Time to dismantle and rebuild the Irish credit union system

Time to dismantle and rebuild the Irish credit union system

At the centre of the movement lies a system that has evolved and developed to where it now is in urgent need of reform. To put it simply the ILCU system is a fundamental part of the problem. (CUDA has proven it’s no different, just a more condensed version)

In the past 7 years well over €70m of credit union funds have financed the operations of this system with little or nothing to show for it. The figure rises to well over €110m when ISIS write offs are factored in. Irish credit unions have invested hugely for little or no gain.

Frankly speaking the system has failed to deliver and in its current form is incapable of delivering on the transformation so necessary if credit unions are to survive.

It is not the fault of the people employed in the ILCU system or its board, chapters and member credit union directors and managers.

What has happened is a natural result of people coming to together to get things done. Over time they create structures and ways of doing things which become embedded as a system evolves full of rules, structures, processes and procedures.

Structure and Process becomes more important than Purpose and in time process or the way people have always done things becomes the only sense people can make out of the whole. People learn how to relate to each other, developing a shared language and understanding with all its inbuilt self-perpetuating deficit thinking.

Those who have attended ILCU AGM’s will have experienced how the self-organising system at work with its attention to agenda, standing orders and endless mind-numbing debate on procedures and minor changes to by-laws. Chapter meetings and many board meetings are similar experiences.

It’s a system designed for self-control and manipulation by narrow agendas. Worse still it's a system that stifles discourse, ideas, creativity and change. It’s also a system that has learned how not to learn and how not to make decisions.

Frustration frequently leads to breakaway groups who within a short time begin to replicate the same way of doing things and then fragment.

CUDA is a good example of a breakaway group. CUDA started with 20 members, claiming to be the progressive voice of credit unions, promising a new form of leadership.

It now has only 10 members left some of whom comprised the group that led the charge against the ISIS project. It has become an irrelevant coalition of differing agendas having proven that breakaways don’t work unless there is a real commitment to change. Furthermore it is proof that transformational change cannot be effected by credit union trade associations.

It is time then for the ILCU system to be dismantled and rebuilt as a modern trade association focussed on representation and providing development support services to its members. CUNA, is one of many examples of trade associations that divested their commercial interests. There are may other examples of credit union systems that truly deliver.

ILCU commercial operations should be sold off or wound down. The days of trade associations competing in the provision of insurance and investment services are long over. Leave the matter to open market competition and its many competitors.

ILCU should give up its role as a supervisor and stabilisation fund manager. Credit unions in the US gave up on this in the 1970’s and state deposit protection has not prevented their growth. Arguably state deposit insurance underpinned their continuing success through increasing public confidence in credit unions, promoting professionalisation and creating the financial stability that credit unions have exploited.

The League should promote and facilitate rapid consolidation and rationalisation and persuade boards to merge operations. It should not provide a safety blanket and claim that other cosier structures are possible. Theoretically they are, but everywhere else credit unions have rationalised into bigger operations having the scale and scope to take full advantage of the credit union business model.

Cease attempting to provide a CIM type facility in house. Advocate and facilitate the establishment of a central treasury management facility using the Central Credit Union model or a similar structure. Ensure that is properly state regulated and supervised. Do not seek a commercial interest nor operational or governance influence.

Positively promote the creation of a modern system of credit union state regulation, supervision and deposit protection for credit unions. Creating the pressure that forces Government to deliver on its duty of care to provide state backed compensation for savers and a modern credit union legislative and regulatory system. Forget about trying to become an Canadian type insystem regulator. This policy battle was lost in 1997 and copperfastened in 2003. It is an irreversible reality.

Concentrate on core trade association services such as advocacy, representation, training and development for boards, managers and staff etc. Allow larger credit unions a little more say similar to Leagues everywhere else. This can be done in a fair and equitable way.

Forget about a centralist federalist type movement such as controlling IT and other core business competencies. Modern credit union IT systems already exist elsewhere. There is no need to re-invent the wheel. It’s up to credit unions themselves to ensure they develop the necessary IT and operational capabilities.

Above all, be the principle facilitator and champion for change and help create the conditions that will revitalise the credit union mission and purpose for a modern Ireland. Focus on working with credit unions that are committed and capable of changing. Let the few lead the many as has happened everywhere else.

This would be a good start.