CFCFE releases research on credit unions and Covid-19

The paper is based of responses from 24 British credit unions and support organisations

New research from the Centre for Community Finance Europe (CFCFE) looks at how credit unions in Britain have continued to serve members during the Covid-19 crisis.

The Credit Union Difference: Responses to COVID-19 in Great Britain report is based of responses from 24 British credit unions and support organisations and covers March and April.

It reveals various responses determined by the needs of populations served. London Mutual Credit Union kept all its branches open to support those requiring access to cash over the counter for their daily needs. Unify Credit Union in Wigan decided to close branches to the public to protect staff and members but continued to provide digital services. Central Liverpool Credit Union and Smart Money Cymru opted for partial closures. Similarly, NHS Credit Union, which does not have a branch outlet, has introduced a ‘Mobile CU’ in Glasgow where its head office is located, so it can remain available to members.

Remote cash delivery is another option. Central Liverpool Credit Union has moved members where possible to electronic money transfer but also offers a collect or drop-off service for vulnerable members. A new scheme will see the credit union send vouchers by text, email or post to customers, who can use them to withdraw cash from a Post Office.

For some credit unions, the pandemic has resulted in a rapid digitisation, adds the report. For example, Central Liverpool Credit Union has introduced electronic signatures. Its online offer has also been upgraded so members can access loan applications more easily and view and manage their balances at home. It has also introduced online chat assistance – as has Clockwise Credit Union; both have the service managed by staff rather than bots.

A number of credit unions have introduced measures to support staff during the pandemic, says the report. For example, Bristol Credit Union’s staff working in the office are being given a day off every two weeks on top of annual leave as a ‘thank you’ for their commitment.

But several credit unions have had to furlough staff as loan and other business volumes have reduced by up to 50% for certain credit unions. In some cases furloughing has been done on a rota basis. A number of credit unions are also covering expenses related to working from home. Enterprise Credit Union is making additional payments to staff to cover any expenses incurred from working at home, while Bristol Credit Union offers up to five days’ leave with full pay to cope with sudden changes in childcare arrangements if needed.

Several new products have been introduced to support key workers, adds the report. These include key worker loans at preferential rates at Clockwise Credit Union and Just Credit Union; and interest-free loans for NHS staff at Bristol Credit Union. London Mutual Credit Union is offering NHS staff free overdrafts up to £2,000 on their current accounts for three months.

Another tendency revealed by the report is flexibility on underwriting. At Central Liverpool Credit Union, the maximum loan amount available at the entry level for new members and those with few savings has been increased from £1,000 to £3,000, and at TransaveUK from £500 to £1,000. Likewise, London Mutual Credit Union has increased pre-approved overdraft limits on its circa 9,000 current account holders.

Savings is the least affected area of credit union business, the report says.

To further support members during the crisis, some credit unions are waiving fees associated with payment facilities. Central Liverpool Credit Union has waived all bank transfer fees, even though this may cost the credit union around £5,000 a month.

Keeping in touch with members is also important for the sector. Staff at South Manchester Credit Union are making wellbeing-type outbound phone calls to vulnerable members, as well as utilising secure messaging to keep in touch with members generally. Similarly, Commsave Credit Union has a callback service for members who are feeling isolated and just need a friendly chat.

As co-operatives, credit unions are concerned about the wider community. According to the report, Enterprise Credit Union has donated £500 to four community groups so far and is planning to help two organisations per week. A charitable fund sponsored by Plane Saver Credit Union has also made donations totalling £5,000 to the British Red Cross, Shelter, the NHS, the Trussell Trust and the Victory Services Club. Likewise, Plane Saver Credit Union itself has made available car parking spaces to key workers.

CFCFE’s research concludes that for many credit unions, the pandemic could potentially undermine their financial stability and even long-term viability.

The research argues that the pandemic has demonstrated the societal importance of the values on which the sector is based as well as the willingness and capacity of many in the sector to speedily change and upgrade operations and service delivery in the interests of members in crisis.

“For credit unions, as for society at large, there will be no going back to a time pre Covid-19,” the paper warns. “An evident follow-on CFCFE paper from this one, once the pandemic has subsided, must be on credit union learning through this crisis and how this learning will strengthen the sector into the future.”

The report was written by Dr Paul A. Jones, Nick Money and Ralph Swoboda. A forthcoming CFCFE report will focus on the actions taken by credit unions in the Republic of Ireland.