How can we stop corporate gombeen men running amok again? Credit unions could be the answer
One of the pioneers of co-operative societies in Ireland, Horace Plunkett (1854-1932), established his first co-operative creamery at Ballyhahill,
Limerick
, in 1891. He raised the hackles of 'gombeen men', the trader money lenders who thrived on the isolation of individuals in need of finance and charged them crippling interest rates.
Plunkett's efforts, helped by others such as writer and artist
George William Russell
and the Jesuit Fr Tom Finlay, included the establishment of agricultural credit societies, sometimes called village or land banks, of which there were 268 by 1908. They were the forerunners of the modern
credit unions
. Plunkett's biographer Trevor West has suggested one of his aims in reorganising rural commerce was to restore 'a sense of dignity, a spirit of self-reliance, and an air of optimism'.
Fifty years later, Nora Herlihy from
Cork
, a teacher in
Dublin
from 1936, devoted to underprivileged students and disturbed by the poverty surrounding them, established an exploratory group, the Credit Union Extensive Services, at her house in Phibsborough. She encouraged a group of neighbours to form Ireland's first credit union in Donore Avenue.
John Hume
in
Derry
in the 1960s also played a key role in the credit union movement, which he regarded as one of his most important jobs.
By 1975, there were 453 credit unions in operation, including 93 in
Northern Ireland
, performing, in the words of Plunkett, 'the apparent miracle of giving solvency to a community composed almost entirely of insolvent individuals'. At the time of Herlihy's death in 1988 there were almost one million members in more than 500 branches; today, credit unions affiliated to the
Irish League of Credit Unions
(ILCU), under one of its slogans, 'For Living, Not Profit', have 3.6 million members throughout Ireland.
READ MORE
Credit unions worked in spite of initial official scepticism. The Irish banking commission in 1938 was dismissive of the idea the State could perform any useful function in relation to co-operative agricultural credit, while the much lauded blueprint Economic Development by
TK Whitaker
in 1958 asserted that 'history affords no support for the belief that co-operative credit societies can be successfully established'. With the Credit Union Act of 1966, however, came statutory recognition of the co-operative concept.
This week, as
Allied Irish Bank
reverted to full private ownership, it was revealed
mortgage
lending by credit unions i
ncreased by 34 per cent to €632 million
in the three months to the end of March, compared with the same period last year. The total credit union loan book now stands at €6.08 billion, its highest since 2008.
ILCU chief executive David Malone said the group was 'eagerly awaiting' changes to the
Central Bank's
lending rules, which could see credit unions treble their mortgage lending from the current cap of €1.9 billion on the back of a proposed new loan limit of 30 per cent of total credit union assets on house lending. Malone has made much of harnessing the 'collective might' of the credit unions: 'We get our funding from our members' savings. We don't have corporate shareholders, and we are not subject to quarterly results forecasts.'
Some within the credit union movement will have reservations about such expansion, given the historic rootedness of the credit unions in the community, dealing with smaller scale financing. However, with the stranglehold of the pillar banks on mortgage lending, it is surely a positive to see member-owned financial institutions making inroads in this area.
[
How AIB went from boom to bust and back again
Opens in new window
]
This week AIB stated it 'profoundly regrets that the institution had to be rescued by the State almost two decades ago and owes an immense debt of gratitude to Irish taxpayers for the support provided during that challenging time.'
Indeed it does. AIB recorded a profit after tax of €2.35 billion last year; its
new mortgage lending was up 14 per cent to €4.5 billion, reflecting a mortgage market share of 36 per cent, while total new lending increased by 17 per cent to €14.5 billion. Last year, AIB and
Bank of Ireland
had a combined mortgage market share of more than 75 per cent while credit unions held less than 1 per cent.
Corporate gombeen men ran amok during the
Celtic Tiger
. The Irish banking management culture was reprehensible in relation to customer charges, interest rates, facilitation of tax evasion and calamitous risk taking.
Patrick Honohan
, governor of the Central Bank from 2009 to 2015, subsequently wrote
Currency, Credit and Crisis: Central Banking in Ireland and Europe (2019)
, highlighting an enduring culture of corporate entitlement, limited capacity 'to achieve decisive reforms of culture', deferential regulators, lenient responses to abuses, and a Central Bank that had been far too passive.
Theologist and philosopher Gabriel Flynn summed up the consequences: with 'the banking sector dominating societal decisions or overriding other community considerations, the inevitable result is an infringement of human dignity'.
It is to be hoped that a greater role for credit unions might lead to a diluting of such violations.
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