A new report published this week concludes that credit unions must work together and in partnership with a wide range of public and private sector organisations in order to reach more consumers.
The report calls for credit unions and social lenders to work in partnership with central government, local authorities, social housing providers, money advice agencies and other locally-based organisations, to provide quality and competitive financial services at affordable rates, while actively contributing to local social and economic development.
Credit unions play a vital role in helping local communities
Which? credit expert Martyn Saville welcomed the report: ‘With many potentially vulnerable consumers still unable to access affordable credit and unwilling to put their savings into the big high street banks, credit unions play an absolutely vital role in supporting their local communities.
‘The findings of the report are borne out by recent events. Just this week we saw one of the biggest credit union mergers in Britain as five local credit unions joined to form the North Wales Credit Union. Unfortunately, this news comes hot on the heels of the collapse of Birmingham-based Lee Bank & Highgate Credit Union, the fifth credit union to fail this year, following the Havant Area Savers Credit Union, the Southend Credit Union, the Worcestershire Credit Union and the Caribbean Parents Group Credit Union.
‘Any move that strengthens the credit union network is to be welcomed, particularly if it means that the £73m of government investment earmarked for the credit union network helps it reach many more consumers.’
Credit union network needs to modernise to grow
The report is designed as a blueprint for the credit union and social finance sector. Entitled ‘Community finance for London – scaling up the credit union and social finance sector’, it examines how to develop affordable financial services in Greater London. The report was developed by Paul Jones of the Research Unit for Financial Inclusion at Liverpool John Moores University, and was funded by Santander.
Credit union membership in London has grown by over 90 per cent since 2005. However, despite this success, credit unions and the social finance sector in general, still lack the capacity and the reach to extend their services to the many more low and moderate income Londoners who could stand to benefit from access to affordable financial services.
Speaking at the launch of the report, Paul Jones said: ‘The credit union sector needs to modernise and to achieve sufficient scale in order to offer affordable financial services to a wide range of households on low and modest incomes. However, it also needs to maintain the community finance ethos and vision that defines and differentiates it from the mainstream.’
Mark Lyonette, Chief Executive of the Association of British Credit Unions (Abcul), added: ‘Credit unions in this country are on the threshold of a major expansion, with new legislation in the coming months freeing up the sector to serve more people with a wider range of services. However, as this study shows, for credit unions to really fulfil their potential and reach all those in need of their help they must work together and with other agencies to achieve the scale and quality of services required.’
For more information on finding your local credit union and how they work, read the Which? guide to saving and borrowing with a credit union.
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