The Irish League of Credit Unions is a 32-county financial co-operative run by a voluntary board of directors and with assets and reserves of about £2.4 billion. It has 2.8 million members, 1.8 million of whom are in the Republic, where there are 429 credit unions.
The league or movement has shown steady growth, and the passing of the Credit Union Act, 1997, is likely to encourage further growth. The limit on the maximum loan a member can draw down is now £30,000 or 1 per cent of the credit union's total shares, whichever is greater.
A £6,000 limit on shares was changed so that members could have savings of up to £50,000, or 1.5 per cent of the credit union's assets. Savings can be held in a mix of shares and deposits. No more than £20,000 can be held on deposit.
The league prefers savings to be held in shares as it is the shares which support the loans made available to members. The size of the loan a member is eligible for is usually a multiple of the number of (£1) shares held by the member, plus his or her credit rating.
The holding of savings on deposit arose because of the old £6,000 limit on shareholdings. Members who had reached the limit put additional money on deposit. The changes brought in by the Act mean that a shift back towards shares can now occur.
Less than 9 per cent of savings in credit unions are on deposit. The average shareholding is just £1,400 and the average loan is £2,400. The league estimates that 55 per cent of credit union members have income levels below which they would be liable to pay tax.
The Minister for Finance, Mr McCreevy, has said that only about 2 per cent of the league's members would have share holdings large enough to be affected by his proposal on dividends. He proposes that dividends of over £500 should be reported to the Revenue. At an average interest rate of 4.3 per cent, credit union members would have to have a shareholding of over £11,000 in order to be affected.
The league general secretary, Mr Tony Smyth, does not dispute the small percentage of people who would be affected, but he objects strongly to the proposed measure.