There can be little doubt that the credit union organisations are one of the greatest successes of the co operative movement and they are certainly its fastest growing sector. Credit unions operate throughout the world, Nepal and the Gambia being two of the more recent countries to have them established. Worldwide membership is running close to 100 million and combined savings in the region of £300 billion. The growth of the movement has been as rapid in Ireland as elsewhere. There are over 500 credit unions and over 1.5 million members; it is hard to believe that the country's first credit union was established only in 1958.
However, while the growth of credit unions has been phenomenal, legislation to govern them has been extraordinarily slow in coming. It is twenty years since legislation was first mooted and the Credit Union Bill now struggling through the Dail, was virtually eight years in the making. And still, it is said, the Bill is not all it should be. Yesterday, the Irish League of Credit Unions was quick to criticise the latest amendments proposed by Mr Pat Rabbitte, the Minister in charge. Mr Rabbitte should hang tough. His amendments are sensible and reasonable.
There are two main aspects to yesterday's amendments. Mr Rabbitte has decided to increase the amount of shares and deposits that members can have. Each member will be able to have savings of up to £50,000 - of which £30,000 can be a deposit and the rest in shares. As a consequence, members who receive a significant inheritance or redundancy payment will be able to lodge it into the credit union if they so wish. Furthermore, bearing in mind the rapid development of financial markets, Mr Rabbitte proposes that the limits may, in future, be amended simply by Ministerial order.
Perhaps the area that most vexes the credit unions is the limit on loans which they can issue. The limit at present is £6,000 and Mr Rabbitte proposed to increase that to £20,000. The League of Credit Unions was quite right to criticise the increase as being too low but it argued that loans should be limited only insofar as they do not exceed 5 per cent of total assets. This is clearly (and understandably) a leap too far for Mr Rabbitte. Are not credit union loans, in the main, for holidays, weddings, modest cars? Mr Rabbitte now proposes to increase the loan limit to £30,000 and says it can be more as long as it does not exceed 5 per cent of all the union's loans or 1.5 per cent of total assets. These limits will facilitate a member who wishes to purchase a local authority house or invest in a small business. What the limits will prevent is a drive by credit unions into the mortgage industry and corporate financing which is not what credit unions are about.
No one should criticise the credit unions for being ambitious. It is entirely appropriate that they should offer members current accounts and cash dispensing cards and other facilities. But credit unions are not banks. They are local self help institutions owned by the members. Unlike banks, they are not profit driven but also unlike banks they do not pay tax on such profits as they make. Interest paid to members does not have DIRT tax taken off it. Bonus shares are liable to tax but the Revenue Commissioners leave it to members to declare voluntarily what they have received. The credit union movement has prospered mightily by keeping to the ethos on which it was founded and Mr Rabbitte has struck the right balance in moving it forward while maintaining that ethos.