How the Banking Crash Sparked a Credit Union Boom

By Ellie Mae O’Hagan, Guardian

Over the weekend I attended the London Community Credit Union’s (LCCU) open day in Hackney. Cake was eaten, finance was debated and new accounts were opened. It seemed like an inconsequential event; it was only a few hours long; but what I witnessed was a small part of a larger phenomenon that has been slowly spreading across the country since 2008.

According to Move Your Money UK, over 500,000 people have joined credit unions in this year alone. In the US, the figures are even more remarkable: from the start of 2009 to mid-2010, 1.5 million members joined credit unions in a year – the number of new members usually expected in a 14-year period. When you examine how credit unions works, it’s easy to see why.

Unlike big banks, credit unions don’t engage in any form of casino finance. When you deposit money into a credit union account, it isn’t invested anywhere or gambled in any way. The only time it is used by the credit union is when it is loaned to other account holders; and even then it is guaranteed by an FSA scheme, meaning that it won’t be lost if the loan repayments aren’t met. Those who join credit unions are not customers, but members – like a co-operative. This allows their interests to be put first, and gives them a share of the profit at the end of the year in the form of a dividend. In credit unions, there are no shareholders demanding more money, no dodgy loans or credit cards, no millionaire CEOs and no bonuses.

But there are also wider social reasons for joining a credit union, and indeed many do so because they value being part of a financial system that is not simply a utility or a money-maker, but something that improves people’s quality of life. I spoke to Rob, 24, who was opening an account at the open day, about why he’d decided to take the plunge with LCCU: “I like the fact that the money in a credit union remains in the local economy – that credit unions put the most vulnerable people first.” The members of a credit union must share a common interest with one another in order to join. In the case of the LCCU, members must live in the boroughs of Tower Hamlets or Hackney. The benefit of a community credit union like this is that members’ money remains within the community, and doesn’t end up in an offshore trust in the Cayman Islands or being spent on bottles of Bollinger in the City of London.

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