Credit Unions are non profit organisations run by members for members, which are part of the co-operative movement and run for mutual benefit. They are very much to be encouraged and indeed their promotion is certainly part of the Progressive Pulse vision. However British credit unions have strikingly failed to become widely established despite strong government support (on both sides of the house), leaving the ‘sub-prime’ sector vulnerable to pay-day lenders such as Wonga with very high interest rates which can reach as much as 1509% APR.
In contrast Credit Unions have a capped rate of 1% per month or 12.7% APR. In Britain Credit Unions are now governed by the Association of British Credit Unions Ltd (ABCUL). Credit Unions however have abysmally low membership in Britain with about 2% of the population being members (However this has grown from 0.5% over the past 5 years so there may be some hope that things will improve). Credit Unions started late in the UK and the first CUs were formed in 1964 by West Indian (Hornsey) and Irish Catholic (Wimbledon) communities.
The contrast with Ireland (both North and South) could not be greater; out of a total population of around 6.5 million, 3.3 million people belong to the Irish League of Credit Unions (ILCU), which is over 50% of the population of the island; the figure in percentage terms is even higher as under sixteens can’t be members. The ILCU for example has 14.3 Billion € in assets. Sadly the Credit Union movement in Northern Ireland is split on very sectarian lines and Credit Unions appeared almost exclusively in Catholic areas in the 1960s and 1970s. In the mid 1980s it became apparent that these were a great success and the Protestant community were keen to establish something similar. Typically despite the fact that ILCU was incredibly successful, the Protestant community wanted something with an “Ulster British Identity”, and approached the then National Federation of Credit Unions (NFCU), whose headquarters were in Bradford to ask for assistance. Ironically Reverend Eamon Casey (then the Director of Shelter and later Catholic Bishop of Galway) was one of the leading people in the formation of the NFCU. In contrast to the poor performance in Britain however, the Ulster branch proved to be a roaring success and outgrew the now ABCUL. It was decided to split and form a separate entity, the Ulster Federation of Credit Unions UFCU which is still growing rapidly and catching up with the ILCU in Northern Ireland.
So why have Credit Unions been such a success in Ireland but not in Britain? The success in the South of Ireland is fairly understandable as it happened in the 1950’s and 1960’s when it was far more difficult to get bank loans (almost impossible as a ‘sub prime’ customer) and had strong support from the Catholic church at a time when respect for the church and church attendance was very high. There was also strong buy in from the middle class community with teachers etc. often taking leading roles. There is a feeling that profit isn’t everything and helping the local community is important. Credit is not just confined to the ‘sub prime’ sector, loans are often taken out by the middle classes for things such as home improvements, considerably lowering the risk of default. In the North the first credit Union started in Derry, championed by no less a person than John Hume. There is also perhaps a strong sense of community sometimes lacking in Britain. There was also buy-in from many middle class members in the North and it is not just seen as just for the poor. The success of the UFCU is possibly more difficult to understand, but it seems to have been spearheaded by the Orange Order; many of the earlier CUs were in Orange Lodges where there is a sense of community and strong loyalty.
What can be done to improve the participation in Credit Unions in Britain?