Jane Hutt MS, Minister for Social Justice and Chief Whip
This statement updates Members about the support we provide to credit unions.
Credit unions provide a lifeline to many households struggling to manage budgets during this cost-of-living crisis. As the crisis has intensified, significant numbers have joined credit unions looking for affordable credit.
We continue to work to raise the profile and awareness of credit unions as an ethical and responsible alternative source of lending. It’s vital that we get the message out that credit unions can support people who are struggling with the cost-of-living crisis. Importantly, credit unions are committed to promoting good financial habits, alongside providing savings and loans, offering assistance, advice and educational tools on budgeting and personal finance.
While some of their rates may be higher than the cheapest loans available from mainstream banks, they're much cheaper than other products available to people who may have been turned down for loans from high street banks, such as doorstep lending or payday loans, where APRs can be more than 1000%. There is also a cap on the amount of interest that credit unions can charge on their loans, with maximum rates capped at 3% per calendar month on the reducing balance.
Credit unions feature strongly in our efforts to tackle poverty and are a significant partner in our financial inclusion work. This is reflected in our continued financial support – we have provided £500,000 to grow their reach in communities across Wales this year.
We provided £1.2m last year to give credit unions the confidence to expand their lending to people who have poor credit histories. This funding is being recycled into this financial year to support more people access affordable credit. To date, more than 2,000 people have accessed loans for the first time from a credit union, and this continues to grow.
With most people now sourcing finance online, it’s vital that credit unions take steps to fully digitise so they can reach as many potential members as possible. Credit unions have risen to this challenge and are matching the digital offerings of banks with £383,000 of Welsh Government support provided since 2021 to provide fintech advancements. Credit unions are also widening their reach by increasing their physical presence in communities, through hubs located in libraries, community centres and other settings across Wales.
Through the Responsible Lenders meetings I chair, I have asked advice services, housing providers and others to explore how they can work with local credit unions to best support the vulnerable clients they serve. This includes providing information on credit unions so people know their options for accessing responsible credit. I want these relationships to grow, with sectors working together, supporting people who are likely to continue to borrow to do so affordably and ensuring they are protected from illegal money lenders.
The ongoing cost-of-living crisis makes the role of credit unions more important than ever. We will continue to work in partnership with credit unions to strengthen their work and widen their reach to support people across Wales.
This statement is being issued during recess in order to keep members informed. Should members wish me to make a further statement or to answer questions on this when the Senedd returns I would be happy to do so.