For anyone growing up in Northern Ireland, credit unions are woven into the fabric of community life. The one I joined as a child began on a dark, cold night in December 1963, in a local community hall. Eighteen founding members each deposited £1 to set up an organisation that would lend to people shut out of mainstream finance.
Sixty-three years later, that credit union has more than 27,000 members, savings and shares worth over £71m, and a loan book of more than £21m. Over that time, it has helped thousands of people get credit that would otherwise have been out of reach. It has also become part of the furniture of local life, financial infrastructure that is rooted in the community and built to last.
That story is common in Northern Ireland, and it isn’t unusual internationally. Credit union membership stands at 40% of the population in Northern Ireland, 28% in Canada, 20% in Australia and 64% in the Republic of Ireland. Yet only 2% of Britons are members of a credit union.
That’s not to diminish the work of credit unions in Britain, which help people often under-served by mainstream banks every day. But it does show how much further they could go.
Today, the Fairness Foundation has published Banking on local places. Drawing on interviews with nearly 20 credit union leaders and experts, it looks at the role that credit unions play in financial inclusion, and how regional policy could make better use of them to strengthen local economies. We’re grateful to Gareth Thomas MP and Irene Campbell MP, two leading champions of this agenda in Parliament, for contributing forewords.
In the report we discuss the value of credit unions in an economy where financial insecurity is widespread. Evidence from the Money and Pensions Service suggests that in 2022, one in six UK adults had no savings at all, and another five million had less than £100 in savings. Our own research has found that nearly a third of 25-to-34-year-olds have zero or negative wealth, a picture which varies sharply across the country.
Credit unions step into that gap. They offer fair, affordable loans and a safe place to save, which gives people an alternative to high-cost lenders and loan sharks. Because credit unions are owned by their members, any surplus stays within the membership. And because they lend to members who share a common bond, often a local area, members’ savings are recycled as loans within the same community. Credit unions are also shedding the outdated “poor man’s bank” label. As bank branches close, more people are choosing institutions that stay on the high street and keep money in the local economy.
“Credit unions belong in any conversation about good growth in every postcode. As the Government seeks to devolve more power and resources to communities, credit unions are natural trusted, local and accountable partners.”
Irene Campbell MP, writing in the report’s foreword
It’s clear that further investment in credit unions could pay off, a claim supported by evidence from on the ground. Through the Big Local programme, communities decided for themselves how to spend National Lottery Community Fund money. Where they chose to invest in credit unions, the results exceeded expectations, with more local saving and greater financial confidence.
The Government has recognised the value of credit unions to some extent, through reforms to the common bond and the launch of a new £30m fund to support their transformation. Yet it could go further, and while the Government is right to be considering higher taxes on mainstream bank profits, it should also choose to invest more in the community alternative.
Our report calls for a new set of interventions to be put in place to back credit unions. As we outline, there is a role for economic development policy to be better informed by the potential of credit unions in local places, including through programmes like Pride in Place, which reference credit unions and other forms of community finance in the list of indicative interventions for funding. Another set of Neighbourhood Boards are due to finalise their spending plans in the next month; credit unions would be an appropriate and worthwhile investment for them.
The report also joins calls for a Fair Banking Act. Among the provisions of such legislation would be a requirement for banks to cooperate with credit unions, supporting them to grow and expand. One way they might do that is through opening up access to banking hubs, ensuring that everyone has access to the financial architecture that is right for them.
“A Fair Banking Act should form part of a new national commitment to affordable finance that is raised locally and benefits communities. Legislating for it would build on the Government’s progress so far, giving credit unions and CDFIs the support they need to grow, and helping to build fairer local economies across the country.”
Gareth Thomas MP, writing in the report’s foreword
Britain now has its first Labour and Co-operative Prime Minister, one who understands credit unions, having championed the SoundPound group as Mayor of Greater Manchester. In today’s report, we suggest that his Government has a real opportunity to help people to build wealth that is held and controlled by their local communities, by expanding credit unions and making them the cornerstone of a fairer economy in communities across Britain.
REMINDER: ‘THE FAIR NECESSITIES’ LAUNCH EVENTS
Will’s book, The Fair Necessities: Why We Need a Fairer Britain and How to Make It Happen, is out and there are three more launch events coming up, including one this Thursday at the Blavatnik School of Government in Oxford.
Oxford: Thu 22 Oct, 18.00 - 19.00
York: Wed 4 Nov, 19.00 - 20.30
Bristol: Wed 11 Nov, 18.00 - 19.30
You can also listen to Will discuss the book on the ‘It’s Bloody Complicated’ podcast: