The Archbishop of Canterbury, Justin Welby, has recently publicly committed the Church of England to the development of the Credit Union network. The church has a ten year plan to develop community credit unions and to make knowledge of their services more widely available.
It is possible that the Church is basing its current development narrative on a feasibility report, published last month by the Department of Work and Pensions, as part of the DWP Credit Union Expansion Project.
The report found the current context of credit union activity populates a community finance landscape with the following characteristics…
1.4 million have no transactional bank account at present
4 million people incur bank charges
up to 7 million people use sources of high cost credit
more than 60% of the 4,500 people consulted for the report said they would use a credit union, if one was available to them…
The report also contains findings that the 80% of 95 credit unions consulted agreed that fundamental change was needed in their organisation and there was recognition that they could, and should, offer more modern financial services.
It is recognised in the report that traditional mainstream banking has created, according to British Bankers Association data, some 4 million basic bank accounts since 2003. This number is unlikely to increase in the future now, unless the mainstream banks are compelled by legislation.
The report offers a narrative about change and growth in credit unions at some length. Capacity to deliver and scalability are the key issues, with the DWP positing an argument that a central umbrella body should be responsible for the tactical growth of credit unions and the creation of a sustainable financial structure.
There are weaknesses in this position. A new umbrella body co-ordinating needed change and ‘managing the money’ runs the risk of becoming another mainstream player in the national financial market. Modern products can quickly develop into yet another High Street portfolio of interest bearing and charge inducing proto-bank accounts.
Is the Church of England the right organisation to carry forward such a programme? Even at this early stage of the discussion there is evidence of conflict between stated social and community aims and the embrace of profit drivers in the sector market place.
Are church communities ideally placed, even at Diocesan level, to push forward a comprehensive marketing plan, embracing the web and new media to facilitate this transformative experience for the credit union sector? How will the injection of faith interests affect the credit union landscape and the make up of any proposed new services?
Credit unions presently rely on grants in aid from a variety of sources, and are not perceived by mainstream financial institutions as sustainable. Is there a Social Finance initiative to be created to help credit unions play an important role in services their customers?
Affordable credit, simple bank accounts with the creation of mechanisms that allow customers to ‘micro-save’ regularly for their bills, with specific local knowledge deployed by branches to enable a bill payments service for customers too – these are some of the additional, innovative services that could be deployed to give the sector additional vitality. All concepts embraced by the DWP report.
Maintaining the local option would be acceptable to the existing network, even though the notion of being a ‘poor person’ lender was seen as a negative, the existing credit unions do have customers who are and make loans to, higher income members of the union network. This cohort of users could be expanded.
Should credit unions, building on this user group, be marketed perhaps as the national key ‘social lender’ of choice, with the Social Finance sector imaginatively supporting local or regional networks of credit unions in line with the DWP report.
Much change is on the way, both from the church, social finance sector and central government we suspect. Our sector will have its role to play we are sure.
If you have a view on this topic let us know. Contact SEEM here.