Swoboda is currently working with Lorraine Corcoran of Afanite to investigate credit union small loans in Ireland. One potential alternative to small loans, in particular top-up loans, is revolving credit, a ‘credit card account without the card’.
Five years ago Swoboda produced a guide implementing such a product in Ireland and Britain. The Revolving Credit Opportunity for Credit Unions explains how the idea of revolving credit – which is very popular in Australia, Canada and the United States – has “the potential to largely replace the current practice of top-up lending, with far greater convenience to members and at lower administrative expense to the credit union”.
The report discussing good practice in the administration of revolving credit, as there are important considerations to ensure it works in the best interests of the member and the credit union. The report identifies the benefits of the product, which include:
- Members want it: this flexible borrowing works for some members, who might otherwise turn to overdrafts or credit cards, carrying higher charges and with great risk of extending indebtedness
- Convenience and flexibility to the member: convenience is key! Reducing the forms, messages and branch visits is attractive for members (and credit unions)
- Cost efficiencies for the credit union: when monitored effectively, revolving credit can become a secure and profitable line of business
- Budget management: this open-ended form of credit saves members from more expensive services for their expected and unexpected payments.
Some Irish credit unions are exploring revolving credit as an alternative to small loans – more on that when we report in the coming weeks. In the meantime, The Revolving Credit Opportunity remains a highly relevant and informative read.