FINANCIAL INCLUSION
Northern Ireland
Briefing Document for a Meeting with
Rt Hon John McFall (Chairman, Treasury Select Committee)
on Wednesday, 06 September 2006.
Introduction
The Irish League of Credit Unions (‘the League’) very much welcomes this
opportunity to highlight current thinking on the involvement and activities of its
member credit unions in Northern Ireland in respect of promoting financial inclusion.
The work of the Treasury Select Committee (TSC) in undertaking an inquiry into
financial inclusion in the UK is appreciated.
The League is a trade and representative organisation for credit unions throughout
Ireland. Founded in 1960, the League represents over 530 member credit unions of
which 104 are based in Northern Ireland. The Irish credit union movement is unique
in that it has developed organically from within communities and continues to be
strongly supported by those communities throughout Ireland. This is reflected in the
strong asset base of €14 billion and membership of 3 million (c. 50% of the
population of Ireland - North and South). Such penetration levels are an indication of
the potential that exists for the further development of the credit union movement in
Ireland. That potential can be realised only where the movement is supported in
offering the services necessary to meet the needs of credit union members.
Approximate figures at year end September 2005 indicate the following in respect of
our 104 member credit unions in Northern Ireland:

Excess 325,000 members collectively.

125,000 of those members borrow from their credit union.

Savings at £575m.

Loans at £403m.

67,700 accounts totalling £17m in deposits from persons too young to be members
of credit unions i.e. those under the age of 16 1.

1
Assets at £710m.
See Article 26 of The Credit Unions (Northern Ireland) Order 1985 (as amended).
2
Of the affiliated credit unions in Northern Ireland, 6 currently hold less than £1m in
assets. 19 hold in excess of £10m in assets. The remaining 79 vary in asset size from
£1m - £10m. There are varying levels of service, opening hours and staffing levels
between member credit unions but each endeavour to serve its members in accordance
with their collective needs and in a manner that is commensurate with the specific
skill and resource levels of each individual credit union.
Credit unions exist only to serve members and are always eager to attract prospective
members to join the credit union. They are ‘not for profit’ organisations, financial cooperatives established by the members for the members with the following objectives:
(a) The promotion of thrift among members by the accumulation of their savings;
(b) The creation of sources of credit for the benefit of members at a fair and
reasonable rate of interest;
(c) The use and control of members’ savings for their mutual benefit; and
(d) The training and education of members in the wise use of money and in the
management of their financial affairs.
In addition, affiliated credit unions are required by rule to operate in accordance with
a set of Principles under the following headings 2:
1. Open and voluntary membership
2. Democratic control
3. Limited dividends on equity capital
4. Return on savings and deposits
5. Return of surplus to members
6. Non discrimination in race, religion and politics
7. Service to members
8. On-going education
9. Co-operation among co-operatives
10. Social responsibility
2
Full text at Appendix 1.
3
Member credit unions in Northern Ireland currently play a vital role in promoting
financial inclusion by providing a significant savings and loans network throughout
Northern Ireland as a whole but often, in areas and to people other providers choose
not to serve. This is particularly significant in rural and disadvantaged communities.
The credit union service plays a crucial part in combating the financial exclusion
experienced by too many, too often within a certain demographic.
Legislative/Regulatory Impasse
The regulation of credit unions in Northern Ireland falls within the ambit of the
Department of Enterprise, Trade and Investment (Northern Ireland). While the League
and DETI (NI) have an excellent working relationship, the ability of DETI to regulate
member credit unions in a manner that is conducive to the continued development of
credit unions within the jurisdiction is significantly impeded by the legislative
environment within which credit unions in Northern Ireland are currently expected to
operate. This legislative barrier has become all the more obvious in recent times as
member credit unions seek to expand the types of services which can be offered to
members.
The crux of the legislative difficulty arises where paragraph 23 of Schedule 3 to the
Northern Ireland Act, 1998, reserves the following to Westminster:
“financial services, including investment business, banking and deposit-taking,
collective investment schemes and insurance; financial markets, including listing and
public offers of securities and investments, transfer of securities and insider dealing”.
Further, the Schedule then states that “this does not include the subject matter of the
Credit Unions (Northern Ireland) Order, 1985”.
Recent experience has taught us that in effect, this means that credit unions in
Northern Ireland cannot seek to expand into the reserved areas such as deposit taking,
insurance and mortgage activity of any type without concurrently seeking to be
regulated by the FSA. While arguments for the potential benefits of these types of
services for both existing and prospective credit union members in Northern Ireland
are compelling, they are perhaps better suited to a dedicated document on the subject.
4
Credit unions in Northern Ireland currently enjoy a Part IV permission under the
FSMA 2000 in respect of the acceptance of monies on deposit from persons too
young to be members (subject to a statutory maximum). Clearly any credit union in
Northern Ireland could submit an application for a variation of that permission to
enable expansion into other areas. It is understood that such application could
jeopardise the existing permission.
The fact that no member credit union has made such application to date strongly
suggests that the risk is deemed too great. Be that as it may, the League would hope
that the TSC can agree that the imposition of such an inequitable blockade on the
development of credit unions in Northern Ireland, particularly where such restrictions
simply do not exist for credit unions in the rest of the UK and in the Republic of
Ireland, is simply not sustainable.
A further option under FSMA 2000 is to seek the enactment of an Exemption Order
under section 38. Discussions with DETI have suggested that such exemption would
necessitate a policy decision from Westminster which could only come via a strong
recommendation from HMT. DETI representatives have indicated that they did not
find support for this in talks with their HMT counterparts over the last number of
years. In recognition of the potential financial/human resource issues for DETI which
could arise in this regard, the League is willing to take reasonable steps to relieve the
problem e.g. engaging professional consultants to prepare comprehensive operational
manuals to cover “regulated activities” for sign off by HMT/FSA/DETI. Also, the
offering of such services could then be subject to audit by a designated entity be it
FSA, DETI or some other agency. The League is open to any suggestions in this
regard in an attempt to alleviate this regulatory stalemate.
Howsoever great the burden of this legislative difficulty at this time, the League is
even more concerned with its potentially detrimental effect into a future where credit
unions will need to be in a position to offer services on a par with other providers in
the sector in order to survive. That they would be prevented from doing so as a result
of a legislative/regulatory impasse is invidious.
The unique ethos of credit unions places them at the forefront in the area of financial
inclusion in Northern Ireland by serving people who would often hold little or no
5
interest for other financial service providers. To credit unions – these people are the
members, the owners and crucially, the users of the services provided.
The perceived and potential role of member credit unions in Northern Ireland in
combating financial exclusion will be addressed under the following headings:
1.
Access to banking services
2.
Access to affordable credit
3.
Financial education and access to financial advice
4.
Social Finance.
5.
The role of the Government, the Financial Services Authority and other bodies
and organisations in promoting financial inclusion
6.
Key recommendations
Access to banking services
The credit union movement in Northern Ireland is at an appropriate stage of maturity
and soundness that it should be in a position to respond to the needs of members as
technology progresses and those needs change.
Article 24 of The Credit Unions (Northern Ireland) Order 1985 (as amended)
expressly prohibits credit unions in Northern Ireland from carrying on ‘the business of
banking’. In addition to the potential competition issues involved, such prohibition
could cause untold difficulties for credit unions in Northern Ireland as they strive to
continue to meet the needs of their members. It is suggested that such a preventative
measure has no place in the legislation of today’s financial marketplace; that Northern
Ireland credit unions should no longer be singled out in this manner (the prohibition
does not apply to GB/Republic of Ireland credit unions) and that the article should be
deleted from the Order.
A number of member credit unions have recently completed a project which piloted
the following services:
6
(a) the acceptance of social security benefits directly into credit union accounts;
(b) the provision of a bill payment service through PayPoint; and
(c) the facility to pay money into credit union accounts via outside agencies.
The Registrar has welcomed these member service enhancements and encouraged the
widespread adoption of same by credit unions. The benefits service initiative is
subject to the formal approval of the Social Security Agency (which is awaited at the
time of writing) and the individual application of any credit union wishing to
participate.
It is clear from the transcript of the evidence taken from our colleagues in ABCUL on
28 February 2006 that the Committee is familiar with the ABCUL/Co-operative Bank
initiative. The League, in conjunction with ABCUL, is currently examining the
feasibility of affiliated credit unions in Northern Ireland joining the initiative.
Access to affordable credit
Credit unions are prohibited by statute from charging interest at a rate which exceeds
1 per cent per month on the amount of the loan outstanding and such interest must
include all administrative and other expenses incurred in connection with the making
of the loan 3.
The registered rules of member credit unions require that the board of directors
determines the rate of interest chargeable on loans from time to time within that
statutory limit and also that the rate of interest charged on any class of loans granted
at a particular time must be the same for all loans of the class. This ensures that those
who are less well off (and perhaps most in need of the credit on offer) do not pay
more for that credit.
The Operating Principles dictate that credit unions are non-discriminatory in relation
to race, nationality, sex, religion and politics within the limits of their legal common
bond. This could be expanded, in practice, to include a reference to the economic
3
Article 28 (5) of The Credit Unions (Northern Ireland) Order 1985 (as amended)
7
standing of members and prospective members. While credit unions are committed to
lending responsibly, a member’s relationship with the credit union is not affected by
the amount they hold in shares or how much they wish to borrow. Credit unions
provide savings and loan facilities to members throughout Northern Ireland in a
wholly financially inclusive manner. Unlike other financial service providers, no loan
or lodgement is considered too small.
This is evidenced in figures extracted from the League’s Annual Report 2005 which
show that the average credit union loan in Northern Ireland for that year was £3,000.
A breakdown of the loan book shows that:

17% of all loans are for amounts below £250;

23% of all loans are for amounts between £250 and £500;

8% of all loans are for amounts between £500 and £750; and

20% of all loans are for amounts between £750 and £1000.
The figures are a clear indicator of the demographic currently being served by credit
unions in Northern Ireland.
Financial education and access to financial advice
The League produces generic information leaflets on many aspects of credit union e.g.
access & joining, savings & loans etc. These leaflets are, in turn, widely distributed by
credit unions among the communities in which they operate.
From time to time, the League engages in campaigns which it deems necessary for the
financial well being of credit union members (and prospective members) throughout
Ireland. An example of this is a campaign which will be launched prior to Christmas
and titled ‘Keeping the Wolves from the Door’. It is aimed at getting a message out to
less well financially informed members of society that there is a viable alternative to
unlicensed Money Lenders and that people should work with their local credit unions
as a more appropriate means to resolve their debt issues.
It is considered that the great challenge facing credit unions in respect of financial
education relates largely to the members of tomorrow who (because of dramatic
8
changes in the economic climate) are of a very different Ireland. Because of this,
much of the work of member credit unions in this area is targeted at young people.
With this in mind, the League looks forward to participating in a Northern Ireland
Financial Education Forum later this month to be facilitated by PFEG (an educational
charity aimed at ensuring that all young people leaving school have the confidence,
skills and knowledge in financial matters to take part fully in society).
In an initiative designed to educate young people in monetary matters, some credit
unions have set up Schools Savings Schemes in local primary and secondary schools
i.e. mini credit unions. Under the initiative, senior students (guided either by a teacher
or a credit union officer) manage the credit union. Students bring their savings to
school and complete their credit union business in the classroom. The initiative has
proven successful on two levels – obviously with students themselves but also, where
children and older students relay the concept of credit union to a household where it
may otherwise have been alien and so, their parents/guardians are more likely to join
their local credit union. In addition, it is hoped that the senior students who coordinate the projects might return to their local credit unions at some stage later in life
armed with that experience to again manage the funds of their peers.
Credit unions also provide an opportunity for senior students of secondary schools
and third level colleges to avail of work experience in the credit union during holiday
periods and weekends. Credit unions facilitate, where possible, people who are
studying for National Vocational Qualifications with long term work experience over
periods of up to a year. Indeed, employment as a whole in the credit union movement
in Ireland is encouraging 4.
Many member credit unions in Northern Ireland participate in nationwide youth
initiatives which endeavour to increase financial awareness in the country’s youth and
particularly, in school children. These include an ILCU National Schools Quiz, an
ILCU National Poster Competition and an ILCU Art for Kids programme. These are
annual events run by the League. A recent youth based project undertaken by the
League involved the production and distribution of a DVD aimed at the 12-18 age
4
See results of a Credit Union Manpower Survey carried out by the League in 2004 at Appendix 2.
9
group which includes footage of young people talking among themselves about their
credit union experiences. Further, the League’s website www.cu4youth.ie provides a
forum for the co-ordination of all things youth orientated.
On the issue of access to financial advice, in keeping with the objects for which a
credit union is formed and specifically that which requires the ‘training and education
of members in the wise use of money and in the management of their financial affairs’
credit unions continually strive to comply with that ideal.
Social Finance
Social finance is defined as the provision of monies by organisations which seek a
social return/dividend as well as a financial return. It is distinguished from
mainstream finance in that it prioritises social gain.
Social finance is a model of investment that generates positive social change by
responding to pressing social needs, particularly where those needs have little hope of
being met by conventional finance models. It is repayable finance which aims to
generate an inclusive prosperity and sustainable development.
Credit unions in Ireland have to date contributed significantly to the availability of
social finance and the League considers the continued provision of social finance to
be an immense opportunity for credit unions in the fulfilment of the objectives for
which they are established. The provision of this type of finance by member credit
unions is important to the economy, the community and the credit union movement.
With this in mind, the League undertook a programme of study in the area and as a
result, in 2004, launched its first report entitled ‘Prioritising Social Gain’ on the
extent to which the credit union movement in Ireland engages in social financing.
A finding of the study is that clarity is needed regarding exactly what social finance
is, what it is not and what it can achieve. It is important to note that social finance
provision is not a structural intervention to alleviate poverty - that is the responsibility
of Government. Clearly poverty can only be eliminated by ensuring that all citizens
have an adequate income and appropriate access to education, housing, health and
10
employment. While social finance may not solve the problems related to poverty, it
can build on infrastructural intervention by Government and provide support in
preventing people from falling into the poverty cycle.
Similarly, social finance should not be regarded as charity. It is lending but with a
significant difference in that the social return is the priority. Credit unions are ideal
vehicles for this type of financing because of their strong community base, common
bond and local knowledge but support is necessary as social finance can be fraught
with difficulties particularly with regard to risk management. Expertise is required in
many areas such as business planning, product development, legal structures, the need
for guarantees and collateral, issues regarding Government grant provision and
commitment by Government regarding continuing core funding for projects. There
has been a misunderstanding of social finance by some who believe that money set
aside for charitable purposes is social finance, this is simply not the case.
Government could support the continued and enhanced involvement of credit unions
in social finance. Expertise in the area already exists in entities such as the Enterprise
& Development Boards, Aspire and Invest NI. This being so, there is no necessity to
invest in new support structures but to clarify and develop current structures so that
they can be accessed by credit unions in the provision of social finance. Credit unions
are ideally poised to work in partnership with these bodies to tease out the specific
needs of a particular locality before becoming involved in a project. Government
could be of immense assistance to the movement in enabling credit unions become
more involved in social financing especially in the areas of micro-finance, community
development and community enterprise development. This would also require
legislative change.
There are two types of social finance providers- Generalist Providers (Government)
and Specialist Providers (e.g. credit unions). Successive Governments have, through
state sponsored investment, invested heavily in both top down social finance projects
and bottom up investment through community development support infrastructures.
The development of local and regional enabling mechanisms to deliver and support
enterprise and community development has been crucially important. District
Councils in Northern Ireland have had a significant influence on disadvantaged
11
communities by empowering them to take ownership of their own futures. Aspire and
Invest NI also act as micro finance providers by enabling the development of
individual entrepreneurs who have remained within their communities thereby
producing a knock on positive effect on employment provision.
As a result of the research undertaken by the League we now can quantify the
spectrum of loans being approved by member credit unions, identify the amount and
percentage of those classified as social finance and other relevant factors to be
considered for future development. It is evident from this study that all credit unions
are providing social finance. A significant proportion of social finance lending is
accounted for by loans to individual members, for example loans to members who
could not borrow elsewhere, individual members who would be regarded as
disadvantaged or already indebted, low income families and loans to individual
members setting up/expanding their businesses, particularly those moving from
welfare to work.
Our evidence shows that social finance accounts for an estimated 10% of a credit
union’s loan book. This equates to £480 million currently being lent out for social
finance purposes throughout the movement nationally. In the Northern Ireland
context, the total value of the current social finance loan book could be as high as
£40m. The study also indicated that credit unions provide loans to Co-operatives,
Community Development and Enterprise projects and credit union led Investment
Projects. When you analyse the statistics of credit union lending it is clear that 8.8%
of loans are to members already indebted who could not borrow elsewhere, 31% of
loans are to members who are regarded as being disadvantaged. Credit union loan
books in the Republic of Ireland only show that a further 31% of their lending is
focused on either co-operative business or micro finance business especially at set-up
stage. In Northern Ireland, due to legislative restrictions, credit unions are unable to
lend into micro finance projects, community development projects and community
enterprise projects to the detriment, in our view, of the wider community. Legislative
change in this area is necessary to fully utilise the capacity and desire of credit unions
to contribute to a reduction in indebtedness among members and an increase in access
to capital (particularly for those developing their own businesses).
12
The credit union movement was founded on the basis that access to finance is an
important tool to facilitate community development. This has remained a priority for
the movement and is of huge importance in relation to the ethos upon which the
movement is built. Credit unions agree that they have a dual social responsibility both to their members and to the wider community within which they operate. This
responsibility must be exercised. It is encouraged and provided for in the credit union
rules and again, central to the Operating Principles. Credit union involvement in
social finance is an integral part of what credit unions are.
The role of the Government, the Financial Services Authority and other bodies
and organisations in promoting financial inclusion
It is strongly felt that the Government has a role to play in ensuring the maximum
contribution from credit unions in Northern Ireland in the promotion of financial
inclusion as follows:
1.
Money Advice Service for the Financially Excluded / Over indebted
Because a large percentage of its member base is in the Republic of Ireland, the
League is perhaps very well placed to suggest that the Money Advice and Budgeting
Service (MABS) offered to those who find themselves in circumstances of over
indebtedness in the Republic of Ireland, be examined as a model for a similar service
in Northern Ireland (www.mabs.ie). MABS provides general information and advice
on managing money and financial services free of charge. In the case of over
indebtedness and depending on the circumstances of the person involved, MABS will
often introduce the individual to the credit union and in doing so, begin a process
whereby the credit union consolidates their debts in a manner that is appropriate to
their means.
The credit union may also set-up a budget account whereby the indebted member will
lodge a portion of their income to their Credit Union Budget Account and the credit
union will pay all agreed bills by direct debit leaving the member with a balance to
cover other necessities. This empowers the member to take control of their finances,
live at an appropriate standard and deal with their debt. One of the key successes of
MABS is that it is integrated locally with all of the essential service providers –
13
housing department, health services, welfare services etc. The value of such a service
in improving the quality of life of clients and their families can be immense.
2.
Funding
Credit unions in Northern Ireland have received no funding from the UK
Government.
The welcome establishment of the Financial Inclusion Fund has seen the setting aside
of a large level of funding to tackle financial exclusion. It is a disappointment that no
such funds have been made available to credit unions in Northern Ireland in light of
the crucial role they perform in the area. It is suggested that Government funding in
the following areas would be appropriate:

Loan Guarantees – credit unions consider applications for credit on an individual
and objective basis. There is a responsibility both to the prospective borrower and
the other members of the credit union to investigate the potential ramifications of
the granting/refusal of such application for credit.
In attempting to lend responsibly, it may happen that a loan application from a
member (particularly a new member) must be refused solely because there is no
established savings/repayment record on which a decision to lend can reasonably
(or responsibly) be based.
If certain loans were Government guaranteed, different lending criteria could be
applied by the credit union no doubt leading to a different outcome. The potential
long term benefit of such a scheme (particularly with regard to financial inclusion)
is that the borrower may, in time, borrow in his/her own right on foot of their
newly established saving/repayment history with the credit union. Perhaps such a
scheme could be operated in conjunction with the money advice service currently
being offered by the Citizens Advice Bureaus throughout Northern Ireland.
14

Money Advice – any funding that could be made available in this area in respect
of the role credit unions are best placed to play, would no doubt operate to combat
financial exclusion.

Capital Funding – for participation in initiatives aimed at broadening the
boundaries of financial inclusion e.g. the ABCUL/Co-operative Bank initiative.
3.
Child Trust Funds
Credit unions in Ireland have, of their own volition, created a Savings Protection
Scheme to protect credit unions against financial calamity or negligent governance.
This fund now stands at approximately €95 million and is backed by a team of
auditors and analysts. The fund protects credit unions in both the Republic of Ireland
and Northern Ireland. Although the scheme has successfully protected the members of
participating credit unions to the extent that none have ever lost money, currently it
does not include a guarantee element.
Member credit unions in Northern Ireland have been denied authorisation to offer
CTFs on the basis that the level of protection offered by the League’s Savings
Protection Scheme is not equal to that available under the Financial Services
Compensation Scheme although ironically, it is not currently open to credit unions in
Northern Ireland to participate in the FSCS.
This is disappointing since the League is committed to the idea that an integral part of
the process of financial education has to be targeting young people. We would of
course contend that credit unions by their very nature and the ‘know your member’
ethos which prevails throughout credit unions the world over are significantly more
suited to being the first step in a young person’s dealings with a financial services
provider than others in the sector.
Anxious not to continue to fall foul of this anomaly both in the case of CTFs and any
future Government initiatives, the League would welcome the views of the committee
on this issue.
15
4.
Taxation
The treatment of credit unions in the taxation regime may be examined under the
following two headings:
(a) Corporation Tax – credit unions are liable to corporation tax on the revenue
generated from investments. The rate of tax is currently 20%. The taxation
revenue generated here could be better used by credit unions in a focused manner
to combat financial exclusion.
(b) Income Tax – credit union members have a tax liability on income earned in the
credit union. Income takes the form of dividend earned on shares. There is no tax
exemption. Credit union members are often unsophisticated savers and so, not
always likely to shop around for the best return on their savings.
Credit unions are currently obliged to make a return of information to the Inland
Revenue regarding members who receive dividends in excess of £350. The
League believes that some form of exemption or provision of a tax efficient
product would be a positive step. It would reward the member who has saved, for
example, £6,000 over 20 years (being liable to tax each year) which is comparable
to an individual with an ISA who may save up to £3,000 a year for a number of
years without attracting a tax liability.
It would also reduce the number of elderly members who may decide to withdraw
their life savings because they live in fear of a tax liability which they probably do
not have. Obviously, such withdrawals bring with them issues of concern around
the safety of those elderly members and their savings.
5. Legislative/Regulatory Impasse
The difficulties currently being experienced by credit unions in Northern Ireland in
this area and previously outlined in this document must be addressed.
16
While the products and services currently available to credit union members in
Northern Ireland constitute basic banking i.e. share accounts, loans and life assurance
(as an additional benefit to members for no direct cost), it is clear that in order to
enable equitable access to other basic financial services to middle and lower income
groups, further legislative changes are required.
The League is keen to offer its members (as it does in the Republic of Ireland) access
to insurance products such as home, travel, car and health. Credit union members are
among those who are under-insured in these areas. Ideally, the League is looking to
Government to enable it offer these services under the auspices of DETI.
Another crucial service is that of pension provision. Again, in the Republic of Ireland,
the development of a basic pension product (PRSA) is currently being progressed
with a view to offering the substantial cohort of people who are under-provided for in
this area (and would otherwise be reliant on the State) an opportunity to save in a tax
efficient and prudent manner for their future well being.
The opening of a basic deposit account is in line with the above developments,
particularly in the context of the current exemption held by credit unions for minors in
Northern Ireland.
With regard to the section on social finance, credit unions wish to be involved in
micro finance lending, particularly where members wish to start up businesses as they
move from welfare to work. This would require a change in legislation but the
benefits from a social inclusion perspective would be significant.
In the Republic of Ireland, credit unions with excess liquidity may invest in
community development and/or community enterprise projects. This would be of
great benefit to disadvantaged communities in Northern Ireland but again, would
require a change in legislation.
The League is eager to develop these services in conjunction with the Registrar and in
co-operation with Aspire, Invest NI and District Councils. The clear benefits to
communities in disadvantaged areas would be significant, leading to additional and
17
integrated social and economic development, a reduction in unemployment, an
integrated combating of poverty and an increase in social cohesion.
Key Recommendations
In conclusion, the League requests that the Committee consider the following key
recommendations to enable credit unions enhance the already significant role they
play in combating financial exclusion in Northern Ireland:
1.
The legislative blockade/regulatory stalemate outlined in this document
(particularly with regard to insurance and deposit accounts) including any
thoughts on the likely treatment of both an application to vary an existing Part
IV permission and an application for an Exemption Order under FSMA 2000.
2.
The deletion of Article 24 of the Credit Unions (Northern Ireland) Order, 1985
(as amended) concerning a prohibition on carrying on the business of banking as
outdated and inappropriate in the legislation of any financial services provider in
today’s market.
3.
An amendment of the primary legislation to enable the acceptance of
groups/societies into membership of the credit union and a corresponding
provision whereby credit unions could invest in micro-finance/community
development/community enterprise development initiatives.
4.
Consider the MABS model and others as possible templates for a similar
scheme in Northern Ireland.
5.
The absence of funding for credit unions in Northern Ireland to support financial
inclusion driven initiatives.
6.
The anomaly presented by the exclusion of credit unions in Northern Ireland
from the Government’s Child Trust Fund Scheme (and any such future
initiatives) on the grounds that the League’s Savings Protection Scheme in
which affiliated credit unions participate does not offer the same level of
18
protection as the FSCS when membership of the FSCS is not open to those
credit unions.
7.
Whether the issue of corporation tax can be explored with a view to utilising the
funds involved in a more beneficial manner from the perspective of financial
inclusion.
8.
With regard to income tax, whether an exemption could be provided or a tax
efficient product introduced to alleviate the situation outlined previously.
Irish League of Credit Unions
September 2006
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APPENDIX 1
CREDIT UNION OPERATING PRINCIPLES
Statement of Credit Union Operating Principles as adopted at Annual General
Meeting of the Irish League of Credit Unions, 1984.
INTRODUCTION
These Credit Union Operating Principles are founded in the philosophy of cooperation and its central values of equality, equity and mutual self-help. At the heart
of these principles is the concept of human development and the brotherhood of man
expressed through people working together to achieve a better life for themselves and
their children.
1.
OPEN AND VOLUNTARY MEMBERSHIP
Membership in a credit union is voluntary and open to all within the accepted
common bond of association that can make use of its services and are willing
to accept the corresponding responsibilities.
2.
DEMOCRATIC CONTROL
Credit union members enjoy equal rights to vote (one member, one vote) and
participate in decisions affecting the credit union, without regard to the
amount of savings or deposits or the volume of business. The credit union is
autonomous, within the framework of law and regulation, recognising the
credit union as a co-operative enterprise serving and controlled by its
members. Credit union elected officers are voluntary in nature and
incumbents should not receive a salary for fulfilling the duties for which they
were elected. However, credit unions may reimburse legitimate expenses
incurred by elected officials.
3.
LIMITED DIVIDENDS ON EQUITY CAPITAL
Permanent equity capital where it exists in the credit union receives limited
dividends.
4.
RETURN ON SAVINGS AND DEPOSITS
5.
To encourage thrift through savings and thus to provide loans and other
member services, a fair rate of interest is paid on savings and deposits, within
the capability of the credit union.
RETURN OF SURPLUS TO MEMBERS
* The surplus arising out of the operations of the credit union after ensuring
appropriate reserve levels and after payment of dividends belongs to and
benefits all members with no member or group of members benefiting to the
detriment of others. This surplus may be distributed among members in
proportion to their transactions with the credit union (interest or patronage
refunds) or directed to improved or additional services required by the
members.
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* Expenditure in credit unions should be for the benefit of all members with no
member or group of members benefiting to the detriment of others.
6.
NON-DISCRIMINATION IN RACE, RELIGION AND POLITICS
Credit unions are non-discriminatory in relation to race, nationality, sex,
religion and politics within the limits of their legal common bond. Operating
decisions and the conduct of business are based on member needs, economic
factors and sound management principles. While credit unions are apolitical
and will not become aligned with partisan political interests, this does not
prevent or restrict them from making such political representations as are
necessary to defend and promote the collective interests of credit unions and
their members.
7.
SERVICE TO MEMBERS
Credit union services are directed towards improving the economic and social
well-being of all members, whose needs shall be a permanent and paramount
consideration, rather than towards the maximising of surpluses.
8.
ON-GOING EDUCATION
Credit unions actively promote the education of their members, officers and
employees, along with the public in general, in the economic, social
democratic and mutual self-help principles of credit unions. The promotion of
thrift and the wise use of credit, as well as education on the rights and
responsibilities of members are essential to the dual social and economic
characters of credit unions in serving member needs.
9.
CO-OPERATION AMONG CO-OPERATIVES
In keeping with their philosophy and the pooling practices of co-operatives,
credit unions within their capability actively co-operate with other credit
unions, co-operatives and their associations at local, national and international
levels in order to best serve the interests of their members and their
community. This inter-co-operation fosters the development of the cooperative sector in society.
10.
SOCIAL RESPONSIBILITY
Continuing the ideals and beliefs of co-operative pioneers, credit unions seek
to bring about human and social development. Their vision of social justice
extends both to the individual members and to the larger community in which
they work and reside. The credit union ideal is to extend service to all who
need and can use it. Every person is either a member or a potential member
and appropriately part of the credit union sphere of interest and concern.
Decisions should be taken with full regard for the interests of the broader
community within which the credit union and its members reside.
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APPENDIX 2
Credit Union Manpower Survey 2004
Breakdown of Results
Total Mangers
Full Time Part Time Total
Incl - General
283
43
Total Full Time Staff
326
Total
1,674
Total Part Time Staff
Total
1,291
Fixed Term Contracts
Full Time Part Time Total
70
43
Number of Vacancies
113
Total
30
Total Employees
3,434
Total Directors
Total
5,428
Total Supervisors
Total
1,440
Total Volunteers
Active
Other
Total
Inc Active & Other Volunteers
232
1,450
1,682
Non Elected Committee Members
Total
634
Total Volunteers
9,184
Response by 511 Credit Unions = 95.7%
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