Report highlights potential for social investment in credit unions

A recent report by Social Finance concludes that there is potential for social investment in credit unions. In collaboration with Big Society Capital, ABCUL commissioned Social Finance to...

A recent report by Social Finance concludes that there is potential for social investment in credit unions.

In collaboration with Big Society Capital, ABCUL commissioned Social Finance to review the credit union landscape to understand the potential for social investment to help grow the sector and make it more sustainable.

The research looked at 25 credit unions and included conversations with investors. Big Society Capital estimates that there may be up to £1.5bn social investment in the UK, a third of which is still waiting to be deployed.

The report argues that in order to broaden their appeal to social investors, credit unions need to better articulate their social impact and develop more financially sustainable growth plans. Furthermore, regulation allowing equity investment opportunities, which are more attractive to investors, should be developed, adds the paper.

The report makes three main recommendations. It suggests focusing on sustainable growth and reported social impact. Credit unions seeking investment are advised to develop “clear, ambitious and viable” growth plans, with a diverse membership demographic.

Likewise, the paper argues that investors should recognise the long-term sustainability challenges faced by some credit unions, their subsequent need for long-term capital and the key business areas in need of improvement. These can include upgraded infrastructure, digital delivery channels, increased automation and improved local marketing strategies.

The report is also encouraging policy makers and regulators to look to improve the attractiveness of existing investment instruments. Measures proposed include increasing the flexibility and financial attractiveness of deferred shares, and the creation of a tax relief suitable for credit unions.

ABCUL head of Policy and Communications, Matt Bland, said: “It feels like there’s an obvious fit between credit unions and social investment, but part of the reasoning behind this research was to flesh out why this hasn’t really happened to date and to identify some of the actions that credit unions, social investors and policy makers might take to address any barriers.

“Credit unions have made a tremendous social impact across Britain, and with the sector doubling its membership and trebling its assets over the last decade, there’s a real opportunity for social investors to support credit unions as they strive to do even more for communities and workplaces all over the country.”

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