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Banks Dodged Tax, Now Fund Local Lenders?
7 Dec
Summary
- UK credit unions hold £4.9bn in assets, serving 2 million members.
- 1.9 million adults in Britain used loan sharks in the past year.
- A 'Fair Banking Act' could boost UK credit union lending to £3bn annually.
The Financial Conduct Authority is encouraging the growth of the UK's mutual sector, particularly credit unions, which serve approximately 2 million members with £4.9 billion in assets. These locally-based lenders cater to low-income consumers often overlooked by major banks. Despite recent government efforts to modernize credit unions, including a £30 million fund and a review of their governing 'common bond', advocates argue that mainstream banks must do more to provide essential capital.
Recent research indicates that 1.9 million adults in Britain turned to loan sharks in the past year, highlighting a persistent need for accessible credit. Campaigners, including actor Michael Sheen, are pushing for a 'Fair Banking Act' similar to the US Community Reinvestment Act. This legislation would compel high-street banks to invest in underserved communities, potentially increasing credit union lending significantly.
While the government has expressed support for financial inclusion and a small-sum lending pilot, critics note the lack of firm targets for the finance sector. The proposal for a 'Fair Banking Act' has gained traction among various charities and lenders, with proponents estimating it could boost annual lending by credit unions and similar institutions from £250 million to £3 billion.
