The emergence of credit unions as an alternative to high street lenders continued today after figures showed further growth in savings and loans.
The Association of British Credit Unions (ABCUL) said some £703 million in savings was being managed by credit unions on behalf of 952,000 members by September last year, as well as loans worth £571 million.
This is a rise on the £690 million worth of savings and £561 million in loans by the end of last June by credit unions, with 940,000 members, according to figures released by ABCUL which are submitted by credit unions to the Financial Services Authority (FSA).
The credit union sector in Britain is currently relatively small compared with other countries such as the United States and Canada, with just 3% of people using the sector here.
But there are more than 400 credit unions in Britain and membership is expected to top one million this year.
Politicians have been encouraging credit union growth at a time when MPs are calling for tougher regulation for payday lenders and debt management companies.
Credit unions were given beefed-up powers by the Government in January, freeing them up to compete more effectively with banks.
The reforms enable the financial co-operatives controlled by their own members to pay interest on deposits for the first time instead of a dividend and to grow by accepting new types of membership.
As well as shaking up the traditional banking sector, suggestions have been made that the expansion could offer those on low incomes who have limited credit options a strong alternative to high-interest payday loans as well as illegal lenders.
Matt Bland, policy and communication officer at ABCUL, said that as well as providing an alternative for those who find themselves shut out by banks, credit unions are also looking to attract middle and higher income earners.
He said: "With everything that has happened with the banks, people are looking for an alternative.
"Credit unions are associated with financial inclusion. It's about providing services that everyone needs."
He said that in countries such as Canada, people are used to using credit unions as their main financial service, something which those in Britain are trying to replicate.
The recent Government reforms include enabling credit unions to accept new types of members such as limited companies and make it easier to expand, consolidate and merge as they no longer need to prove that all eligible members have something in common.
Offering an interest rate on savings up front rather than a retrospective dividend will also enable consumers to compare return rates more easily.
A spokesman for ABCUL said it was still "early days" for credit unions to be offering interest rates on savings, but he said many credit unions offer dividend rates which compare "very favourably" with banks.
He said that last year Glasgow Credit Union, which is Britain's biggest credit union with more than 27,000 members, paid a 3% dividend rate, while Plane Saver Credit Union, which is used by employees of Civil Aviation Authority-regulated companies, paid as much as 6% on some accounts.
A recent report published by Barnardo's argued that more should be done to promote credit unions.
It said bank accounts must be "fit for purpose" after finding that one in 10 households on low incomes are trying to manage their finances without access to mainstream banking services.
The study looked at the typical cost of paying off a £100 loan over 12 months and found it would be £112 for a credit union, rising to £142 for a pawn broker and £173 for a rent-to-own loan.