Some credit unions could return all their savings to members and still lend!

[Brendan Burgess]

Here is the analysis I did of St Jarlath's Credit Union in Tuam earlier this year

Members' shares| €119m
Members' Reserves|€20m
Total Members' funds|€139m
|
|
Loans to members|€ 25m
Less bad debt provisions|€4m
Net loans to members|€21m
As a percentage of funds|15%

They could return almost all their savings to their members and still fund the loan book.

cash, bank deposits and investments|€114m
Members' shares|€119m

So they needed only €5m from their members' shares to fund the loan book.

As at least €5m of the loans was backed by deposits, these borrowers could have repaid their loans by withdrawing their deposits.

So St Jarlath's could have returned all their members' shares.

 

[Brendan Burgess]

I did an analysis of the accounts of Bantry Credit Union here.

Analysis of Bantry Credit Union's accounts

Total members' shares|€44m|
Less shares as security for loans|€4m |my estimate
Members shares not linked to loans|€40m
Deposits and investments|€43m

They could pay back all their shares in full and still have €3m to lend.

|2013|2012
Members' loans repaid during the year|€5m |€5.3m
Members loans granted|€4.5m|€3.9m
Surplus|€500k|€1.4m

As loan repayments exceed loans granted, they can repay their shares in full and still have plenty to lend.

There seems to be many credit unions which could refund the full money to their savers and it would not affect their ability to meet their objective as a social lender.

This would have huge advantages for the Credit Union and its members

• As it would have no savings, the Central Bank would have almost no interest in it. The cost of compliance and regulation would be dramatically reduced.
• They would save all the costs of a deposit handling business - Savings Protection Insurance; staff, computer systems etc.
• The members would earn more on their savings by placing them directly in the banks rather than indirectly via their credit union.
• The Central Bank lending restrictions could be raised. Around half of all credit unions are subject to lending restrictions from the Central Bank. These are there to protect the savers. If there are no savers, the lending restrictions would not be needed.
• They could be more flexible in their lending. Some Credit Union is inherently more risky as they are lending based on need and not based on repayment capacity. Such credit losses would not be as big an issue if it was not the members' money which was being lost

 

[WizardDr]

Er they could lend to other Credit Unions.

That would be too radical.

Oh its in the 1997 Act.

Fancy that.