WRITTEN QUESTION E-0074/01

by Nicholas Clegg (ELDR) to the Commission

(22 January 2001)

Subject: Credit Unions

Is the Commission aware of, or has it itself carried out any comparative studies on the existence of Credit Unions across the EU?

Experience suggests that Credit Unions provide an invaluable service by offering loans and savings accounts to small businesses and individuals who might otherwise be denied such services by mainstream banks and lending organisations.

Answer given by Mr Liikanen on behalf of the Commission

(27 March 2001)

The Commission is fully aware of the importance of credit unions across the Community. This term covers both those organisations (credit unions proper) which are organised essentially on a local basis and provide savings and credit facilities to the individuals who are members, and those organisations more generally known as mutual guarantee societies (MGS) which provide access to credit facilities for the small businesses which belong to them. Credit unions are normally, and MGS often, organised along co-operative lines. In both cases their major purpose is to facilitate access to credit for their members, to be used in the case of credit unions normally for expenditure on private consumption, and in the case of MGS for business investment. Exceptionally, the same organisation may carry out both functions.

Regulatory requirements and traditions regarding both credit unions and MGSs, and the concept of risk-sharing in general, differ widely across the Member States, as does public support for their development.

Credit unions proper are particularly established in the United Kingdom, for example, where they fall under the Credit Unions Act of 1979. These unions specialise in the provision of finance to low income consumers and their objectives under the Act include: the promotion of thrift among members; the creation of sources of credit for members at a fair and reasonable rate of interest; the use and control of members' savings for their mutual benefit; the training and education of the members in the wise use of money and in the management of their financial affairs. No Community directives yet apply to these institutions. Credit unions in Ireland and the United Kingdom are exempt from the prudential regulations that apply to other credit institutions that are eligible to receive deposits from the public, although in both of these jurisdictions there are national supervision regimes that apply.

MGSs are sometimes established by small businesses or their representatives together with financial intermediaries, such as banks. They facilitate access to loan finance by offering guarantees to lenders, thus helping to address the fact that a large number of small businesses are undercapitalised, and banks can be reluctant to give loans to them as also launched several smaller comparative studies some years ago.

In order to increase awareness of mutual guarantee schemes, the Commission, following a call for proposals, has selected the European Mutual Guarantee scheme (AECM) to organise several conferences in the Member States, including those Member States where such schemes are underdeveloped.

In addition, under the 3rd Multiannual Programme in favour of small and medium-sized enterprises (SMEs) (1997-2000)(1) the Commission launched a pilot action that supported both feasibility studies and the establishment or the development of a small number of MGSs (including in Ireland and the United Kingdom).

Under the Growth and Employment Initiative (1998-2000) and the new Multiannual programme for enterprises and entrepreneurship, in particular for SMEs (2001-2005) adopted by the Council on 20 December 2000, Community funds aimed at strengthening loan guarantee schemes and MGSs will be made available and managed by the European Investment Fund (EIF).

The 3rd European Round table of Bankers and SMEs also mentioned in its final report the important role of MGS and highlighted some of the best practices in Europe(2).

(1) COM(1999) 319 final.

(2) see: http://europa.eu.int/comm/enterprise/entrepreneurship/financing/round_table.htm

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