Credit unions

Last updated: May 2009


We can collectively challenge the power of the banks – and local loan sharks – by taking fnancial services into our own hands. Katy Brown investigates credit unions.

Developed in the 19th century, credit unions are not-for-proft fnancial co-operatives, owned and controlled by their members. The members of any one credit union all share a ‘common bond’ – which could be living or working in the same area, having the same employer, or belonging to the same church, trade union or other organisation.

Members pool their savings, allowing loans to be made. There are approximately 600 credit unions in the UK, with around a million members. Their main purpose is to provide affordable loans and safe savings to their members, as well as educating members on managing their own fnances.



Credit unions’ basic functions are savings and lending, but some offer Child Trust Funds and Cash ISAs. Twenty-one now offer current accounts managed by the Co-op Bank. Money can be withdrawn directly at the credit union offce by cashing a cheque at a post offce or, in some cases, from a cash machine using a debit card. As they are not-for-profts, all money made goes back into running the organisation rather than to outside shareholders. If there’s a surplus at the end of the year it’s given back to members in the form of a dividend. Profts therefore stay within the community. Proposed changes to legislation would allow credit unions to pay savers interest instead.

A volunteer board of directors controls and manages each credit union. All offcers must be members, elected by the membership at an AGM on a one member one vote basis. A Supervisory Committee of members and an annual independent audit checks that the union is acting responsibly.

Credit unions invest their money in commercial banks, often the Co-operative or Unity Bank, a specialist bank for social enterprises, charities and trade unions – so they aren’t completely independent from the mainstream fnancial sector. Different credit unions use different banks so check where your money is invested before signing up. But your savings are as safe as anywhere else, with up to £50,000 protected by the FSA compensation scheme. And they’re legally obliged to insure themselves against fraud or theft.


Increased interest

In the face of the fnancial crisis, credit unions are reporting increased interest. According to Mark Lyonette, Chief Executive of the Association of British Credit Unions (ABCUL), credit unions provide a safe and affordable alternative to high street banks on the one hand, and money shops and loan sharks on the other. They offer savings and great value loans plus they’re local, ethical and know what their members want. Because they’re fnancial co-operatives, they’re sheltered from the current economic turmoil. They’re not controlled by anonymous City shareholders and since most of their funds come from members, they don’t gamble with their customers’ cash on money markets.



I finally got round to joining my local credit union in Edge Hill, Liverpool, in the process of writing this article. Joining couldn’t have been easier, I simply popped in armed with my passport and a recent utility bill with £1 to join and £1 for my frst deposit. A form was flled in for me and within a few minutes I was a fully paid up member – with a membership number, paying-in book and a vote at the forthcoming AGM.

The Edge Hill and District Credit Union Ltd, set up in 1992 by a group of neighbours and community members, now has 800 adult members and 250 child savers. Initial funding was received from both the Catholic and Protestant Church. The union was originally for people who lived in the area but has expanded to include local businesses and their employees.

The boundaries have been enlarged too. Volunteer worker Barry Evans said, “We were set up as an effort to put the loan sharks out of business.”  According to Barry, it’s worked,with local loan sharks in decline. “We’ve defnitely had a positive impact on the local community. We’ve set up four people in business and put two people through university as a result of training received through their involvement with us. One of them did a thesis on social welfare using this organisation as a study.” According to Barry, the credit crunch has seen an increased demand for loans, but no rush to remove savings – and the union continues to grow.

I plan to move my modest savings as soon as possible, as no matter how ethical, a bank is a bank and banks exist to make profts. And I’d much rather my savings help support people in my local community.

Find your local credit union. Call ABCUL on 0800 015 3060 or see or

Alternatively, check Yellow Pages or your local Citizens Advice Bureau