Saturday, March 17

In My View

The Aricle above is from The Northern Echo in January this year.
The piece below was published in The Journal on Wednesday 14 March.

Credit where credit is due – by Peter Troy

Rarely these days are the words, bank charges, bank profits, credit, and debt out of the headlines. What is very rarely in headlines is – what are the alternatives to high street and internet banks as well as high interest rate doorstep lenders.

Enter 'credit union' into Google and an amazing 44,800,000 entries are flagged up. So what are Credit Unions and why is the Government so keen to offer support? They are democratically - run co-operatives - which appeals to Labour’s traditional activists - they offer low-interest loans encourage their members to save regularly and also borrow at affordable rates. Importantly Credit Unions refresh the financial needs of people that the high street banks can't or won't refresh.

One key function of Credit Unions is to significantly reduce the influence of 'doorstep lenders' which were comprehensively criticized in a report last year; a £300 loan over 30 weeks would involve paying back around £450. A credit union loan would require paying back around only £320.

Credit Unions are well regulated and thus safe. Regulated by the Financial Services Authority they are co-operatively owned and run by the savers who are also members. Loans can be taken out for as little as £10 pounds or much larger amounts depending on how much has been saved. The system works because by members making regular savings they form a pool of money which is then available to be lent out to members who they have been saving for a qualifying amount of time (usually about 8-12 weeks).

Credit Union's are not new, their history dates back to 1864, when one Fredrich Raffiesen founded the first credit union in Heddesdorf in Germany. By the time of his death in 1888 credit unions had spread to Italy, France, the Netherlands, Austria, and North America and to a lesser extent Britain.
In recent years the concept has grown considerably to 560 across the UK - 16 of which have been established in recent years in the North East.

To establish a Credit Union there needs to be a common bond which determines who can join. For the Durham City and District Credit Union, which was launched in 2003 and has over 160 members, people have to live and work within the boundaries of the City of Durham but the common bond can be a place of work, church or community group. The essential ingredient in the establishing of a Union is the considerable efforts and dedication of groups of local volunteers.

In the North East, Credit Unions have received a welcome boost of publicity thanks to Durham MP Dr Roberta Blackman-Woods. The tenacious MP recently joined the City of Durham Credit Union and then immediately asked a question in the House as to what extra help Credit Unions can expect from the Government in the wake of the collapse of the huge savings club organized by Fairpark which was forced into liquidation at the end of last year causing much misery to thousands.

The prompt reply from Ed Balls, the enigmatic Economic Secretary to the Treasury stated that a Growth Fund of £36 million to boost coverage, capacity and sustainability of credit unions was being made available. The Government is also shortly to announce further funding to support the training requirements of staff and volunteers working for such organizations.

So there we have it the growth of co-operatives filling a role as much needed in the 21st Century as in the 19th. Clearly there is such a thing as society.
More information on Credit Unions can be obtained from the office of the Durham and City Credit Union 0191 375 7677.

No comments: