How a credit union is bridging divides through financial inclusion

East Sussex credit union is working with charities and the local authority to offer affordable loans to help homeless people

In East Sussex, an area with one of the highest homelessness rates in England, a credit union is addressing the need for affordable loans.

Working in partnership with charities and the local council, East Sussex Credit Union (ESCU) provides cost effective and flexible loans that meet the needs of the local community. At £28,752, the average salary in Sussex remains the lowest in the South East, and is below the average for England. Brighton and Hove also has one of the highest homelessness rates in England.

Chief executive Ann Hickey has been with the credit union for 20 years, when it was set up by a locals including a councillor and a single parent who wanted to do something about poverty and loan sharks. It started life in East Brighton, but spread to the whole of East Sussex, Brighton & Hove, and is open to all members of the South East Region on Unite union. Total membership is more than 8,300, with over £3m in savings. Since being set up the credit union has lent out £12.4m, with £1.5m lent out in 2018/19.

As it grew, ESCU diversified its offer, and each year membership increases by 10-20%. To join, applicants have to pay a one-off £5 membership fee and at least £1 to open up their savings account.

Members can also get an Engage account and debit card which comes with online banking, a mobile app and clever money management options. The Engage account is only available to credit unions and does not allow users to run overdrafts. Ms Hickey says the money management facility is useful to members who receive universal credit due to the fact that they receive one lump of money from which they have to make various payments. “The Engage account gives people the opportunity to change their budgeting method,” she said.

Through Umbrella Brighton and Hove, a fund which helps homeless people secure accommodation in the private-rented sector, the credit union is providing interest-free loans for rent deposits, rent in advance and letting agents’ fees.

“This project helps people move out of hostels. They can’t afford rent deposit so this funds rent deposits for them,” says Ms Hickey. Applicants are encouraged to save while they repay the interest-free loan. As the loans are repaid, the money is available to be lent to other members.

One member said: “I felt my situation was hopeless and that I was very alone and stuck in a bad position, not having a guarantor or means to get enough of a deposit to move into a more permanent address. My support worker told me about Umbrella and together we made an application. Within a month I was able to secure the funds and move into my new studio flat.”

By partnering with Umbrella the credit union has helped 22 people, with loans averaging at £800.

The credit union also helps people who have recently arrived to the UK and are working but do not yet have a credit score. The 0% interest loans scheme is a partnership with Voices in Exile, which supports refugees, asylum seekers and those with no recourse to public funds. The recipients of the loans are nominated by Voices in Exile and the credit union administers the loans for the charity.

Brighton charity, Thousand 4 £1,000 (T4K) is also partnering with ESCU to provide an affordable loan scheme for its clients. The charity works with people who are the target of the Home Office’s hostile environment policy, which aims to make staying in the UK difficult for those without leave to remain, to encourage them to leave voluntarily. Many have been through the asylum system, most have no access to benefits, and some are on incomes too low to meet their needs or are unable to access credit. With funding from T4K, ESCU offers interest-free loans to help spread the cost of immigration applications. The capital funding of £20,000 for this project was granted by the Guardian and Observer Charity Appeal via NACCOM, a network of 55 accommodation providers working with people facing destitution.

To stop people in the area becoming homeless the credit union also works with the local council. Those who struggle to keep their rented homes are offered a deposit guarantee scheme run in partnership with the council.

The council puts a bond with landlords to say they will cover that deposit but tenants have to save by joining a credit union. Over 750 people joined ESCU through this scheme, amassing £235,000 in savings. If they damage the property that money goes to landlord; if not that is theirs for a deposit if they move on.

The scheme also aims to address the limited council housing stock. Around 35% of housing in Brighton is privately rented.

ESCU is also working with England Illegal Money Lending Team (EIMLT), which investigates and prosecutes loan sharks while supporting those who have borrowed money from them. With support from EIMLT, the credit union delivered the anti-loan shark message at several Pride events in the county. The credit union was highly commended in the Stop Loan Sharks Champion Awards of 2019.

The award recognised ESCU’s work tackling loan sharks through its roadshows, where iy invited charities, agencies and DWP employees to come and listen to people receiving universal credit. As part of the initiative, the credit union has also been outreaching to support workers and attended Unite meetings to explore what support is needed in the local community.

ESCU has also worked with charities and agencies, allowing these organisations to act as intermediaries to secure accounts for homeless people so they cane claim benefits; this includes people who don’t have any ID.

“This gives them the facility to claim universal credit and helps them to get off the street,” said Ms Hickey. More than 100 people throughout the credit union’s area have been helped through this approach, she added.

And by partnering with a local bus company, the credit union is able to offer a 20% discount for its members, who can also get loans for annual bus tickets. This helps them save £500 a year. Annual children’s tickets also come with a 10% discount and enable children to travel in the
summer holidays.

Asked how her credit union was able to carry on so many projects, Ms Hickey says volunteers play a key role. “We couldn’t have gotten where we are without volunteers and our board – all of whom are volunteers as well. We have a strong volunteering culture here.”

In spite of the success of such projects, raising awareness about what credit unions do remains a challenge, warns business development manager Emma Brown. 

“A lot of people don’t know what a credit union is,” she says. “Credit unions are not something people tend to talk about. When I go out doing a presentation to people my first question is do you know what a credit union is? That is a hard battle. The government gets that social lenders are a good alternative to high cost lenders and are trying to support us, but there’s a lot of us and a lot of need so there is a struggle to be able to compete with other lenders.”.

To raise awareness the credit union has also teamed up with 12 local employers.