This article is from page 2 of the 2007-11-27 edition of The Clare People. OCR mistakes are to be expected so download the original SWF or the rendered page 2 JPG
ONE of Clare’s largest credit unions has said it proposes to pay its mem- bers the same dividend they earned last year, despite predictions of slashed earnings on shares.
The ACCA (Association of Char- tered Certified Accountants) is advis- ing credit union members to expect a lower dividend and loan interest re- bate this year.
Aidan Clifford, Advisory Services Manager, ACCA Ireland, said, ““The current trend is for credit unions to be under-lent and over-invested and because investments yield a lower return than loan interest, the surplus
available for distribution in many credit unions will be lower this year.”
He added, “A number of credit un- ions have also been hit with invest- ment losses from perpetual bonds and other bonds and a generally un- derperforming stock market, adding to the downward pressure on divi- dends.”
All credit unions in Ireland have a September 30 year-end and will traditionally hold their AGM in De- cember to allow a dividend and loan rebate to be paid prior to Christmas.
Credit unions take deposits from members, lend the funds to other members and the balance of un-lent
funds are invested. The target for credit unions is to lend out €7/0 of every €100 deposited and invest the balance.
Few credit unions achieve this, with €50 being more normal and in some cases as low as €20 in every €100 being lent. Investments typi- cally yield a much lower return than interest on loans and this year invest- ment income has been hit by falling markets and losses on some unusual investment products such as “per- petual bonds”.
The Registrar of Credit Unions has barred credit unions from investing in some of these more exotic prod- ucts in the future. Mr Clifford con-
cluded, “Some credit unions are so heavily invested and so under-lent that they risk being described as dysfunc- tional savings clubs.”
But Paddy McNamara, acting man- ager of Derg Credit Union, said that the board will be proposing paying a two per cent dividend when the AGM is held in December.
‘“That’s the same rate as last year and the year before.” he said, adding that that is ““a much better rate than the or- dinary bank deposit account, which would typically pay much less on an active account. Credit union members have full access to their funds, pro- vided they are not being used to guar- antee loans and a better rate.”