Credit unions around the country are becoming more effective at reaching the financially excluded, helping people to stop using expensive home credit, encouraging people to save and providing services to people who don’t have bank accounts according to new research from Bristol University.

Of the 1,473 credit union members from 17 credit unions who were questioned for the survey, 22% had used home credit at some point and, of these, 41% had stopped using home credit as a direct result of joining the credit union; a further 16% had used home credit less since becoming a member. 

The report, entitled Membership counts: Who uses Credit Unions? also shows that credit union members are less likely to have a bank account than the general population – only 83% of credit union members reported having a bank account, compared to a national figure of 93%.  Amongst credit union members on low incomes (less than £200 per week), 29% were without a bank account.   Credit union members were also found to be more likely than the general population to be managing on a low income and in social housing - two of the main indicators for financial exclusion identified by the Government. 

For nearly a third of respondents (31%), their credit union account was their only way of saving.  This rose to 46% for those living in low-income households (£200 or less per week).  Almost three quarters of the members questioned said they saved regularly with their credit union, and the most popular reason for saving with a credit union was that it was ‘a more convenient way to save’, a reason given by 58% of respondents. 

The research was commissioned by the Association of British Credit Unions Ltd (ABCUL) with funding from the Esmee Fairburn Foundation and was carried out by the Personal Finance Research Centre at Bristol University.

Sharon Collard, a Research Fellow at Bristol’s Personal Finance Research Centre, who conducted the research said: “Credit unions can clearly play an important part in providing access to financial services.  The challenge is to ensure that these services are available as widely as possible within the communities they serve.”

ABCUL CEO Mark Lyonette said: “This report shows how credit unions are reaching a wide range of people in their communities and provides an invaluable baseline from which credit unions can measure their current and future work.  It will help inform strategies for bringing credit union membership, and the affordable credit and savings opportunities that come with it, to many more people in years to come.”

The Esmee Fairburn Foundation has funded the research as part of a project designed to enable more credit unions to offer transaction banking to their members.  A deal developed by ABCUL and a number of its member credit unions is enabling credit unions to offer their own current accounts to members using the back office services of the Co-operative Bank.

Sharon Shea, a Grants Manager at the Esmée Fairbairn Foundation said: “The Foundation is interested in innovations which help those credit unions serving the poorest areas and customers to innovate and grow to scale.  This project we are currently funding has the potential to have a significant impact on the credit union movement in the UK which, as this research report demonstrates, do offer a way out for people on low incomes.”