credit unions

credit unions

Credit unions are increasingly an alternative for banks and payday loans

15h ago
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Membership is increasing but credit unions still have an image problem to address to bring more sustainable finance onto their balance sheets After more than a hundred years of being outside the mainstream financial services sector, last April it looked as though credit unions might start edging their way in. £38m million of government funding was allocated to the Credit Union Expansion Project, with a view to growing credit union membership in the UK from just over 900,000 in 2012 to two million by 2017. As an alternative to banks and pay day lenders, credit unions, owned by local savers and borrowers have fans who want to see a more sustainable financial system. So, is membership increasing and how is the expansion project taking shape? The latest figures posted on the Bank of England’s website show a membership increase of almost 17% in the year ending September 2013. The previous two years saw year-on-year increases of 8% and 9%, respectively. However, actual membership is still hovering just above the one million mark. There is a long way to go and hurdles to tackle to grow this number. Credit unions have an image problem that needs to be addressed in order to bring more sustainable finance on to their balance sheets, according to Matt Bland, policy manager at the Association of British Credit Unions (ABCUL). He says the perception of credit unions for many people is still of a service that is for “the poor”. ABCUL is charged with running the expansion project for the government. “The big challenge that we’re grappling with here is that there’s been too much focus on supporting people who find it difficult to access mainstream services, so credit unions can find themselves disproportionately exposed to bad debt. “They want to continue to do that costly but socially worthwhile work, but it needs to be balanced with a core membership that is in a more financially stable position,” says Bland. There are around 500 credit unions in the UK, differing vastly in size, from those with just a few hundred members and run by volunteers, to those with more than 10,000 members, offering a wider range of services such as insurance and mortgages. Many receive grant funding from local authorities or charities, but it’s not enough to sustain them. Helping a larger number of credit unions grow and offer more service is something on which ABCUL is working with members. Attracting more customers is difficult with few high street service points and limited services. “The expansion project is looking at how we can collaborate and access economies of scale to provide services in a way that credit unions couldn’t individually,” says Bland. ABCUL is now exploring, for example, whether groups of credit unions could get together to create secondary cooperatives offering specialist products such as mortgages for members. Martin Groombridge, chief executive of London Capital Credit Union and one of the delegates of a recent US credit union field tr