Credit Unions & Registered Providers: Delivering Change Through Collaborative Partnerships
Debt is a paralysing issue; on a personal level it can cause anxiety and hopelessness and for Registered Providers (RPs), rising arrears can prevent investment being directed back into customers. One in ten people living in Barking and Dagenham in East London owe money to the council alone; they are one of many local authorities and housing associations in the country that have teamed up with a credit union in a show of best practice. A preventative approach, this partnership aims to avoid debt, encourage sustainable behaviour and stop evictions.
Credit Unions offer financial products to members, such as small amount, short term loans with fair interest rates, budgeting pots and savings accounts. According to the Joseph Rowntree Foundation, credit unions are the “best placed partners” for local government and housing providers to provide residents with access to financial services invested in their growth rather than punitive profiteering. In fact, there is a historical precedent for partnerships between housing providers and credit unions – with some of the strongest credit unions in the country having grown from first serving the employees of local government.
In England credit unions aren’t a mainstream choice for financial services, despite the benefits being a member could provide, with only around 1% of the population being a member. In part this could be due to a stigma that the function of credit unions is to combat poverty and the mislabelling of them as a ‘poor-man’s bank.’ In contrast, across Northern Ireland and the Republic of Ireland almost half of the population, nearly 2.9million people are members of a credit union.
This difference might be shifting however, as there has been noticeable growth in the credit union sector in recent years. In the UK, credit unions have £900 million assets as of 2016 and 800,000 members. This ‘third sector’ type of lender has gained governmental endorsement, but there needs to be a drive to increase their visibility throughout society. When utilised by housing associations, real change can be achieved. Arhag Housing Association in London partnered with a credit union to offer residents a new way of banking and their homelessness prevention scheme prevented 300 families from facing eviction. Whilst partnerships in Scotland between South Ayrshire and North Ayrshire Councils and the 1st Alliance Credit Union are helping RPs to avoid 35-40 evictions a year.
Advances in technology have helped break down one of the barriers to joining a credit union. This is because membership of a credit union is often dependant on sharing a commonality – normally location – with the rest of its members. Communication tools have meant shared values can be the chosen commonality for members to organise around instead.
“We consider that in this area social landlords can play a key role in assisting tenants find alternatives to high-cost credit when looking to get essential household goods. This can create better options for consumers and could provide them with a cheaper, lower-risk source of finance.” Financial Conduct Authority
“Our credit union is a co-operative, but that doesn’t mean we are a small voluntary project. Credit unions are successful businesses working in partnership with other organisations, in this case to help many tenants manage welfare reform.”