Credit unions are looking for permission to lend larger amounts for longer periods, according to the movement's annual report.

Mr Liam O'Dwyer, chief executive of the Irish League of Credit Unions (ILCU), said the current housing boom was forcing low- and middle-income earners to restrict more of their borrowing to mortgages, leaving less for the traditional credit unions loans.

With the average credit union loan coming in at €6,700, and 37 per cent of loans amounting to €750 or less, Mr O'Dwyer said: "It is evident that traditional business is still the credit unions' core area, which is restricting the expansion of loan portfolios."

The ILCU is pressing the Government for changes in the Credit Union Act to allow the movement to develop a wider service for members.

The gap between savings and loans has been growing in recent years, with tighter regulation forcing the volunteer-run movement to develop more sophisticated investment strategies.

ILCU president Mr John O'Regan said the key development in 2004 would be training credit union staff and volunteers in business planning, governance and compliance requirements.

The ILCU's annual report, which was published yesterday, shows that savings in its 532 affiliated credit unions rose 12.8 per cent to €9.7 million in 2003. Loans rose by 7 per cent to around €6 billion.

Mr O'Dwyer said the growth in lending was in line with projections. "The situation is that savings have been particularly strong in recent years," he said.

"This clearly indicates the confidence which the general public holds in credit unions. It also reflects the higher dividends on offer than in mainstream financial institutions."

Despite the disaffiliation of several unions in the past couple of years, the number of members in the movement rose almost 4 per cent last year to 2.7 million.

Mr O'Regan, said: "The continuing success in all areas demonstrates growing public support for the unique service offered by credit unions."

Mr O'Dwyer said the movement was "poised to expand its role in the loan and savings market and further develop its role as the largest social finance provider in Ireland".

Since January, the league has moved to a new affiliation fees structure, allowing greater transparency.