Credit unions: an idea whose time has come

Credit unions can help with mortgages. Picture: PA
Credit unions can help with mortgages. Picture: PA
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Credit unions have played an honourable and vital role in Scottish society, pivotal in the long fight against financial exclusion and have proved a socially cohesive tool in communities large and small.

In Glasgow – Scotland’s biggest and, in many ways, most socially-challenged city – one in five of the population belongs to a credit union. These are impressive numbers, but perhaps not when compared to Ireland where 73 per cent, and the US and Canada, where over 40 per cent of their respective populations are credit union members. In the UK as a whole, 5 per cent or one in 20 people, are in a credit union.

This could be viewed in the glass-half-empty scenario, which laments that so many people have no access to mainstream financial institutions; or the half-full interpretation, which I prefer, that these remarkable numbers are proof of the credit union success story.

More of Scotland could benefit

Credit unions have transformed communities and helped hundreds of thousands of people, and not just those of limited means.

Profit, unlike in all other financial organisations, doesn’t come into it. Despite the significant numbers already taking advantage of what credit unions have to offer, it is clear that there is capacity within the model for a lot more people to benefit, especially in the rest of Scotland as well as in Glasgow.

The usefulness of credit unions in helping people access the mainstream is recognised by policy makers. The Association of British Credit Unions (ABCUL) recently won a £35.6 million contract from Department of Work and Pensions to expand and modernise the movement in the UK, with aims which include increasing membership by a million by 2019 and saving consumers up to £1 billion in interest payments.

Many credit unions offer mortgages, cash ISAs and current accounts. And, following new regulations last year, credit unions can now expand their services to corporate members. This would be a significant step and many credit unions are currently considering this option. However, with £210m tucked away in savings and £180m on their loan books in Scotland, it is difficult not to see credit unions as an idea whose time has come.

• Steven Cunningham is a partner in Alexander Sloan chartered accountants and business advisers

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