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Charities and social enterprises to benefit from new credit union powers

3 January 2012

For the first time, credit unions will be able to offer services directly to charities, social enterprises and community groups, allowing credit unions to compete more effectively with banks and other lenders to provide fair and affordable financial services.

Charities, social enterprises and community groups in England, Scotland and Wales will next week start to benefit from new credit union powers to reach many more members, organisations and communities.

The new powers, which come into force on 8 January, are the result of legal changes that will give credit unions more flexibility to choose who can access their services.

For the first time, charities, social enterprises or community groups will be able to join a credit union and benefit from its services. New partnerships will also allow all of an organisation’s staff, members and service users to join one credit union, no matter where they live or work.

ABCUL, the trade association for credit unions, said that up until now, credit unions have been hampered by outdated restrictions which meant only individuals were able to become members, not organisations themselves, and all of a credit union’s members had to have something in common, such as living in the same geographical area or working for the same employer.

The new rules mean that organisations will be able to join a credit union and use the financial services it provides. A community group, for example, may be able to use a credit union to manage its money, which will help groups that may have trouble opening a bank account and has the added advantage that money is kept in a community.

A social enterprise may wish to support its community by joining a credit union and depositing funds, knowing that their money is being recycled locally, providing a source of affordable credit to other credit union members, many of whom may be their employees or service users.

Credit unions also no longer have to prove that all the eligible members have something in common. This means a credit union can now provide services to all the staff, members and service users of a charity, social enterprise or community group, even if they are spread around the country.

Up to 10% of the members of a credit union will be allowed to be corporate members. As well as accepting ordinary shares, credit unions will also be able to seek investment by offering deferred shares, which will be transferable but not withdrawable, and only repayable in limited circumstances. Deferred shares will count towards the capital of a credit union.

Some credit unions may also start doing business lending. This could offer an alternative source of finance for start up and existing organisations and businesses.

“These changes are a major breakthrough in the delivery of credit union services to organisations around Britain,” said ABCUL CEO Mark Lyonette.

“The new rules mean that, for the first time, credit unions will be able to offer services directly to charities, social enterprises and community groups, allowing credit unions to compete more effectively with banks and other lenders to provide fair and affordable financial services. The changes will also help credit unions build stronger relationships with the staff, members and service users of organisations, helping them to develop a savings habit – which can only be good for communities.”

As financial co-operatives, owned and controlled by their members, credit unions have no outside shareholders to pay and any profit they make stays in the community and is used to develop the credit union and provide a return to savers.

More information about the new credit union powers, the services provided by credit unions and who can benefit are available here.

Charities, social enterprises and community groups that would like to make contact with their local credit union can check which ones operate in their area by visiting www.findyourcreditunion.co.uk or calling ABCUL on 0161 832 3694.

ABCUL, the Association of British Credit Unions, is the main trade association for credit unions in England, Scotland and Wales. At the end of June 2011, Britain’s credit unions were managing £690m of savings on behalf of over 900,000 people, and had over £560m out on loan.

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