W E L O O K A T T H I N G S D I F F E R E N T L Y Presentation to the Joint Committee on Jobs, Enterprise &

1. W E L O O K A T T H I N G S D I F F E R E N T L Y Presentation to the Joint Committee on Jobs, Enterprise & Innovation 5th June 2014 David Matthews Irish League of Credit Unions

2. Contents • About us • The Irish League of Credit Unions • Services to SMEs • Roadblocks • Internal & external • Impact of lending restrictions on credit unions & SME lending • Possible solutions • County Enterprise Boards & Credit Unions • Investment Fund for lending to SMEs

3. About us • The Irish League of Credit Unions • Largest credit union trade & representative body • 376 affiliated credit unions in the Republic of Ireland • Regulated by the Central Bank of Ireland • 3 million members, total assets €12.6bn • Total Savings €10.6bn • Total Loans €3.8bn, average loan €6,300 • Funds to lend – approximately €5bn • Credit unions want to lend & need to lend • Viability will depend on our ability to lend

4. Credit Unions & SMEs • Under credit union legislation:- • SMEs can be members of credit unions • Either as individuals or firms • SMEs can borrow from credit unions • Either as individuals or firms • About 5% of loans are to SMEs or for business purposes • Credit union loans • Maximum interest rate 12% per annum (12.68% APR) • Average rate is 10.25% • Flexible repayments, no charges or interest penalties

5. Roadblocks • Internal Roadblocks • Independence of credit unions means that service offerings are variable • Not all may have the skills to assess business loans • Not all would want to offer them • External Roadblocks • Loans to SMEs are higher risk than personal loans • Credit union’s “Risk Appetite” is low • Central Bank oversight

6. Lending Restrictions • 60% of credit unions are subject to some form of lending restriction • Most restrictions include a prohibition on “commercial” lending • Can include personal loans to self-employed members • Most restrictions include a monetary limit • Too low to provide meaningful funding to SMEs • Average limit is €25,000 • Limit would include personal loan(s) to the member

7. Possible solutions - #1 • Credit unions & County Enterprise Boards (CEBs) • Credit union receives a business lending proposal, does an initial assessment & refers it to the CEB if it looks positive • CEB can: • Provide support through a financial adviser, • Assist in preparing a business plan / projections, & • Can provide mentoring services to SMEs (if required) • Application is discussed & approved by a joint committee

8. Possible solutions # 1 • St Canices (Kilkenny) Credit Union & Kilkenny CEB • Credit Union set aside a fund of €2m • Loans between €10,000 & €40,000 can be considered • 55 loans totalling €1,170,500 approved to date • Current amount outstanding €439,000 • Average loan is €21,000 • Most perform well • Could be extended to other credit unions, especially if some form of guarantee was available

9. Possible solutions # 2 • Credit unions could invest in a “fund” to lend to SME borrowers • Would require Central Bank approval • Up to (say) 10% of Reserves (€200m) • Invest in a centrally-managed fund (with appropriate skills) for small businesses • Could get over variability of skills, services, etc. • Perhaps with some level of state guarantee?

10. In conclusion • Credit unions were established to provide members with access to affordable credit • Credit unions have funds and are keen to lend • SMEs have a key role to play in the future success of the Irish economy • SMEs need credit to survive and thrive • Credit unions can be part of a solution • We would welcome continued engagement with the Department of Jobs Enterprise and Innovation on this matter