Credit Unions and the Financially Excluded a Matter of Principle

Published by Graham Tomlin for Credit Union Solutions Ltd in Housing and also in Central Government, Education, Health, Local Government

One of the problems that credit unions in the UK have had to bear since 1979 is the name “the poor person’s bank”. This title was bestowed on the movement at around the time that the first legislation was enacted and has hung like an albatross around our neck ever since.

Fortunately thousands of Police Officers, Fire Fighters, Health Professionals, Local Government Employees and British Airways staff do not take any notice of such tags. They are happy paying less for their loans and picking up dividends on their savings, undertaking their transactions on the internet and enjoying the free life savings and loan protection insurance that come with their credit union accounts.

Other community based credit unions focus their services upon serving the financially excluded pretty well to the exclusion of other groups and some like Dalmuir do it exceptionally well while others struggle and close.

Between these two groups there is a third group of credit unions that have a strong community base AND a strong employee based membership that pays into their credit union accounts through a deduction from pay. It is to this group that Registered Social Landlords, Councils and charities turn when they seek to address the problems of financial exclusion.

This last group recognises that in order to serve the financially excluded a degree of cross subsidy will be required in their business. Income generated from members paying through payroll deduction will be used to undertake the promotion of school savings clubs, develop financial inclusion forums or undertake the time consuming work of debt management.

Make no mistake working with the financially excluded is resource hungry because they are a high maintenance group of members and require constant reminders to pay and assistance with managing their accounts.

So why do credit unions bother with them at all? The answer is in our co-operative principles.

1^st Principle: Voluntary and open membership.

2^nd Principle: Democratic member control.

3^rd Principle: Member economic participation.

4^th Principle: Autonomy and independence.

5^th Principle: Education, Training and Information.

6^th Principle: Co-operation among co-operatives

7^th Principle: Concern for community.

These principles guide the co-operative movement across the world and in the UK credit unions share them with the Co-op Bank as well as all the other co-operatives.

It follows that working with the financially excluded ticks our 5^th and 7^th Principles boxes. Even if a credit union exists in an area of affluence where poverty is less likely, by virtue of the 6^th Principle, they too can make a contribution to helping the financially excluded as well by sharing expertise and resources with credit unions more actively engaged with the financially excluded.

Not so much a poor person’s bank but more likely a bank for everyone. There are now 90 million credit union members in the USA, 11 Million in Canada, 3 Million each in Australia, the Caribbean and Eire, 2Million in Poland and for the late starters 1 Million in the UK.