehow tapped into the zeitgeist of the Noughties, just as they did in the Fifties?