Financial inclusion and credit unions ZOE DIXON, TRANSACT, TOYNBEE HALL

Transcription

1 Financial inclusion and credit unions ZOE DIXON, TRANSACT, TOYNBEE HALL

2 What is financial inclusion? Financial inclusion is a state in which all people have access to appropriate, desired financial products and services in order to manage their money effectively. It is achieved by financial literacy and financial capability on the part of the consumer and access on the part of the financial product, services and advice suppliers. Financial capability is having the knowledge, skills, confidence and motivation to manage your money well. This includes understanding financial products, being able to use them and having the confidence and motivation to do so.

3 There must be recognition that financial exclusion can be caused by both insufficient or discriminatory supply and a lack of capability on the part of the individual only by tackling both will we move towards financial inclusion

4 Financial Inclusion Health Check for Organisations Analysis of organisational impact on service users financial health Data gathered through interviews and focus groups with senior and front-line staff and service users Measures reality gap between policy, practice and impact on service users Recommends action plan for quick wins and strategic/systemic improvements

5 What is a credit union? Common Bond APR capped Thrift Ethical alternative Community resource Savings Don t know Poor man s bank Community bank Loans Old fashioned A credit union is a profit sharing, democratically run financial co-operative which offers convenient savings and low interest loans to its members. The members own and manage their credit union themselves.

6 The objects of a credit union are- Credit Union Act 1979 (a) (b) (c) (d) the promotion of thrift among the members of the society by the accumulation of their savings; the creation of sources of credit for the benefit of the members of the society at a fair and reasonable rate of interest; the use and control of the members' savings for their mutual benefit; and the training and education of the members in the wise use of money and in the management of their financial affairs.

7 The Growth Fund Government support Administered by the DWP from the Financial Inclusion Fund 42m from m from ,134 loans ( 175,351,444) Based on 317,798 loans, total interest savings to FE individuals in deprived communities are estimated between 119.1m and 135.1m. The Legislative Reform Order Approved on 8 November 2011, into force on 8 January 2012 Removal of the exclusive common bond Provide service to groups Payment of interest rather than dividend

8 Government support Increasing the cap on APR This is currently set at 2% per month or 26.8% annually On the 1 st April 2014 this will change to 3% per month or 42.58% annually The Credit Union Expansion Programme (CUEP) 36 million given to the sector to expand and modernise Products a fuller offering Advertising increase awareness Skilling up transitory nature and reliance on volunteers Move towards sustainability, cease external funding in March 2015 Banking the unbanked, lending to the excluded

9 Credit unions take on Wonga London Mutual Credit Union s pilot: Can payday loan alternatives be affordable and viable? 6,087 applications requesting 1.5m 2,923 loans distributed with value of 687,757 (62% repeats) 3 month option, 59% Delinquency rates of 6.3% compared to 28% rollovers for industry Savings of 119 per borrower, 144,966 in total for the community 74% had borrowed in previous 12 months, taking average of 3.2 loans Almost 18,000 accumulated in savings 27% went on to take out longer loans Income of 12.02, to administer ( first, 4.00 repeat) 2.30 loss, but could be 3.06 income

10 Credit unions and universal credit Ending of direct payments Transactional bank accounts required Budgeting assistance required in many cases Solution? credit unions Examples of it working: East Midlands 28 founder members, pay for rent accounts at one of 5 CUs Citysave Credit Union Coast Housing and Neath Port Talbot Credit Union

11 Find your credit union

12 Any questions? Thank you for listening