CSFI

CSFI
Credit unions
have not
expanded
in Britain as
elsewhere
Credit unions have existed in Britain since the mid-nineteenth century. But, unlike in
many other countries (e.g., Ireland, where more than 70% of the population belongs
to a credit union), they did not expand in the mainland UK into full-service, modern
financial institutions. Instead, they largely remain small local cooperatives, offering
limited savings and loan services. Few had a High Street presence and, even now,
they rarely offer electronic or mobile banking facilities. Founding principles of
community, mutual support and self-government have often taken precedence over
expansion, modernisation, professional management and sound governance.
Despite that, political support for credit unions has been growing – with funding from
government initially being channelled through the Growth Fund (2006-11) and most
recently the Credit Union Expansion Project (2012-17). The latter is particularly
significant since it has moved support away from subsidy into investment, offering
credit unions the opportunity to use a variety of automated platforms facilitating
faster lending decisions, a banking app for online banking and payroll deductions
for savings and loan payments. With parallel support from Barclays and Lloyds,
important links are also being created with the conventional banking sector.
Box 10: The future for British credit unions and financial
inclusion
“The past two years have seen credit unions in the UK reach a number
of milestones. More than a million Britons now use their services, and
more than £1bn is entrusted to the management of the 350 credit
unions in England, Scotland and Wales. The sector has doubled its
membership and tripled its asset base in the last decade.
"Much of this growth has been driven by unprecedented engagement
by the sector with low-income communities. Under schemes like the
DWP’s Growth Fund, credit unions have seen hundreds of thousands of
low-income households make use of their services to replace high-cost
credit with affordable loans and to begin to save – in many cases for the
first time. This role in supporting low-income communities and enhancing
life chances is firmly embedded in the credit union growth story, and its
lending has saved low-income families many millions in interest.
“So far, so positive. But the sector is not without its challenges. Since
the peak of the financial crisis in 2009, credit unions’ lending growth
has lagged behind that of deposits, expanding at roughly half the rate.
The continued use of extraordinary monetary measures by the Bank of
England has also put investment income under pressure.
“Credit unions’ cost-income ratios are pressed even further in the
wrong direction by high operating costs, driven by outdated manual
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