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Newsroom & speeches
25 October 2007
The Economic Secretary, Kitty Ussher, today met people in Miles Platting who have benefited from loans funded by the Government’s Growth Fund and distributed by Manchester Credit Union – avoiding the trap of using expensive forms of home credit and loan sharks.
Manchester Credit Union (MCU) last year successfully bid for money from the Growth Fund, part of the Government’s Financial Inclusion Fund set up to help the small but significant minority of people who are unable to access even the simplest financial services, leaving them vulnerable to serious debt.
One of the main barriers to these people using some credit unions was the need to save for 10 to 12 weeks before borrowing - a requirement needed because those savings are used to provide funds for loans. The Growth Fund makes separate money available so that credit unions can provide instant affordable credit to those who were financially excluded - in particular those who traditionally used home credit (charging in excess of 177% APR) or even loan sharks, who charge even more extortionate rates of interest.
Kitty Ussher visited the MCU in its Miles Platting office - based in one of the most financially excluded parts of its area of operation – which opened in February. In the ensuing eight months the MCU has had almost 1,000 new members, of which 700 have had an affordable loan from the Growth Fund.
The Minister met some of these new members, who are also encouraged to save a small amount each week whilst repaying the loans, which then qualifies them for loans at even lower rates of interest.
Kitty Ussher said:
“Everyone should be able to manage their money effectively and securely; plan for the future with a reasonable degree of security; and have the information, capability and confidence they need to prevent avoidable financial difficulty. Meeting these people today has shown how the Government’s Growth Fund, together with the help of the MCU, has made a very real and significant difference to their lives.
“Cooperatives and credit unions provide an excellent service and I want them to thrive and grow further, providing a local, trusted, alternative to the national banks on every high street, bringing a greater range of services to a wider range of people. Overhauling the outdated legislative framework they operate in will be key to achieving a significant expansion of the sector.”
“As a first step I am today announcing that we will make an order under the Electronic Communications Act 2000 to permit cooperatives to communicate with their members and the authorities electronically. I can also announce that we will work with the FSA to see what can be done to include tenants and employees of housing associations within the common bond of existing credit unions. Both of these measures have long been requested by the sector.”
Manchester Credit Union Manager Christine Moore said:
“The Government’s Growth Fund helps us to help people who face financial exclusion, and it is essential that the fund continues to enable credit unions to make a real difference, helping people towards financial inclusion and to become strong enough to continue to offer the loans in the long term”
Mark Lyonette, chief executive of the Manchester-based Association of British Credit Unions (ABCUL), said:
“I’m delighted that the Minister has been able to see such a dynamic credit union in action today in Manchester. Manchester Credit Union provides a great example of how credit unions around the country are using the Growth Fund to make sure that more people have access to affordable credit and other essential financial services such as safe savings.”
1. While visiting MCU today Kitty Ussher reaffirmed her commitment to the mutual sector by delivering two key reform proposals requested by the sector - requests to relax membership qualifications for credit unions – usually referred to as the common bond, and to allow electronic communication between cooperatives and their members and other stakeholders.
2.The Minister also announced today that the Government will publish a consultation paper in December 2007 setting out how it intends to take forward legislative reform for the credit union and cooperative sector.
3. HM Treasury invited the Department of Work and Pensions to run the £42 million Growth Fund to allow credit unions and community development finance institutions to make affordable loans to financially excluded people without access to mainstream credit. Since the Fund began in 2004 more than 100 of these lenders are now receiving funding, and over 41,000 loans have been made.
4. Manchester Credit Union (MCU) was founded as the East Manchester Credit Union, in one of the most deprived areas of the country. It provides a range of local, easily accessible and affordable financial services for people facing financial exclusion – including loans to help them avoid the trap of loan sharks who charge extortionate interest. The organisation expanded in February to cover the whole of the city of Manchester.
5. The MCU was formed in 1991 as Beswick and Openshaw Credit Union. It has offices in Beswick (open 6 days a week) and Miles Platting (open 5 days a week). There are also 7 satellite collection points in Clayton, Gorton, Openshaw, Newton Heath and Collyhurst. Further cash collection offices are due to open in November in Cheetham Hill, Blackley, Monsall and Wythenshawe. MCU also provides credit union services via payroll deduction to employees of Manchester City Council and MANCAT, as well as most of the major social housing providers in Manchester. MCU will also be bidding to the DWP Growth Fund to enable it to offer the new Credit Union Current Account to members, which would be a major step forward in terms of financial inclusion, as many of its existing and potential members do not currently have a bank account.
6. The MCU can be contacted on 0161 231 5222; email info@manchestercreditunion.co.uk ; web http://www.manchestercreditunion.co.uk/
7. ABCUL is the main trade association for credit unions in England, Scotland and Wales. At the end of September 2006, ABCUL's 400 credit unions were managing over £348 million of members' savings on behalf of over 426,000 people, and had over £308 million out on loan. ABCUL is the country’s largest development, information and training network for new credit unions. It is a democratic, not-for-profit organisation and is improving day-to-day operations, legislation and regulation for all credit unions.
8. Media enquiries should be addressed to the Treasury Press Office on 020 7270 5238
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