Credit Unions & Registered Providers: Delivering Change Through 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 1^st 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

Case Study 1: Alliance Homes: Credit Union partnership promotes financial inclusion

Alliance Homes was one of 9 housing providers in the South-West and West Country savings and loans credit union. The scheme aimed to bring wide cover to the region that was previously underserved by credit unions. This meant in the past that residents in financial difficulty were more likely to turn to loan sharks and high-street lenders.

The choice, service and affordable products offered are very competitive and all interest is reinvested for the benefit of its customers. This ethical not for profit model will really help communities and households across the south west.

Martyn Gimber, Alliance Homes Group

Case Study 2: Lewisham and Bromley Credit Union  

This homelessness prevention initiative helped save Lewisham Council over £1m in costs and social care, as well as debt to housing associations through the cost of arrears and evictions. 109 families became members of Lewisham Credit Union and received a homelessness prevention loan. The credit union has 12,000 members, 40% of which are residents of housing associations and of those, 60% signed up because they were able to access a small loan that did not require previous savings with the union. Of the 109 families who were helped, most remained loyal members to the credit union

The report demonstrates the powerful impact that partnership between local government and credit unions can have. An investment of just £85,000 has seen savings of £1.1m for the council and an unquantifiable amount for the families involved. The report is timely as concern continues to grow at the housing crisis in which we find ourselves as a country. This is just one of the areas in which credit unions partnering with key institutions in the community can unlock value and create virtuous circles where everyone wins.

Matt Bland, Head of Policy, Association of British Credit Unions (Abcul)

Case study 3: Unity Enterprise, Yorkshire

Aside from loans, there are other ways credit unions and housing associations can offer direct support to their residents facing financial exclusion. After all the banks closed their local branches in Chapeltown, Unity Enterprise partnered with HSBC to make sure that at the very least, the community had access to a charge-free cash point.

A large proportion of our customers, as well as other registered providers are already engaged in partnerships with Credit Unions to improve access to fair banking and to create sustainable tenancies. There is still a low adoption rate in the UK however, to these life changing services across the country. Technology has helped organisations join forces, but in order to attract members the offering online will need to become as intuitive as those of high street financial service providers. For RPs there is a huge amount to gain by championing and partnering with these organisations to help residents take control of their finances. 

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.

Carol McHarg, Chief Executive, 1st Alliance (Ayrshire) Credit Union