A confidential report for the Irish League of Credit Unions has warned that some of its 530 credit unions will probably go out of business because clients are not repaying their loans, writes Arthur Beesley, Senior Business Correspondent.
In spite of the warning from the league's own rationalisation committee, the body said yesterday that the three million people who have €12.6 billion in savings with the credit union movement have no reason to be concerned about their funds.
"They should not be worried about their money at all," said the league's executive manager, Pat Fay. A member of the committee himself, he said the league had an insurance fund to protect clients' funds and said no person ever lost money in a credit union.
However, the report said the current degree of delinquency - the failure to repay loans - in some credit unions increased the risk to the movement in terms of its "potential impact" on the insurance fund, known as the Savings Protection Scheme.
It cited a 2003 analysis which said the ratio of loans not being repaid was in breach of the league's own target in 72 per cent of 448 credit unions surveyed.
In a survey for the committee, almost half of the credit unions that were in breach of the target indicated that they had no or limited difficulty with regard to controlling delinquency. "This is worrying because these credit unions are either ignoring their delinquency problems or are not aware of them," the report stated.
"With decreasing trends in loan growth, increasing delinquency and increasing direct competition, it is not unreasonable to think there will probably be some credit union failures in the coming years."