Credit unions and financial inclusion

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By Damian Hinds MP - 23rd November 2011

Damian Hinds MP writes about the rapid development of the credit union sector and the potential for much further growth.

Over one million UK households still do not have a transactional bank account. Many, many more rely on very high-cost sources of credit such as doorstep lenders.

Credit unions offer accessible current account facilities and an alternative to high-cost lenders: responsible, affordable credit, along with the encouragement of savings.

This month, the Legislative Reform (Industrial and Provident Societies and Credit Unions) Order was made. The LRO paves the way for innovation, growth and consolidation in the credit union sector. It will liberalise the 'common bond' requirements, allow fixed savings rates rather than the 'divi' to be paid on savings accounts, and allow credit unions to have organisations as well as individuals as members.

The government has also committed up to £73m to a credit union modernisation fund to help stimulate sector development. Possibilities have been discussed for hooking up credit unions with the retail network of the Post Office, as well as greatly improving the back office functionality and interfacing of credit unions.

The sector has grown rapidly in the UK over the last number of years but remains small by international comparison (except in Northern Ireland). This is an exciting time, with the potential for much further growth, and the Westminster Hall debate will give an opportunity to discuss the issues and opportunities involved.

Damian Hinds has been Conservative MP for East Hampshire since 2010 and is the chair of the APPG on Credit Unions