Select Committee on Treasury Written Evidence


Memorandum submitted by the Association of British Credit Unions Limited (ABCUL)

INTRODUCTION

  1.1  The Association of British Credit Unions Limited (ABCUL) welcomes the opportunity to make a submission to the Treasury Select Committee inquiry into financial inclusion. ABCUL is the principal national trade association for British credit unions and represents 70% of the 549 credit unions throughout England, Scotland and Wales.[1] ABCUL member credit unions encompass 85% of the £345,607,000 share capital and £286,819,000 loan portfolio of the half a million adults who uses credit unions each week.

  1.2  ABCUL, like its member credit unions, is an Industrial and Provident Society. It is a co-operative owned and controlled by its members. ABCUL belongs to the World Council of Credit Unions the world wide apex body whose members represent 43,147 credit unions in 91 countries serving 136 million people.

  1.3  Over the last eight years the Association has played a leading role in reforming and modernising the credit union movement in Britain. As a result the credit union movement is now adopting models of development and offering a range of products which has dramatically improved the scale of many credit unions. Credit union membership has almost doubled since 2002 and British credit unions now serve approximately over 500,000 adult members and 70,000 junior members.

  1.4  Credit unions have four statutory objectives:[2]

    (a)  the promotion of thrift among the members of the society by the accumulation of their savings;

    (b)  the creation of sources of credit for the benefit of the members of the society at a fair and reasonable rate of interest;

    (c)  the use and control of the members' savings for their mutual benefit; and

    (d)  the training and education of the members in the wise use of money and in the management of their financial affairs.

  1.5  ABCUL and its member credit unions welcome the Treasury Select Committee's inquiry into financial inclusion. We are pleased to contribute written evidence to the inquiry and would welcome an opportunity to contribute orally. In this paper we set out the present contribution of credit unions to promoting financial inclusion across a number of areas, not just the provision of affordable credit. We summarise the key changes that the movement has undergone in recent years with legislative and regulatory support from the UK Government. We finish by recommending the key actions necessary to fulfil the potential of credit unions to promote financial inclusion.

  1.6  ABCUL is currently undertaking a piece of research with the Personal Finance Research Centre at Bristol University[3] to document who uses different types of credit unions. The majority of credit unions have always understood their membership to be the low-waged, those in receipt of benefits and those who without the credit union would otherwise be financially excluded. However, in recent years some commentators have claimed that credit unions are not predominantly serving the financially excluded. There are also widespread misunderstandings about the nature of many employee credit unions. For instance credit unions in the passenger transport industry estimate that 40% of their members when joining the credit union are using high cost forms of credit.

  1.7  Preliminary findings from the research show that for those responding to the survey the credit union is the preferred source of saving and borrowing. Evidence is also emerging that members have stopped using high cost credit as a direct result of joining the credit union. The final research report will be published in March 2006 and we would welcome the opportunity to share the findings with the Treasury Select Committee. We feel this research will be valuable to this enquiry as it looks in detail at credit union member's attitudes to saving and borrowing.

  1.8  Attached to the report in Annex 1[4] we have included a recent article from Paul Jones, Liverpool John Moores University (2005) which charts the key stages in the development of the credit union movement and explains the reforms underway within the movement.

ACCESS TO BANKING SERVICES

  2.1  The problems arising from lack of access to appropriate transaction services are well documented. Those living without a bank account often pay more for goods and services because they cannot access the discounts made through direct debits and standing orders. Cheque cashing is also a problem with the only solution often being high cost cheque cashers. As financial exclusion is linked to poverty, we have in Britain a situation where the poor pay more.

  2.2  ABCUL believes that there are two key issues in this area which need to be addressed before we will realise the benefits of transaction banking for the unbanked and underbanked. These are:

    —  The overriding focus on simply reducing the numbers of people without a bank account has obscured the need to ensure that basic bank accounts are appropriate for people on low incomes and therefore well used.

    —  The extent to which mainstream suppliers are ever going to deliver an appropriate, affordable solution within existing market constraints remains unresolved.

  2.3  The Government's agreement[5] with the banking industry to halve the numbers of adults in households without a bank account has understandably led to the Financial Inclusion Taskforce placing a major emphasis simply on counting the number of accounts opened. ABCUL agrees with the criticisms expressed by consumer groups that this is not the key issue. The basic bank account is not fit for purpose as it has not completely addressed the needs of low income consumers. The National Consumer Council has stated that, "solutions that work for people on higher incomes cannot be expected to work for low-income consumers without addressing their specific needs and circumstances".[6] Much work needs to be done on transforming the existing basic bank account if it is ever to meet those needs.

  2.4  More fundamental to this issue is the need for clarity on who can and will provide these services. There appears to have been an undocumented change of thinking within Government over the last six years on the extent to which they expect banks to directly provide transaction banking services for all who could be reasonably expected to use them. The PAT14 report on Access to Financial Services[7] concluded that the banks would provide resources for others to provide these services. The major policy initiative was the contribution of £180 million from the banks to funding the development of the Universal bank account/Post Office Card Account (POCA). The failings of the POCA to provide a basic transaction account linked to the payments systems are well documented. It does not provide customers with somewhere to receive their wages, it provides no outgoing basic electronic funds transmission and does not offer access to the Link ATM network. The banks frustration at being asked to fund a poorly specified product have left a lasting legacy that still dominates this landscape. This is preventing a clear definition of the problem let alone a workable solution.

  2.5  It is not clear why or how the Government now believes banks can or will provide these services within the existing market constraints eg Free in-credit banking. It does not seem to be in the interests of consumers to accept uncritically the assumption that banks will eventually design an appropriate product which is profitable and then promote it effectively to all who need it. It is not clear that the banks view on who should provide these services has changed since the PAT14 report.

  2.6  Engaging with the banks to develop a clear understanding of this problem is a challenge that the Financial Inclusion Taskforce should be prepared to take on in the coming months.

  2.7  The PAT14 report also contained a significant commitment to developing the capacity of the credit union movement. The plans to develop a central services organisation (CSO) funded by banks ending up being lost in the wake of the Universal Banking project. The key purpose of the CSO was to enable credit unions to provide transaction banking for their members. It is ABCUL's belief that despite the failure of this project to get off the ground this has remained as the missing piece of the jigsaw for credit unions in the UK.

  2.8  Six years later the credit union movement has grown significantly in scale and capacity and has gone on to design its own appropriate transaction banking services working in partnership with the banking industry. This has been achieved without any public subsidy either nationally or locally. Over the last two and a half years the Association and its members have engaged with the banking industry in a competitive tendering process supported by banking technologists Bayberry.

  2.9  In November 2005 ABCUL announced that it had chosen The Co-operative Bank as the preferred supplier. As a result work has now started on developing a full service account which will provide people on low income with a more appropriate product than the basic bank account.

  2.10   This initiative will allow credit unions to offer their members a credit union service account including ATM access, direct debits and standing orders plus the availability of a low risk debit card. Credit unions have worked hard to design the account to eliminate the undesirable features of existing basic bank accounts.

  2.11  One of the major criticisms of the basic bank account is that low income consumers operating in cash are generally not used to monthly budgeting, and are more likely to have irregularities in their income and expense. Yet one of the features of a basic bank account is that standard bank charges are incurred when there is any mismanagement of the account. These fees represent a high proportion of weekly income.

  2.12  It has been a key design consideration of our account that credit unions will be able to set fees in line with credit union rather than bank policy. This will mean charges will be substantially lower as they will be set in order to discourage abuse of the account, rather than to generate profit.

  2.13  Another major drawback of basic bank accounts is the barriers to access that can be present at branch level. Banks have been reluctant to promote basic bank accounts. The anti-money laundering regulations have also been a barrier to access with many banks adopting anti-money laundering policies whereby only government issued photographed documents such as passport and driving licences are acceptable forms of ID.

  2.14  Credit unions do not refuse access to membership to anyone as long as they qualify for membership under the common bond. By their very nature credit unions are inclusive organisations and are member owned and run, and many credit unions treat financial inclusion as one of their primary objectives. While still being compliant credit unions have adopted more flexible anti-money laundering policies which recognise that not everyone has a passport or driving licence. Credit unions will readily accept other forms of acceptable ID such as letters from a person in a position of trust in order to ensure that no one is excluded from their services.

  2.15  In summary we believe our credit union service account will provide credit union members with a current account facility that is tailored to their needs, affordable and accessible.

  2.16  Credit unions will deliver these services by "piggy backing" on the existing back office systems of partner bank. In effect they will rent their technology while maintaining ownership and control of the accounts. We are confident that the first credit unions to offer their own accounts to members will take place in 2006 with a further roll out in 2007.

  2.17  Supported by the resources of the larger credit unions and the Association we believe credit unions have introduced one of the most exciting step changes in the financial inclusion landscape.

  2.18  The potential for these services to have a major impact has increased dramatically since PAT14 as the credit union movement can now receive most kinds of benefit paid directly into the members credit union account. The introduction of individual service accounts will hugely improve the efficiency of this service and allow credit unions to make a huge step change in the number of people receiving benefits that they can serve sustainably.

  2.19  Support from the UK Government to individual community credit unions operating in areas of high financial exclusion would enable them to roll out a low cost and appropriate alternative to the POCA and basic bank accounts.

ACCESS TO AFFORDABLE CREDIT

  3.1  Credit unions currently provide affordable credit to around 500,000 adults in Britain. As of June 2005 credit unions had a loan portfolio worth £286,819,000. The demand for credit union loans generally peaks at Christmas time, which can be seen in the fact that credit unions had on loan £315,680,000 as of December 2004.[8] 58% of these loans are for less than £1,000.[9]

  3.2  In 1999, at about the same time as the PAT14 report was being published an alternative model for community finance was being sketched out on the drawing board. This model proposed by Community Finance Solutions eventually became the Community Regeneration Trust, the most usual form of Community Development Financial Institutions (CDFI's) for personal lending.

  3.3  Community Regeneration Trusts or Moneylines as they are often known were put forward on the back of criticisms of the failure of credit unions to achieve coverage and scale.[10] ABCUL shared many of those frustrations with the prevalent approaches to credit union development in the 80s and 90s. However, it was the Associations view that the most effective way forward was to reform the credit union movement. We believe that the comparative progress over recent years has shown that this strategy was a sound one.

  3.4  In 2004 there were just six of these Community Development Finance Institutions (CDFIs) for personal lending. Between them they had a total loan portfolio of £1,200,000, comprising of 2,668 loans. This figure rose £100,000 from £1,100,000 in 2003.[11] Many of these organisations have scaled back considerably their initial business plans. For example Portsmouth Area Regeneration Trust, now South Coast Moneyline started in 2000 projecting that it would itself be lending £4 million by 2006.

  3.5  Therefore six years after the launch of an alternative to credit unions the credit union sector still represents over 99% of all third sector lending in Britain. Perhaps more significantly the present growth in the number of people on low incomes served by the credit union sector is outstripping the growth rate of CDFI's for personal lending. Credit union membership continues to grow at more than 10% per annum.

  3.6  Perhaps not surprisingly another new vehicle has now been proposed as the community finance solution. The Community Banking Partnership[12] has been proposed by Community Finance Solutions, the New Economics Foundation and the National Association of Credit Union Workers.

  3.7  Credit unions are currently subject to a maximum interest rate of 12.7% APR, which works out at 1% per month on a reducing balance. The Government has agreed to raise this to 2% per month or 26.8% APR in order to give credit unions greater flexibility in their lending. CDFIs are not subject to an interest rate cap but charge between 20-30% APR for personal loans.

  3.8  However, despite the efforts of all third sector lenders there is still an estimated 7.8 million adults in the UK who do not have access to affordable credit and who invariably turn to high cost lenders for their credit needs. The National Consumer Council have estimated that low income consumers pay on average £129 a month in interest—11% of their income, and people on benefits borrow an estimated £330 million a year from home credit, with interest payments alone amounting to an estimated £140 million.[13]

  3.9  A £500 loan over 55 weeks from the largest home credit providers, Provident Financial costs a borrower £325 in interest. A loan for the same amount over 52 weeks from a credit union costs £31.07, a saving of £293.93 on an individual loan. We can see the impact of this on a community. Streetcred credit union in Rochdale which was registered in April 2001 has lent over £1.8 million, and has saved their community an estimated £1.6 million in interest payments.

  3.10  Streetcred credit union is just one example of how community credit unions have been developed in a more effective manner in recent years. ABCUL has played a major role in providing the thought leadership and the operational expertise to change business development models and product offerings.

  3.11  Many credit unions had been set up in the 1980s and 1990s solely as anti-poverty initiatives. Run solely by local volunteers, these credit unions were not built for expansion and growth, and although they had a real impact in the communities in which they were based, this impact was limited.

  3.12  In 1999 a significant piece of development research into credit union's in Britain was published called, "Towards Sustainable Credit Union Development".[14] For the first time credit unions were encouraged to become more business focused and more professional. The employment of paid staff and professional high street premises, along with clear leadership and vision began to show real signs of growth in those credit unions that adopted the changes.

  3.13  In July 2002 credit unions became regulated by the Financial Services Authority which added credibility and financial discipline to the movement. Today ABCUL are promoting the "Quality" credit union model as the best vehicles to promote financial inclusion. Quality credit unions are credit unions which have developed to meet the actual, rather than the perceived needs of its members. They operate capacity based lending money based solely on an individual's ability to repay. This is a major departure from the traditional model of lending people money as a multiple of what they had saved. From January 2006 regulatory reforms from the FSA mean credit unions will also be able to offer larger loans over longer periods.

  3.14   All credit unions provide affordable credit to those that would otherwise have to turn to high cost lenders to meet their needs. Yet credit unions that are providing affordable credit to the highest numbers of financially excluded individuals are those that have embraced change.

  3.15  One of the key catalysts for change was the introduction of the World Council of Credit Unions PEARLS Monitoring System. The far-sighted sponsorship of this programme by Barclays has had a far reaching impact upon the way that credit unions work. Understanding PEARLS has taught many credit unions to be both more flexible and more responsible lenders. PEARLS has already proved itself as a powerful tool for change, for example just one credit union that has taken part in the PEARLS project has seen it's loan portfolio grow from £99,000 in 2001 to £745,000 in 2005.[15] However, there is more work that can be done to extend this understanding and improve the practice across the movement.

  3.16   Credit unions that have adopted the PEARLS principles for lending have seen a huge increase in the demand for loans. Therefore an injection of capital into the movement through the Department of Work and Pensions £36 million Growth Fund is to be welcomed. The balance of government investment and PEARLS lending practices has the potential to have a huge impact on the credit union movement's ability to provide affordable credit to large numbers of financially excluded people.

  3.17  We believe that the PEARLS programme could usefully be extended to many more credit unions working in areas of high financial exclusion with the support of the UK Government. This investment would help protect and maximise the investment of the Growth Fund.

FINANCIAL EDUCATION AND ACCESS TO FINANCIAL ADVICE

  4.1  Low financial capability skills are inextricably linked to financial exclusion; credit union staff and volunteers routinely help members fill in forms, each loan application form must be completed with a budget plan, and most credit unions provide additional financial education in the form of leaflets or formal education initiatives including outreach work.

  4.2  Credit unions are also active in local schools. ABCUL recently surveyed members and of those responding 625% were active in their local schools. This involves setting up collection points where pupils can save, involving pupils in the running of the collection points, and offering credit union services to the parents and teachers.

  4.3  ABCUL are involved with Pfeg which is campaigning for the introduction of financial capability into the national curriculum. We support this move as children and young adults who leave school must immediately interact with the financial services industry or benefits system without any prior knowledge of how they work. With the prevalence of easy credit now available it is young people who are proportionally borrowing more and becoming over-indebted.

  4.4  We also support the FSA's work on supporting improved financial education in the workplace. Some credit unions have a purely industrial common bond which means that members must work for a particular employer or in a particular industry in order to be able to join the credit union. A number of employers have recognised the benefits that a credit union can bring for their employees and so have provided support to the credit union. One credit union whose members work for a particular bus company has even helped their employers to retain staff. The bus company has started an initiative whereby they will make regular contributions to the savings account of all new employees that join the credit union which they can only access if they complete one year of service. This has significantly increased staff retention as most staff leave within the first year. Employee credit unions interact with members through payroll deductions and this is the point when many new employees start to save, often for the first time. Therefore employee credit unions provide direct access to the financial system at a key life stage.

  4.5  We expect that credit unions will be able to play an increasingly important role in developing financial capability.

INCENTIVES AND BARRIERS TO SAVING FOR PEOPLE ON BELOW AVERAGE INCOMES

  5.1  Credit unions currently have a share capital of over £345,607,000. Initial findings from the research we are currently undertaking with the Personal Finance Research Centre at Bristol University has shown that the main reasons why credit union members save with the credit union are because: it is convenient, it allows them to borrow, they were recommended by a friend or relative, and it pays dividends. Half of those responding save to buy things they want or need, the majority save with the credit union monthly or more often, and already there is some evidence of greater regularity and amount being saved with the credit union compared with other forms of savings.

  5.2  In the last few years the move to direct payments of benefits has greatly increased the number of people having their benefits paid into credit union. There have been some interesting consequences, particularly around the level of benefit that credit unions have retained in savings.

  5.3  Southwark credit union in London started offering a benefit service to members in 2005. By June 2005 235 members were having a total of £344,950 in benefits paid into the credit union and £32,149 or 9.3% of that was retained by the credit union as savings. Other credit unions are reporting between 5% and 10% retention of benefits.

  5.4  This suggests that to those on low incomes or in receipt of benefits, and who may otherwise be financially excluded, the credit union is an attractive savings vehicle. Credit unions do not require a minimum level of savings, they do not require that a set amount be saved, or that savings be paid on a specific date. Members can save in cash, by benefit or wage deduction or by direct debits and standing orders.

  5.5  Credit unions do encourage members to save, and in some cases saving is a requirement of membership. However, credit unions do not require people to save more than they can afford, they simply require them to save which can be as little as pennies each week. The option to save small sums of money and to save irregularly is not easily available on the high street. Yet those that are financially excluded tend to have erratic incomes and are hit hard by unforeseen circumstances, this presents a barrier which makes regular saving difficult to manage.

  5.6  The initial findings from the Savings Gateway pilot proves that those on low incomes can and are willing to save if there is an incentive to do so. However the amount of benefit income that credit unions are retaining in savings and the fact that they have always required their members to save shows that people can save without necessarily needing a financial incentive. The key to mobilising savings among low income groups is convenience and flexibility. Dave Richardson, Technical Officer for the World Council of Credit Unions (WOCCU) has written that, "as verified by the credit union experience, poor people have a much higher demand for savings products than lending services".[16] Credit unions throughout the world have shown that savings mobilisation among even the poorest of communities is possible.  

  5.7  The WOCCU publication, "Striking the Balance in Microfinance, A Practical Guide to Mobilising Savings",[17] discusses the importance of trustworthiness and client confidence in the institution in which they are saving. The book also states that client relations and how the customer is treated by a financial organisation is extremely important to low income and first time savers. However, the situation in Britain is that many people still feel excluded from mainstream financial organisations, that they deem "not for them".

  5.8  The effect of savings on an individual cannot be underestimated, which is why it is impossible to talk about a long term solution to financial inclusion without including the accumulation of assets into the strategy. Credit unions have a significant role to play in promoting savings among those with below average incomes, mainly because they are accessible, flexible and treat all members equally. Therefore we propose that the Government recognise the role and value of credit unions in any future schemes to promote savings to those who are on low incomes. The Government should ensure that credit unions can become authorised providers of the Savings Gateway if and when it is rolled out nationally.

  5.9  ABCUL have just secured a change in the legislation to allow credit unions to also offer cash ISAs, and initial interest from credit unions indicates that take up of these products by their members will be significant. This will help credit unions strike the appropriate balance between savers and borrowers. We will be happy to share information with the select committee once these products have been running for an appropriate amount of time.

THE ROLE OF THE GOVERNMENT, THE FINANCIAL SERVICES AUTHORITY AND OTHER BODIES AND ORGANISATIONS IN PROMOTING FINANCIAL INCLUSION.

  6.1  The government has committed £120 million to help promote financial inclusion, £51 million will go towards providing additional face to face money advice and £36 million has been allocated for the provision of affordable credit through third sector lenders. This injection of capital for third sector lenders is welcomed by the credit union movement. ABCUL has used the last year to promote, both to our members and others, the ways in which credit unions can make the biggest impact with these funds.

  6.2  We have asked our members to sign up to a common approach to the growth fund which is based on best practice within the movement. The DWP guidelines for granting growth fund money to third sector lenders are target driven and will demand that applicants have a proven track record and provide robust business plans to support their application. The funding regime also ensures that the money goes directly to the organisations involved in lending. We fully support this approach as it will increase accountability. In the past much funding was channelled through third party organisations such as development agencies or consultants. This model failed to generate significant growth or sustainability in the sector and we are keen that those mistakes are not repeated.

  6.3  Therefore we hope that government continues to recognise that funding for third sector lenders needs to be focused on organisations that can prove that they can make a difference to financial exclusion. Additionally funding must go directly to the lending organisations whose primary interest is in the growth and sustainability of that business.

  6.4  We welcome the moves that government are currently making to promote financial inclusion, however, in terms of reducing the numbers of unbanked we have set out in Section 2 the key issues that we would like to see addressed.

  6.5  The introduction of banking services for credit unions has the potential to make a very significant impact on financial exclusion. The credit union movement has invested in the development of these services. In The Cooperative Bank we have a banking partner committed to providing the technology needed to make this available to all credit union members. The first credit unions to launch their own service accounts will take place in 2006.

  6.6  Currently only the largest credit unions have the existing resources to implement the service. Although the costs are relatively small in comparison to other financial inclusion projects, for those credit unions involved, the implementation of banking services represents the most significant investment that they have ever had to make.

  6.7  However, there still remain a significant number of credit unions, particularly community credit unions that could manage and deliver the service and who are keen to roll this out to their members. However, it is these credit unions that are prevented from doing so because of the initial investment that is required. We believe that the Government should recognise the strategic importance of this initiative and support individual community credit unions in entering the market.

  6.8  We are not envisaging a complete roll out of banking services to every credit union in the country. We understand that many of our members rely heavily on volunteer support and currently do not have the capacity to undertake such a significant development. However, there are credit unions, many of which are based in the most deprived local authority areas in the country that would be able to deliver these services to thousands of people in their communities. This would bring "banking" services into the heart of those communities, through trusted organisations, offering products that meet the needs of the financially excluded.

  6.9   ABCUL would be happy to provide the Treasury select committee with further information regarding our banking services project.

  6.10   Although ABCUL welcome the DWP Growth Fund, it is finite and the number of credit unions benefiting from government investment will be limited. However, the movement in still in need of investment capital. One source of capital open to credit unions is subordinated loans; credit unions can access subordinated loans from any source, however the lender must agree to the loan being subordinate to the members savings should the credit union become insolvent. This has restricted the number of sources of subordinated loans open to credit unions.

  6.11   HM Treasury recently consulted on extending Community Investment Tax Relief (CITR) to CDFIs for personal lending. ABCUL argued that if there was an extension of CITR then it should also be extended to credit unions seeking subordinated capital. This position was supported by the Financial Inclusion Taskforce and several high street banks that confirmed that they would be willing to lend to credit unions on a subordinated basis and at favourable rates if they could receive CITR on those loans.

  6.12   It is unclear whether or not CITR will be extended as Treasury have said that further investigation needs to take place into current usage by CDFIs for business lending. However there is a strong demand within the credit union movement for an extension of CITR as the growth fund, while welcome, will not completely meet the demand for capital that currently exists in the movement. We believe that the availability of CITR for subordinated lending to credit unions would provide one of the building blocks for long term sustainability of the movement.

  6.13   Credit unions have also identified a change in legislation which would help them to build capital and promote financial inclusion in their communities. The Credit Union Act 1979 5(1) states that only individuals can be members of credit unions, however many credit unions have been approached by local community groups who wish to deposit their money with the credit union, however they are prevented from doing so by current legislation.

  6.14   Given that government are investing £36 million in supporting third sector lenders we feel that these additional measures which would boost credit union capital represent coherent joined up thinking and would create additionality to what the Growth Fund is trying to achieve.

THE BENEFITS OF FINANCIAL INCLUSION AND THE EXTENT TO WHICH FINANCIAL INCLUSION MEASURES CAN CONTRIBUTE TO COMBATING POVERTY AND REDUCING BARRIERS TO EMPLOYMENT.

  7.1  Treasury has stated that, "Financial exclusion imposes significant costs on individuals, their wider neighbourhood and society as a whole".[18] As stated previously the National Consumer Council has identified that people on benefit pay an estimated £140 million per year in interest rates on home credit which reduces the income they can spend on their families and in their communities. This is just one aspect of financial exclusion. Money is being taken out of the pockets of the most vulnerable individuals and communities which directly detracts from the work government is doing to create wealth in communities.

  7.2  Very few employers now pay in cash, therefore in order to access employment people need to have access to the banking system. Many credit union members have their wages paid into a credit union. We know of credit unions which have saved employees from losing their jobs simply because they were able to accept that persons wages when a bank account was not available.

  7.3  Credit unions are part of the financial system and as such can provide a mainstream solution to financial exclusion. With the right investment and legislative change credit unions have the potential to provide financial services to many more financially excluded individuals and families.

January 2006






1   FSA figures, December 2005. Back

2   Credit Union Act, 1979. Back

3   Funded by the Esmee Fairbairn Foundation, 2005. Back

4   Not printed. Back

5   The goal was published in the Pre-Budget Report 2004 (Pre-Budget Report, HM Treasury, December 2004). The terms of the goal were agreed between the five biggest retail banks, the BBA and the Treasury. Back

6   National Consumer Council, Fact sheet: Basic Banking, 2005. Back

7   Policy Action Team 14-Access to Financial Services, HM Treasury 1999. Back

8   FSA quarterly aggregate statistics. Back

9   Hayton K, Gray L and Stirling K (2005), Scottish Credit Unions, Meeting Member Demands and Needs. GEN Consulting Scottish Executive Social Research, Edinburgh. Back

10   Investing in people and places, Karl Dayson, Bob Paterson and James Powell, 1999, University of Salford. Back

11   Inside Out, The State of Community Development Finance 2004, CDFA publication, April 2005. Back

12   Community Banking Partnership: A national demonstration project, Pat Conaty, Mick Brown and Bob Paterson, nef, November 2004. Back

13   Affordable Credit Fact Sheet, NCC and POLICIS, July 2005. Back

14   Paul Jones et al, Liverpool John Moores University. Back

15   Llandudno Credit Union, North Wales. Back

16   Unorthodox Microfinance: The Seven Doctrines of Success, MicroBanking Bulletin, February 2000. Back

17   Striking the Balance in Microfinance, A Practical Guide to Savings Mobilisation, Lessons from Credit Unions in South America, edited by Brian Branch and Janette Klaehn, 2002. Back

18   Promoting Financial Inclusion, HM Treasury, December 2004. Back


 
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