Credit unions offer an alternative to traditional banks and building societies for personal saving and borrowing.
They can be a lifeline for individuals unable to access ordinary banking products. As non-profit entities, there are no third-party shareholders extracting profit, money is simply reinvested for the mutual benefit of the members. Traditionally, members would be from the same town, industry or trade union, although their reach has now expanded online. In 2018, credit unions across the UK had over 2 million members and held £3.3bn in total assets.
Credit unions help to tackle financial exclusion by maintaining a physical presence on high streets, where often many commercial banks have tended to go fully online. They also tackle predatory lenders by offering much lower interest rates than payday loan companies.
Anchor institutions, and local government in particular, are able to support credit unions in the form of grants or guarantees, as well as depositing funds with credit unions that would otherwise be invested with banks.
Case study – London Plus Credit Union
London Plus Credit Union works in partnership with Hexagon Housing Association to give tenants access to financial services such as low-cost loans to tackle predatory payday lending, safe savings to avoid unexpected debts and money management advice. The credit union serves residents and workers from a selection of London boroughs, housing association tenants, as well as members of specific churches and Unite the Union.
London Plus Credit Union launched at the end of 2008, and has grown to nearly 6,000 members covering six London boroughs and several partner organisations. Over the last ten years, members have taken out loans totalling £9m – more than £1.5m in the last year alone. By doing so they have saved more than £11m compared to what they would have had to pay for them if credit union loans were not there for them.