Good Afternoon and thank you to ABCUL – (the Association of British Credit Unions Limited) - for inviting me to speak at this afternoons “Future of Welsh Credit Unions” event.
My previous career was in the mutual Building Society sector – which, like Credit Unions, were formed as Member-owned co-operatives, democratically controlled by their members.
De-mutualisation took hold Internationally during the final decades of the 20th Century, generating the growth of new mutual financial organisations, particularly credit unions – promoting thrift, providing credit and other financial services at competitive rates to members and supporting sustainable community development.
As the Centre for Social Justice has stated, we need to “enable consumers to take on credit without taking on unmanageable debt, allow debtors access to the type of debt advice right for them, give every consumer the opportunity to learn how to manage their money effectively, and encourage Britain to develop a savings culture again”.
Welsh Conservatives have supported investment in Credit Unions and the development of financial services through Credit Unions they offer an alternative, safe and reliable way of saving and borrowing money.
However, my Building Society background and qualification as an Associate of the Chartered Institute of Bankers taught me that all financial services providers, including credit unions, must have the expertise to manage lending risk and assess their borrowers’ capacity to repay debt.
Much will depend upon Credit Unions in Wales working together and growing their saver base, enabling the development of both smaller, shorter term loans and other products including secured mortgages and car loans.
Financial affordability, education and inclusion are key, with Credit Unions making personalised assessments and serving many who would otherwise be excluded from mainstream credit.
At this point, let me declare that two of my daughter’s work in the third sector, one as a Money Adviser and the other as a Debt Adviser.
Speaking in the Assembly four years ago, I stated:
“Advice agencies are dealing with more payday loan debt.
It’s too easy for people to access the short term benefits of pay day loans.
Research from The Association of Business Recovery Professionals, showed that of the people they sampled who had taken a payday loan, 60% regret the decision and 48% believe the loan has made their financial situation worse.
Only 13% believe their payday loan had a positive impact on their finances.
We have to be smarter in getting across the long term implications, and encourage people to make time to fully understand the terms & conditions before making their decision.
Action is required to curb Loan companies which lend on the premise that the person borrowing will not be able to pay back on the due date and which then charge extortionate sums of money for late, overdue and other payments –
– and loan companies whose model is to lend multiple loans to householders on very low incomes where the cumulative weekly repayment can be anything from 10% to 90% of their gross and in some cases net incomes”.
I also stated that “The Welsh Government must maximise the freedoms delivered by changes to the UK Credit Unions Act freeing credit unions to work with organisations such as housing providers, community groups, employers, social enterprises and charities to bring financial services to new groups of people.
A year ago, North Wales Credit Union told me they had decided not to become involved in the first wave of credit unions adopting the UK Credit Union expansion programmes automated loan decision banking platform on cost grounds - and that they were working with other Welsh Credit Unions on the route forward.
At their Annual General Meeting in January, we heard that an estimated 35 million of the 52 million loan transactions annually in the UK, people would save by using a Credit Union, yet only 2.5% of people in Wales currently use Credit Unions.
We heard that Credit Unions need to grow and become the preferred alternative to high interest lenders – and that Credit Unions support for deferred shares to support capital adequacy ratios.
When I last meet ABCUL three months ago they told me that with current Welsh Government funding due to end in 2017, is the key issue facing Credit Unions financial sustainability. They told me that Credit Unions in Wales need to develop a solid evidence base showing added social value and to focus on broadening their membership base.
To achieve this, they are working with Credit Unions in Wales to develop a collaborative strategy, but they need
they next Welsh Government to provide capacity building support for the transition beyond 2017.
Our 2016 Manifesto will state that Welsh Conservatives will support credit unions to ensure their sustainability, working with them to improve financial inclusion and access to affordable finance.