May 4, 2016
A story of steady growth
Whenever a story involving the scandalous practices of payday lenders appears in the news, it’s usually accompanied by calls for the credit union movement to step up to the plate and offer a more civilised, fairer system of lending to those who can least afford to borrow. But that is to misunderstand the ethos of credit unions which is about encouraging thrift as much as it is about lending. It is an ethos that clearly carries a widespread appeal. Scotland now has the fourth largest credit union membership in Europe and continues to grow.
ABOUT 250 people a week are joining credit unions in Scotland as a growing number of savers and borrowers look for alternatives to mainstream lenders.
Membership of credit unions has grown 4 per cent in Scotland over the last year, with 375,000 people now using the customer-owned co-operatives to access a range of financial products including ethical savings and affordable loans.
“The number of people using credit unions is continuing to increase at quite a fast rate in Scotland,” said Frank McKillop, communications manager at the Association of British Credit Unions (ABCUL). “We’re at the stage now where Scotland has the fourth highest level of credit union membership in Europe behind the Republic of Ireland, Northern Ireland and Poland. However, Scotland is gaining on Poland for third place. Poland has 8.1 per cent of the adult population using credit unions, while Scotland is now at 7.3 per cent.”
In 2015, savers put £454 million into credit unions in Scotland, up almost 8 per cent on 2014, while borrowers took out £276m, up 5 per cent. Glasgow is the nation’s ‘credit union capital’, with the highest level of credit union membership of any city in Britain. About a quarter of people in Glasgow are using credit unions, versus 2 per cent across Britain. Two of Britain’s biggest credit unions are based in the city – the NHS Credit Union, with 14,000 members – and The Transport Credit Union, with 13,000 members.
“When members of the former Transport and General Workers’ Union started that credit union more than 30 years ago for a few bus drivers, transport was largely public sector,” Mr McKillop said. “But with privatisation over the last 20 years, they now have a lot of commercial operators in there like Stagecoach, First Group and Arriva.”
Ahead of the Scottish Parliament elections this May, ABCUL is calling for all employers to offer credit union membership, which would allow workers to save and repay loans via payroll deduction.
Mr McKillop said more credit unions were partnering directly with employers and added: “Employers recognise the business case for their staff having access to regular savings and affordable credit. That’s backed up by some recent research showing that people who have money worries are more likely to be absent from work, more likely to have health problems and lower productivity when they’re at work.”
Mr McKillop said credit unions were among the most competitive in the market for small loans of up to £3,000. Because they are self-help bodies set up to help their members rather than make a profit, lending decisions can take into account the member’s personal circumstances and the credit union’s knowledge of their sector – including typical pay rates and shift patterns.
Savers can also receive dividends once a year of up to 3 per cent of the total amount saved, depending on performance.
Traditionally set up to fill a gap in banking provision for those on lower incomes, Mr McKillop said credit unions were now appealing to people in reasonably well-paid employment.
“The message is that credit unions are good for your financial health however much you’re earning,” he added.
There are also 52,000 junior savers in Scotland’s credit unions who have usually saved through school savings clubs. ABCUL’s Credit Union Charter is calling for every school to have a credit union champion to help pupils learn about saving and budgeting.