Credit unions' assets have increased to €16 billion in 2016 from €14 billion in 2011, according to new research from the Central Bank.

The Central Bank's "Financial Conditions of Credit Unions" report shows the overall financial position of the country's credit unions has shown signs of improvement, but it warned that challenges remain.

Today's report showed that the average sector loan to asset ratio decreased from 42% in 2011 to 27% in 2016, while the average sector investment to asset ratio rose from 55% to 69%.

It also noted that credit quality has improved with sector average arrears down from 18% of total loans in 2011 to 10% in 2016.

But the Central Bank noted that there was considerable variations among credit unions and later stage arrears remained a concern.

Total loans had been in decline over a number of years, but since 2014 there has been some increase.

Credit unions saw growth of 16% in loans advanced over the period September 2015 to September 2016, with loans rising from €1.9 billion to €2.2 billion over that period.

The Central Bank said that credit unions' ability to withstand additional financial stress, as measured by total capital, is reasonably strong with the average sector capital ratio at September 2016 standing at 16%.

"While the figures for 2016 show evidence of some recovery including growth in lending, the challenge remains that, without other changes including development of products and services, credit unions are unlikely to develop sufficiently to ensure a sustainable business model into the future," commented the Registrar of Credit Unions Anne Marie McKiernan.

She said that credit unions' priority focus in 2017 should be on embedding the benefits of restructuring and making significant progress on building the business models required for future viability.