Co-op Party chair Gareth Thomas has been lobbying ministers for measures to allow credit unions to finance social programmes such as community energy projects and social housing.
Earlier this month the Labour/Co-op MP asked the government when it will “bring forward proposals to allow well-funded credit unions to provide low-cost credit cards and low-cost car loans, and to invest in other social programmes such as energy co-operatives and housing schemes?”
John Glen, economic secretary to the Treasury, replied: “Following on from the budget, we have a series of measures to assist credit unions to expand their role in delivering affordable credit across communities. We have a scheme of work over the next three months to pilot interest-free loans and prize-linked saving schemes, to help credit unions to grow as they have been doing in recent years.”
In a follow-up letter to the minister, Mr Thomas asked for further information about government plans to help “the growing credit union sector to continue expansion of its services”.
He said the British credit union had seen “striking” growth over the past 15 years, trebling its membership to 1.34million people and almost quadrupling its assets to £1.6bn.
“As the sector grows it is becoming even better equipped to expand the services it is permitted to offer to members,” he added, arguing that this expansion would increase credit unions’ capacity to promote financial inclusion at a time when “traditional high street banks are becoming further removed from local communities”.
Mr Thomas said there would be wider benefits from allowing credit unions with sufficient surplus assets to support social programmes.
“It allows individual credit unions to diversify their portfolio and increase returns on investment for members,” he wrote, “[and] allows communities to pursue projects that benefit the local area that they might not otherwise be able to finance.”
It would also put “a significant proportion of members’ funds (currently held in bank accounts and thus accruing interest rates below the rate of inflation) to a more productive and economically rewarding purpose … addressing a key social issue that deeply affects the communities which credit unions serve”.
He said representatives of the Northern Ireland credit union sector are already in talks with the Prudential Regulation Authority on similar issues and are “currently preparing a business case for how they could help finance social housing”.