Five questions about: Credit unions

 

Credit unions? Is this some sort of left-wing lender?

No. Credit unions are mutual financial co-operatives – usually set up in workplaces or local communities – that take deposits and give loans to their members.

Hasn't the Archbishop of Canterbury been banging on about them?

He sees credit unions as the solution to hard-up people falling into the clutches of allegedly unscrupulous, high-cost credit companies, such as doorstep lenders or payday loan firms.

Why have they been in the news this week?

First, Lloyds Banking Group has promised £1m to credit unions, as part of its Helping Britain Prosper Plan announced on Wednesday. Lloyds' chief, António Horta-Osório, said the bank wants to help "those facing financial difficulties, coping with disabilities, striving to buy their first home or find their first job". Meanwhile the Minister for Welfare Reform, Lord Freud, said: "Credit unions play a vital role in helping people build up savings."

Do they?

They can do. The credit union sector in the UK is still relatively small compared with other countries such as the US and Canada, with only around 400, although that does add up to 470,000 members. There have also been big success stories in local areas across the UK. For instance, Haringey Council in north London this week advanced £250,000 to its local credit union.

So we're likely to hear more from them in the coming months?

Last year the Government handed credit unions £38m to help the mutuals take on expensive payday lenders. With the Church's support and local initiatives – such as Haringey handing secondary school kids £20 each in a credit union to help encourage them to save – the unions could make an enormous difference for millions of struggling people.

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