Credit unions could be the answer for community-minded businesses seeking a bank
Imagine keeping your money somewhere which directly and only benefitted the community you live in – as close to a purely ethical 'bank’ as you could imagine.
In other words, while you get on with life and business assured your money is safe and ready for you when you need it, that same money is also serving others – sometimes far more needy than you.
At different times in different contexts ideas of mutuals and building societies supporting members rather than shareholders were in favour, then out of favour, as the nation voted for the benefits of commercial banking.
But the limitations and instincts of a market dominated by such institutions has also become apparent and not always desirable, first as a result of the financial crash and its wake.
And then came COVID-19, resetting the dials, making many think hard about the roles they play in their communities like never before.
Not every company can turn its hand to producing PPE, scrubs or food parcels to express their support, but anyone with even a very small amount of money can think about opening a credit union account.
At least that is what Gloucestershire Credit Union would like to see happen – be that a contingency fund, a firm’s annual charity fund-raising efforts or its Christmas party kitty. Smaller firms can even open corporate accounts.
In doing so you would be investing directly in your community through the financial co-operative.
It is what The Raikes Journal has done, meaning every penny that is spent with us works for the county.
Al Jack, who helps run the Gloucestershire Credit Union from its headquarters at Gloucester Library, said some firms already had accounts, others used it to save because they want their money to benefit where they live.
Gloucestershire Credit Union’s compensation scheme covers savings up to £85,000 – but far, far smaller sums invested in the community enterprise are more usual and still have considerable impact.
“Any business that is able to bank with us will be benefitting the community automatically,” said Mr Jack, who began working life as a technical IT engineer, but is now one of just three paid-up staff members among an able team of county volunteers.
Credit Unions’ hurdle to overcome is the perception they are just for those who cannot access mainstream banking, obtain a credit score or live on or below the breadline. They are for everyone.
“There are two ways of looking at credit unions. For many, they are simply a place to get credit and manage their finances. To the others, perhaps a way of ridding themselves of the banks entirely,” added Mr Jack, who left his native Glasgow aged just 10 as his father’s career in the steel industry took the family ‘all over’.
“We do have some companies who use us already, and we have been wanting to promote the service more to business for some time, but it is how to do it. And we have to move carefully because we need to make sure our level of service continues too.”
Membership is growing. The county’s union passed 1,000 members in January. Members can access their accounts online and obtain pre-paid debit cards to help them manage their money.
“Our challenge is we need to broaden our offer or we will never be a truly viable business other than to people on the breadline. We need people with savings to put it into the credit union, and we work very hard to get loan pricing right so we can offer competitive rates”
While it is there for everyone, it is not a soft touch. If you need a loan and your credit and financial history is doing you no favours, the credit union might offer you an interest rate on a loan of 42 per cent.
“That shocks some people, but when you tell them the same person could otherwise be looking at 1,200 per cent elsewhere (with the payday lenders), it suddenly looks a lot more reasonable. Loan sharks are in another league altogether.
“Ultimately, we need to set the rates right to make sure our everyone is protected, but we will work with people to try to get the lowest rates possible. If we know someone has a good credit history, we can take them straight through to other much lower options.”
Those with poor credit histories should not downhearted, however. The union did, he said, work hard to “offer pathways to lower interest credit to members who come to us with poor credit histories by building a relationship with us over time”.
In the credit union’s own words, its three main aims are to encourage its members to save regularly, to provide loans to members at fair and reasonable rates of interest and to provide members with help and support on managing their financial affairs (if required).
In short, credit unions also offer higher interest rates on deposits and lower rates on loans.
According to the Gloucestershire Credit Union’s website “credit unions’ approach to finance is over 150 years old but it has stood the test of time. They began in Germany in the 1850s and have since spread all over the world.
“Gloucestershire Credit Union is one of over 57,400 credit unions operating in more than 115 countries including Australia, America, the Dominican Republic and the Seychelles”.
To find out more visit Gloucestershire Credit Union.