Updated 27 June 2012

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Credit Union Expansion

27 June 2012

DWP are pleased to confirm that it was announced today that the Government will take forward the findings of the Credit Union Feasibility Study (UK Parliament website). 

In particular, the DWP will make a further investment of up to £38 million over the next three years in credit unions.  This investment, which is in addition to the £13 million invested in 2011/12, will be conditional upon the credit union industry meeting a number of agreed milestones for collaboration, modernisation and expansion.

The aim will be to support the sector to provide the kind of financial services that people want for up to one million more consumers on lower incomes, and do so in a way that enable credit unions to modernise, expand and become financially sustainable.

Further information will be published next week.

Save the Date: 3rd July 2012 in Birmingham

An event is being organised in Birmingham to build on the consultation and understanding of the credit union feasibility study recommendations. The event is intended for credit unions and partners and will include a briefing on the requirements of the department and timeline, followed by a question and answer session.

This update is to advise you of the proposed date.  Further details of the venue, timing and agenda will be confirmed as soon as possible.

To register your interest, please send the name(s), position held and organisation(s) details to:

Catherine Mitchell - Catherine.Mitchell3@dwp.gsi.gov.uk
by Friday 22nd June 2012.

Further events may be held dependant upon demand.

Request for views on recommendations of the Credit Union Feasibility Study

10 May 2012

Credit unions have made substantial progress in recent years to increase access to financial services and loans to people on lower incomes, but more can be done to secure credit union expansion and modernisation to the point where they serve a million more people and become sustainable.

DWP managed a feasibility study to examine the scope and options for the modernisation and expansion of credit unions.

The feasibility study  (423KB) is now complete and has established that:

• there is a market and demand from low income consumers for modern banking products and services, and that the total market could be as high as 7 million people.
• credit unions are ideally placed, serving their local communities, to help meet this demand and serve an additional 1 million people.
• consumers on lower incomes would be willing to trust credit unions to provide their financial service.
• credit unions can become financially sustainable if they:
  • complete a major programme of business and cultural change
  • introduce automated systems to reduce their operating costs and allow them to introduce the modern financial services that potential new customers need
  • attract a balanced mix of customers able to make deposits, and take out loans with a wider value range than can be the case at present.

How you can help us

We think the report suggests a real way forward for the credit union sector and we would be happy to hear your views on an informal basis.  Your views on how credit unions could serve one million more people and achieve financial sustainability would be very welcome as part of our ongoing informal dialogue with the credit union sector and those interested in its development.

If you would like to share your views with us, please email us at: Newcastle.thegrowthfund@dwp.gsi.gov.uk by Friday 8th June 2012.

Modernisation and expansion – feasibility study update

10 April 2012

Although the Growth Fund has ended, more still needs to be done to secure credit union expansion.

Ministers have considered the recommendations of the Project Steering Committee and are keen to support credit unions ready to embrace change and expansion. An update will follow soon.

In the meantime we are organising a number of regional road shows to share the findings from the credit union feasibility study with those who have an interest in the effects of financial inclusion on their customers.

28 October 2011

We have now submitted the feasibility study for the DWP credit union modernisation and expansion programme to the project steering committee (PSC).

The PSC will review the feasibility study findings during November before making a recommendation to DWP Ministers on how and whether the programme for the modernisation and expansion of credit unions should proceed.

While the PSC may request additional information, we anticipate Ministers will make a decision by the end of 2011. In the meantime, we have extended Growth Fund contracts with our partner credit unions and community development financial institutions for a further six months. This will ensure they can continue to deliver affordable credit in the run up to Christmas and on to March 2012.

We want to thank all of you for feeding into the feasibility study. The active engagement of so many stakeholders has ensured that our recommendations are evidence based and realistic. Over 4,500 consumer surveys were undertaken and 92 credit unions and community development financial institutions provided their views on the opportunities and challenges for achieving growth.

In addition, we consulted a broad range of organisations, including:

• local authorities
• housing associations
• charitable foundations and
• voluntary sector organisations representing the interests of low-income and financially excluded people.

We can confirm at this stage that our research suggests there is a:

• large demand for affordable credit, although consumer knowledge of credit unions is limited
• real appetite for growth by the credit union movement and
• desire to move towards sustainable business models.

Many of the local authorities and social housing providers that we consulted:

• championed the work of their local credit unions
• said it would be difficult for them to maintain current levels of support.

At the same time, as the DWP credit union expansion and modernisation feasibility study is being considered, changes to the Credit Unions Act 1979 are due to pass through Parliament. The Legislative Reform Order complements the aims of the feasibility study. It will enable credit unions to grow their membership by removing restrictions in the current law, allowing them to:

• provide services to community groups, businesses and social enterprises and
• offer interest on savings, instead of a dividend.

While we are waiting for decisions on the way forward, DWP will continue to work with contractors to prepare for the future.

The DWP contract management team is arranging a new programme of regional forums for their contractors where a range of issues and suggestions will be discussed. These will include:

• future Business Change Plans, and
• what changes can be made now.

As well as these forums we have held loan process mapping events around the country. This allowed DWP contractors to work in small groups to:

• look critically at their own loan process maps and
• consider a standardised loan process model that they could all operate.

Following these events pilots are now taking place to test the agreed models.

Key contacts

DWP Feasibility Study Project Team