ECONOMICS

CREDIT UNIONS

Introduced by Tim Pearce, Regional Co-ordinator for the South West of the Co-operative Party ,on 11 December 1997

Although established for some time, Credit Unions have been attracting interest in the press recently and the speaker was confident that a growing number will be set up. A Union was being formed in Bath and Councillor Gillian Pitman spoke about its progress.
The basic idea is that members save each week and once a depositor has been a member for thirteen weeks, an application can be made for an unsecured loan of up to five times the amount saved. Repayment is weekly at the same rate as money deposited. Maximum interest charged is 1% a month on the outstanding balance and interest at up to 7% p.a., decided by the management committee, is paid on credit balances.
A key factor in any scheme is the concept of a common bond amongst members. They may be residents in a particular geographical area; employees of a company; members of a church, or the self-employed in a particular industry. Well-established Credit Unions exist for black-cab drivers, members of police forces, employees of certain local authorities, etc. The common bond concept ensures a greater feeling of responsibility amongst members and means that the elected management committee have a good knowledge of the outlook of the membership. Those based on a geographical area must limit the boundary for this reason.
The schemes are attractive to those who do not have bank accounts, but they have also appeal more widely because of the favourable rate of interest on loans.
The discussion group questioned the speaker closely about all aspects of the running of a Credit Union. It was interesting that the principle of mutuality was important at a time when it appeared to be reducing in Building Societies. The meeting reserved judgement on the potential for growth of this form of personal finance, but noted the popularity of Credit Unions in Ireland and Canada.
Rodney Tye