5 December 2005
Treasury Mapping of Credit Unions and Community Development Finance Institutions (CDFIs)
As set out in ‘Promoting Financial Inclusion’ (Pre-Budget Report 2004), many people on low incomes are unable to access mainstream credit products that meet their need for low value, short-term loans. Reliance on alternative credit sources, such as home credit companies and pawnbrokers, means that the most vulnerable consumers typically pay Annual Percentage Rates (APRs) in excess of 100 per cent.
Third sector, not-for-profit, lenders such as credit unions and CDFIs offer an affordable, community based alternative.
Credit unions are mutual financial organisations offering savings and loan facilities to their members. Credit unions are legally obliged to define a group of people who share a ‘common bond’ from whom they can recruit their membership and to whom they can provide services. This is often the workplace and/or the local community.
CDFIs are not-for-profit organisations providing lending and investment facilities at competitive rates in disadvantaged communities. Although the majority of CDFI activity is focused on lending to small businesses, there has been a rise in recent years in the levels of personal lending and micro-finance lending (the lending of small sums to individuals in order to spur business creation).
The Government recognises that where credit unions and CDFIs serve communities in particularly deprived areas, they can be vital in targeting those encountering exclusion from mainstream financial services, helping clients obtain money advice in the course of providing a loan, and connecting people to more mainstream opportunities. In order to enhance the coverage, capacity and sustainability of this sector, the Government has taken a number of initiatives:
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A Growth Fund of £36 million will be administered by the Department for Work and Pensions from mid-2006 to increase the supply of affordable loans to those on low incomes by third sector lenders.
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In order to increase the ability of credit unions to lend to the financially excluded, the Government will increase the maximum rate that credit unions can charge on loans to 2% a month. This decision follows a period of consultation with the sector and consumer groups.
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The Financial Inclusion Taskforce, established in February 2005, has been tasked with monitoring and evaluating the impact of the Government’s initiatives in increasing the provision of affordable loans and considering how such provision could be further enhanced.
In ‘Promoting Financial Inclusion’, the Government published its intention to map the location of credit unions and CDFIs in order to ensure that support provided to these organisations is appropriately targeted.
These maps were created using data from the English Index of Deprivation 2004, the Scottish Index of Multiple Deprivation 2004, and the Welsh Index of Multiple Deprivation 2005 .
The maps will be used, in conjunction with other sources of evidence to identify gaps in the coverage of affordable sources of credit and to inform future policy development.
The maps are available below in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website. For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page . Please note: some of these files are large and so may take several minutes to download depending on your network connection.
Credit unions and CDFIs mapped against deprivation, by region
East England
East Midlands
London
North East
North West
Scotland
South East
South West
Wales
West Midlands
Credit unions and CDFIs mapped against deprivation, by city
Birmingham
Blackburn
Bolton
Bradford
Cardiff
Coventry
Edinburgh
Glasgow
Hull
Leeds
Leicester
Liverpool
London
Manchester
Middlesbrough
Newcastle
Newport
Nottingham
Oldham
Sheffield
Southall
Wolverhampton
Credit unions and CDFIs mapped against population density, by city
Birmingham
Blackburn
Bolton
Bradford
Cardiff
Coventry
Edinburgh
Glasgow
Hull
Leeds
Liverpool
Leicester
London
Manchester
Middlesbrough
Newcastle
Newport
Nottingham
Oldham
Sheffield
Southall
Wolverhampton
