The Association of British Credit Unions (Abcul) is talking to banks and building societies about how best to expand the financial services its members receive.
The association, which represents most of the UK’s 680 credit unions, has set itself a target of providing 1.5million people, half of whom it says are excluded from obtaining credit from banks and building societies, with £1.3billion of low-cost credit by 2006.
Abcul has called on leading UK banks and building societies to fund a central services organization that would provide credit unions with administrative support, treasury services and technical and marketing assistance.
Simon Williams, head of corporate affairs at The Co-operative Bank, where most UK credit unions bank, said a central facility would enable credit unions to play a much bigger role in Britain than before.
But it would ‘require a much broader view of the market to be served by credit unions – serving the workplace as well as the community, and avoiding the stigma of being just for poor people’, he said.
Abcul’s recently published business plan for the central services organization envisages providing more than 700,000 individuals with a low-cost equivalent of a current account for bill paying and access by debit card, and also limited overdraft facilities, by 2006.
It says the central services organization would be fully operational by the start of 2002. The facility would be expected to function without subsidy within a further four years.
Abcul representatives are meeting banks to discuss the contribution they might make.
The request for funds comes at a time when UK banks are under pressure to lend financial support to a Post Office plan to provide basic banking services through its 18,000 outlets (see EP2, 2000). The Universal Bank would serve the estimated two million people who at present do not have access to a bank account.
A business plan outlining the idea was put forward by the Post Office last month, but received a lukewarm reception from most banks. The plan proposes that banks collectively contribute £130m a year to the running costs of the Universal Bank.
The government and the banks have been asked to respond officially to the business plan by the end of the year.
Abcul told EP the credit union scheme was not a challenge to the Post Office’s proposals.
‘There’s no reason why once the central services organization is established, our people couldn’t use post offices just as account holders of banks do at present,’ it said.
UK credit unions have £165m in assets and 270,000 members.