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Modernisation and expansion – feasibility study update
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
External Relations Managers
| Name | Role | |
|---|---|---|
| Sharon Wheeler | Working with the Housing Sector |
Sharon.Wheeler@cih.org |
| Suzanne Wigmore | Working with Local Government and local authorities |
Suzanne.Wigmore@bristol.gov.uk |
| Will Aston | Working with DWP’s business partners and the community and voluntary sector |
Will.Aston@bristol.gov.uk |
DWP Feasibility Study Project Team
| Name | Role | |
|---|---|---|
| Christine Steele | Communications | Christine.Steele@dwp.gsi.gov.uk |
Modernisation and expansion – feasibility study update
7 June 2011
The feasibility study project steering committee (PSC), chaired by Deanna Oppenheimer from Barclays Bank, met for the first time last month.
The objectives of the feasibility study and the terms of reference for PSC have been agreed.
The objectives are to:
- create access to a common range of financial services for up to a million people on lower incomes
- offer these financial services through credit unions, a customer service centre, and ideally across Post Office counters
- expand and modernise credit unions capable of delivering these services so they may become sustainable within five years.
The terms of reference for the PSC are to advise:
- on the objectives of the programme.
- on the specification of the feasibility study, including the suitability of the study areas proposed. DWP will manage the commercial relationship with the contractor.
- Lord Freud whether the study provides evidence to support the investment of up to £73 million of public money between 2011 and 2015.
Issues being considered by the PSC include:
- why credit unions have greater market penetration and are more successful in some countries than others
- what realistic options exist for achieving the expansion and modernisation of the sector
- what realistic options exist for providing services to a million more people on lower incomes
- the degree to which credit unions aspire to expand, and
- the degree that an IT solution to these issues could drive the changes sought.
Our view is that IT solutions will need to work alongside a programme of cultural change with the need for credit unions and others to:
- have the desire and capacity to serve more people,
- increase the range of products and services they offer,
- reduce their operating costs and
- make a surplus from the income from operations.
We see credit union mergers as having an important role in helping to achieve these ambitions. The performance of credit unions and CDFIs with existing DWP contracts is also clearly important.
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:
- the new management information required from contractors,
- mergers and plans to develop, and
- performance against contract.
After the forums we will hold individual consultations with all DWP financial inclusion contractors. This will allow more detailed discussions about the potential and options for growth. We will supplement the consultations with similar discussions with a range of other credit unions that do not currently have a contract with DWP, and indeed may not wish to have a contract with DWP in the future.
Modernisation and expansion – feasibility study update
3 June 2011
The Department for Work and Pension plans to continue its work with credit unions to increase financial inclusion and reduce poverty. This policy aims to:
- foster diversity,
- promote mutual financial organisations, and
- develop a thriving and efficient credit union sector.
Building on the DWP Growth Fund (which ended on 31 March 2011), support for credit unions may continue for up to four years through the new modernisation and expansion fund of up to £73 million.
The objectives of the new fund are to enable delivery of financial services to financially excluded people and people on lower incomes. These services include:
- bank accounts,
- a bill payments service, and
- credit and savings products.
We also want to support the expansion and modernisation of credit unions to the point where they are able to become financially sustainable within four or five years.
From April to September 2011 we will be working with our partners, including the Post Office, to test the best way(s) of expanding and modernising those service delivery organisations that are ready to expand. We will conduct a feasibility study to examine the scope and options for the modernisation and expansion of credit unions, including the readiness of credit unions to expand as described.
During feasibility testing, existing contracted suppliers who met our selection criteria will continue to deliver the customer facing financial services that they do now.
Following feasibility testing, we will decide on the way forward and make a further announcement.
The feasibility study will be led by a project steering committee (PSC) that will report direct to Lord Freud, Minister for Welfare Reform. The PSC will be chaired by Deanna Oppenheimer, CEO Barclays Bank Western Europe.
To support this work we have appointed three external relations managers. Their role will include:
- raising awareness of the potential to develop a centralised credit union type support solution,
- keeping our partners up to date with developments from the feasibility study, and
- promoting business relationships between credit unions and those interested in working with them.
The relationship managers are:
- Sharon Wheeler, working with the Housing Sector
- Suzanne Wigmore, working with Local Government and local authorities
- Will Aston, working with DWP’s business partners and the community and voluntary sector.
