Credit unions are not-for-profit financial organisations set up for the purpose of ethical savings and borrowing and provide an alternative to traditional banks and high-rate loan providers. The Minister has brought together representatives from credit unions across Wales for a special event to see how their role in supporting communities can be extended, especially in light of the current economic climate.
The money revealed today will go towards encouraging more people to use credit unions. It will also help the institutions to develop the services and products they provide for customers so that credit unions become a more visible and widely available source of affordable financial services.
£612,000 of the funding will support the work of Welsh credit unions for another six months, from October through to March 2014. This money will allow the extension of a three year Welsh Government backed programme to increase assets and membership of credit unions, which was due to end in September.
The offer of an additional £1.25million is dependent on credit unions providing a business case setting out how they will significantly extend their reach and services.
Credit unions offer people an alternative to payday loans and the Minister is concerned about the rise of payday lenders in Welsh high streets. He has submitted evidence to the Office of Fair Trading (OFT) consultation on referring the payday loan market to the Competition Commission and met with OFT officials.
Today, he will challenge credit unions to provide additional financial services and products to meet the needs of customers. The proposals they submit will help him to decide how best to support the credit union movement in future years. The Minister said:
“Credit unions are unique. They are run for communities by communities and offer a real, ethical alternative way of managing your finances. I am committed to working with credit unions across Wales to increase the profile of the services they customers and their role in supporting resilient communities. In these tough economic times helping people manage their finances and debt has never been more important."
"This new funding is about encouraging the rapid development of credit unions so they can reach their full potential, from improving their backroom operations to improving the great services they provide.
“One area that is increasingly important for credit unions is providing loans. They can offer customers far more affordable loans than those offered by payday loan companies and I‘m keen to hear how we can raise awareness of this.
"Payday loan companies are popping up all over the country with a barrage of advertising on TV, online and in our newspapers. As the full impact of the UK Government’s welfare reforms start to kick in I am very concerned that more and more people will be tempted by these loans to make ends meet.
“I know that by working together we can do much more for the people of Wales who deserve efficient, affordable and transparent financial services on which they can depend. Credit unions are ideally placed to deliver that."
Later today the Minister will visit the Neath Port Talbot Credit Union which has over 7,600 member accounts.