St Canice’s Credit Union has money to lend and is looking for people to take out responsible loans.
This was the message from the board of management at the credit union’s annual general meeting held last Wednesday night in the Ormonde Hotel.
In addition to getting more money into circulation to boost the local economy, St Canice’s Kilkenny Credit Union Ltd is also aiming to increase its loan book in order to continue generating profits for its members.
One of the keys to this, the AGM was told, will be to attract andcater for members of the younger generations.
In the fiscal year that ended on September 30, the credit union approved 8,648 loans totalling €20 million – a decrease of 1,690 loans on the previous year.
Several factors contributed to the decrease – not just the recession, the meeting was told.
For one thing, national regulations determine a maximum level of indebtedness that a person can have, which can lead to loans being refused or decreased.
The age profile of St Canice’s Credit Union’s members is also increasing, said treasurer Vincent Kenrick, and older members generally focus on maintaining and growing their savings rather than taking out loans.
“This is not a problem as long as the next generation falls into place,” he said. But while many children have accounts with the credit union through their schools or joint accounts, “they are not all progressing to becoming active members.”
“The credit union is not meeting the needs of that generation,” he said. For instance, “it has not been possible to supply online services to them in the same way as the banking sector.”
With younger people preferring to conduct their transactions on a mobile phone, he added, “the board has decided to undertake a sea change in its thinking.”
A cause of concern
One consequence of giving out fewer loans is that it is more difficult for the credit union to generate income for members.
Although the credit union was able to approve a dividend payment of 1.25% – a marked increase over last year’s rate of 0.5% – the institution is having to rely on investments to generate income.
At year’s end, loans to members stood at €46.8 million, down from €58.1 million a year earlier. That has left the credit union over-reliant on income from investments in a volatile market, Mr Kenrick said. And although “investment income has kept us afloat this year,” that can’t be relied on in future years.
“The drop in our loan book is an issue of major concern to the board,” he said.
The most profitable use of members’ money is to lend it out and get it back, auditor Martin Freyne of PricewaterhouseCoopers told the meeting, and the least profitable is to lend the money out and not get it back. Investing it falls somewhere in between.
Calling the fall in the loan book a “warning sign,” he told the members: “Your savings are rock-solid safe. This is good in terms of security but not fantastic in terms of future profitability.”
And although St Canice’s Credit Union ended the fiscal year with a €4.3 million surplus, Mr Kenrick said that the figure “comes with a health warning.”
The credit union also had to set aside an additional €2.8 million in provision for bad debts. That is a slightly lower amount than in the previous year but it amounts to 19% of outstanding loans.
And €2.2 million in bad debts were written off in the current fiscal year, although €700,000 in bad debts was recovered in the year.
Debts are written off when no payment on the loan is received for a year, members were told, but that money is still pursued by the credit union.
The majority of the loans written off were in the value of €2,000 to €4,000, Mr Kenrick said, with the rate of write-offs “substantially less in the top bracket.”
“We are working with those people to try to get the money back,” he said.