Credit Unions: a case study

The Handsworth Breakthrough Credit Union was one of a number of initiatives undertaken by local churches as a response to the social unrest in Birmingham in 1985.

John Rose has been with the credit union since his vicar asked him to get involved right at the start. Each credit union must have a Common Bond, such as a place of work or 'live or work' in an area. For Handsworth Breakthrough the Common Bond was association with a church listed on the Churches Together in Birmingham database.

In May 2007 the 350+ members of Handsworth Breakthrough Credit Union had on deposit savings of £223,562 and its 50+ 'junior savers' hold an additional £8,361 in savings. There is also a staggering £212,182 on loan. The credit union is one of a handful in the country which offers a tax-free ISA (Individual Savings Account), which paid 4.3% - the same dividend as on ordinary savings - last year, and is aiming for 4.5% this year. Also unusually, it pays a year-end 'cash back' on loan interest paid by borrowers.

The money figures are impressive but credit unions are also about building social capital, meeting needs, encouraging saving, good money management and recycling local money within the local community. Care is always exercised but loans can be made even with poor credit history. This helps avoid high interest rates from store cards or 'sub prime' lenders such as catalogues and doorstep lending. Often loans are used to pay off expensive credit card bills or outstanding loans.

Handsworth Breakthrough means that every church in Birmingham can link people to affordable loans with life insurance as standard and to a regular savings facility. This is good news for the 4.5 million people who do not have a bank account and the millions of others who have less access to mainstream credit and pay more for the credit they can get. Credit unions help address financial exclusion but their appeal is widespread. They can be found in wealthy communities and in workplaces and are perfect for saving and borrowing, for example in buying a car or saving for a holiday.

Credit unions are a valued community service and an outreach ministry for the church. They are not a quick and easy win. Partnerships are often the key to success for a church wanting to get involved but the rewards are immense. Within the routine administration of the credit union it is a joy to watch those struggling when they first join build savings, take and repay loans and find financial freedom. Volunteers also benefit. The final word should be with John himself. 'I have learned many IT skills I did not have before and I thank God and the credit union for that'.