‘the development of credit unions in the united kingdom - a critical review of government policies...

‘The development of credit unions in the United Kingdom - a critical review of government policies

since 1997’

Dr. Nicholas Ryder

Head of Commercial Law Research Unit

Department of Law

UWE

Introduction

• Credit unions – an introduction

• Reasons for lack of growth

• Why 1997?

• Government policies

• Conclusions

Credit Unions – An Introduction

• What is a credit union?• What is the purpose of a credit union?• Historical development• Statistical data• International comparisons

– United States of America– Canada– Australia– United Kingdom

Reasons for lack of growth

• The youth of the movement• Stages of development• Inappropriate development models• A single trade body• Over reliance on state funding• Restrictive legal framework• Weak financial regulation• Public perception as a ‘poor persons’ bank’

Why 1997?

• Conservative policy 1979-1997

• General Election May 1997

• Creation of the Social Exclusion Unit and the Credit Union Task Force

• Credit unions propelled from political obscurity to height of New Labour’s financial inclusion agenda

• Promotion of affordable credit

Government Policies

• Models of Development– Credit unions traditionally developed on the

old or social model– Heavily reliant on state support– Many credit unions were insolvent– New model adopted with conditions– Promotes credit unions as economically

viable financial institution

Government Policies

• Single Trade Body– Fragmented representation– Association of British Credit Unions Limited– Proposed creation of the Central Services

Organisation– Credit Union National Association (US)– Irish League of Credit Unions (ROI)

Government Policies

• Restrictive legal framework– Credit Unions Act 1979– Regarded as the most restrictive of its type in

the world– Particular provisions include:

• Common bond• Provision of loans• Additional financial services• Membership of a compensation scheme

Government Policies

• Weak financial regulation– Credit Unions Act 1979– Registry of Friendly Societies– Restrictive interpretation of key phrases within

the Credit Unions Act 1979– Financial Services Authority and

reinterpretation of key phrases– Membership of the Financial Services

Compensation Scheme

Government Policies

• Devolution– Welsh Assembly Government

• ESF Funding• Adoption of new model• Membership increase by 216%

– Scottish Government• ESF Funding• Adoption of new model• Membership increase by 99%

Government Policies

• Public perception as a ‘poor persons’ bank’– Still seen as a panacea for debt and poverty– Often associated with combating problems

associated with loan sharks, pay day loans and irresponsible lending

Conclusions

• Credit unions have grown during the ‘Credit Crunch’

• Due to government support

• Continued support by the Coalition Government

• Growth has reached a plateau

• Lessons from history

Contact details

• Nicholas.ryder@uwe.ac.uk

• http://twitter.com/#!/DrNicRyder