Assembly Speech- Role And Potential Of Credit Unions In Northern Ireland 17/2/2009


Mr Speaker / Deputy Speaker

Context in which we are discussing this report:

A. A major downturn in the economy with unemployment rising and closures of household name companies commonplace.

B. The situation that has arisen with the Presbyterian Mutual Society, an unregulated organisation that leaves many investors facing extreme difficulties.  They may wish that PMS had considered regulation as the organisation became more sophisticated in its approach.

C. On a more positive note a desire from the Credit Union movement to play an increasingly positive role through increased services to their members.

I rise today as a member of the Committee for Enterprise, Trade and Investment to support the report and would also like to declare an interest as a member of a credit union. 

The report highlights the importance of credit unions to the local community and outlines the role they play.  For many people the local credit union is their first point of call when they wish to apply for a loan, either for a comfort item or as is more likely out of necessity. 
However, in Northern Ireland, credit union members are not able to receive the full benefits of membership when compared with those members living in GB or the Republic of Ireland. And it is this type of issue the report attempts to address but with the safeguards that investors expect and need.

One of John Hume’s claims to fame is that he is credited with starting the first credit union in Northern Ireland.  From this time we have witnessed an amazing growth with the development of around 170 credit unions throughout the Province. 

This is coupled with the fact that credit unions are supported by both sides of the community with the Orange Order and the Roman Catholic Church actively promoting the benefits of credit unions throughout their community.  There is no exclusivity in this as individuals cross what might be perceived as boundaries to join a locally based credit union. And this is to be welcomed.

The importance of the credit union movement can be seen by the fact that in Northern Ireland some 26% of the population are members of a credit union, while in England and Wales it is less than 1% of the population.  This confirms the very important role the credit unions play within our local society.  It also verifies the confidence the local community has in the credit union movement

The report highlights a number of recommendations in order to improve the services a credit union can provide to our society.  It is clearly evident from the recommendations, the most significant change we can make to the role played by credit unions is to create the circumstances that will allow them to expand the range and quality of services they may provide.  Currently credit unions can only provide a small number of services, which include share accounts, loans and life assurance.  Compare this to the number of services available in Great Britain and also the Republic of Ireland and you can see that the people of Northern Ireland are not able to utilise the full benefits of a credit union.

I also welcome the recommendation that the FSA and DETI should work together to provide credit union staff with knowledge and skills to operate the new regulatory arrangements and to operate additional services.
In encouraging additional new services, which will come under scrutiny, staff training and development will be necessary and important.  In this context it is essential that the recommendation to agree a package with Her Majesty’s Treasury to grant a financial support package to assist credit unions in implementing change is fully explored.  The opening of an FSA office in Northern Ireland would also allow this process to run more smoothly.

The final recommendation I wish to mention is the appropriate reinvestment of assets by credit unions into community development and community enterprises, which will have the potential to bring about significant economic benefits to communities.  I have reiterated the positive role credit unions play in the community and the reinvestment of a proportion of assets by credit unions would be something to be welcomed.

In conclusion I would like to make two important points.
1. The report acknowledges that many individual credit unions are content with current regulatory arrangements and have no desire to expand the range of services they offer.  If that is the level of their ambition then they can take advantage of the ‘lighter touch’ Version 1 FSA regulation provided to credit unions that wish to provide only core services will meet the needs of these credit unions.

2. For those with more large-scale thinking changing from the current regulatory regime to the FSA regime will require credit union management and staff to train in the operation of the new procedures. For this training to be successful it will require close co-operation between the credit union movement and the FSA. This can be accommodated within the FSA’s Version 2 regulation.

The report allows for those with vision and ambition and for those who want to provide valuable, important yet limited scope of activity. I recommend this report approved by the whole committee to the House