‘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
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Credit unions – an introduction
Reasons for lack of growth
Why 1997?
Government policies
Conclusions
Credit Unions – An Introduction
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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
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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:
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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