Savings are up, but that brings another challenge – Allen
“The level of business, particularly in lending, dramatically fell during the early stages of Covid,” the manager of Mullingar Credit Union, Tom Allen, has told the Westmeath Examiner.
“In April we were lending about 10 per cent of what we had the previous year – and on the other side, savings were flowing in, and have continued to flow in.
“But loan demand has recovered – from early June there has been a huge recovery. The loss was severe in the first 10, 12 weeks, but we’re back close to the level we were at in the end of February.”
Mr Allen said that September was better than 2019. “The growth in the our loan book from June to the end of October was roughly double what it was in the same period last year, even allowing for the now bigger entity with the transfer of Longford Credit Union. “A lot of that is likely to be pent up demand from the early part of the year when people were spending nothing, when they were too worried to make any significant investment.”
Mr Allen thinks the economy is performing at different levels depending on location, and colleagues in the west have told him that “practically every business is closed”.
“But around the midlands, business is quite busy. A lot are open – maybe not open in the same manner as before – but they’re all trying to keep on their feet. If you look at building supply and the construction, they’re all busy, and the same with lots of others.”
Mr Allen paid tribute to the suppliers that Mullingar CU works with. “We’re a local business too, and practically every supplier we use is local, now spread over a wider area because we’re in Longford, but as much as possible we deal with local suppliers, and every one of them helped us no end to get through this [the pandemic], and we’re very appreciative of that.”
Asked for his view on the future of the local economy, Mr Allen said a lot depends on how the pandemic is managed, how effective vaccines are and how quickly they can be distributed and “the confidence that people have in them, and the willingness to take them, and the confidence that they’re able to go out and take part in business life again”.
“One thing we have seen since the first week is that people have built up savings – they have dramatically increased, and that’s not just in the credit unions, it’s throughout the banking institutions.
“All credit unions have much more savings than they’re able to handle and that’s putting real pressure on credit unions, because you have to hold regulatory reserves of a minimum of 10 per cent against all savings, so if we take in €1m in savings, we have to put by €100,000 against that on day one. And to earn a return no that in an investment environment that is negative, you could be talking 20, 30 years to earn that 10 per cent.
“It’s a tricky scenario and it’s not sustainable long term. But the credit union is a mutual organisation owned by members and if that’s what they want to do, that’s what they want to do. The challenge for us is to turn that money around by loans to people, expand our business, our lending, and do something useful with that money, to make a return on it, and through those returns make that 10 per cent.”
Mr Allen believes there is plenty of money in the economy and if we get the handling of the pandemic right, “there’s a bright enough future”.
He said Brexit is a concern, however: “These things have a habit, in the European scenario, of being pushed to the limit, and then finding a solution, and we hope the same will apply in this case.”
Mr Allen concluded with an appeal for people to support local retailers. “I think people should support local – we have 60 or 70 people working in the credit union and they’re all earning their income from local people, and there’s an onus on them to put money back into the shops, and that applies across the board, so please support your local community. The multiplier effect of spending local is powerful – if we keep revolving in the community, it’s huge.”