A CREDIT union would benefit the whole community. But the idea needs to be fully investigated before being given the green light.

Credit unions are cooperative financial institutions owned and controlled by the members who use them.

‘In common with what goes on in England and lots of places in the world, people are utilising credit unions as one of the ways to address poverty and exclusion from financial services,’ said visiting consultant Chris Funnell.

He was invited by the Citizens Advice Bureau to see if the idea would assist people in poverty locally.

‘It’s far too early to say. We have got to look at it from several points of view,’ said Mr Funnell, who has 12 years’ experience in the field.

‘Firstly, is it legally feasible to set up a credit union or credit-union-like operation without investing enormous time and resources in adapting the law?’

Factors like whether there is a need and if it is possible to create the physical infrastructure also need to be addressed.

Mr Funnell said that credit unions let in anybody and, because of the way they operated, people had to save before they could borrow, which is normally in proportion to their savings.

Financial advice is also offered to help people build up a credit rating necessary to allow them to use mainstream financial organisations.

‘It encourages thrift first: savings first and borrowing next.’

Borrowing costs were low and there were no charges for setting up the account.

‘They are really useful. They do help people not get into debt and if they do, to gradually get out of debt.’

To work, a credit union needed sufficient people involved and it could also benefit those who were financially better off.

‘They are used by people who prefer to do business with financial services they own and control and people who prefer to put some of their money into an organisation that’s allowed to use that money only for the benefit of the local community – it’s the ultimate in ethical banking.’

To have a self-sustaining credit union, Mr Funnell believed about one in 10 people in Guernsey needed to be involved.

‘I think that in a sense how a credit union really demonstrates its value to the community is by bringing it together by making the richest and poorest owners and members of the same institution.’

A union took between one and two years to set up and another five before it could function as a fully independent organisation.

Before then, government and charity would support it.

‘They have to be convinced the pay-offs in terms of the contribution to the anti-poverty strategy is worth that investment.’

There are now between 600 and 700 credit unions in the UK.

‘We’re talking about hundreds of thousands of members and tens of millions of pounds in savings and borrowing,’ he said.

‘Because of the cost and energy involved, the majority are focused on areas where there’s significant depravation.’

Mr Funnell got involved with setting up unions after working on a project in a deprived area. He decided to move there and had his credit card cancelled because of his postcode.

‘I decided that I would look into the solution of this thing of not having the power to decide.’

He is now involved in training and consultancy work.

‘Credit unions do have a massive impact on people’s lives.’

n Chris Funnell and the Citizens Advice Bureau would like to hear from anyone who has a view about setting up a credit union. He can be emailed at chris@can.coop