Building Resilience

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Building Resilience

• Credit Unions and Capable Communities
• John Galt Alison Dowling
• INTRODUCTIONS
• THE POLICY CONTEXT FOR COMMUNITY CAPACITY
  BUILDING
• A CREDIT UNION PERSPECTIVE
• EXAMPLES OF GRASS ROOTS PROJECTS
• DISCUSSION

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The Policy Context For Community Capacity Building
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Credit unions as community capacity builders

• 115 credit unions in Scotland with a combined
  membership of approximately 250,000
• Self-help, democratic savings and loans
  institutions...extremely valuable for both
  individuals and communities (UK Parliamentary
  report on Credit Unions in Scotland, 2009)
• Addressing the lack of access to financial
  services, especially in our most deprived
  communities
• Strong community-based organisations can provide
  a focus for change in their neighbourhood or
  community

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What is community capacity building?

• Activities, resources and support that
  strengthen the skills, abilities and confidence
  of people and community groups to take effective
  action and leading roles in the development of
  communities.
• (Skinner S Strengthening Communities CDF 2006)

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Community capacity building in national policy

• WALT and Scottish Govt/COSLAs joint statement
  on community learning and development
• National Outcomes Framework
• Social Policy Framework
• Community Empowerment Action Plan
• Curriculum for Excellence
• Scottish Govt Regeneration Discussion Paper

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Community capacity building - Now more than ever?

• Responding to economic realities
• Shifting public sector resources from crisis
  management to early intervention and prevention,
  especially in relation to poverty
• Increasing the emphasis on community-led
  solutions
• Building capacity in communities can help to
  achieve wider social policy outcomes

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A credit union perspective
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What are credit unions?

• Credit unions are co-operative savings and loans
  businesses, owned and controlled by the people
  who save and borrow with them
• Run on a 'not for profit' basis for the benefit
  of all members. Credit unions are
  "not-for-profit" because they operate to serve
  their members rather than to maximize profits
• Managed by a volunteer board of directors who are
  democratically elected by the membership at AGM,
  and volunteers and/or staff run the day to day
  business of the credit union
• Members must share a 'common bond'.  The common
  bond of Renfrewshire Wide Credit Union is
  'living or working in Renfrewshire'. 

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• Credit Union Classification
• Type 1 smaller, community based credit unions
  e.g. Renfrewshire-Wide Credit Union
• Type 2 larger, occupationally or local
  authority linked credit unions e.g. Transport
  Credit Union
• unlike other non-profit organisations, credit
  unions are financial institutions that must turn
  what is, in economic terms, a small profit (i.e.
  "surplus") to be able to continue to serve their
  members.
• a credit union's revenues (from loans and
  investments) need to exceed its operating
  expenses and dividends (interest paid on
  deposits) in order to maintain capital and
  solvency
• credit unions use excess earnings to offer
  members more affordable loans, a higher return on
  savings, lower fees or new products and services.

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Mighty oaks from little acorns grow
...the RWCU story
In operation since the summer of 2006, the RWCU
emerged from a collaboration of three existing
credit unions, Linwood, Renfrew and Erskine, who
had existed as credit unions in their local areas
for up to 25 years. RWCU board members have each
given up to 30 years unpaid service Started
with nothing but a desire to help people in their
local communities to a social enterprise with 6
full-time and 3 part-time staff, over 35
volunteers, a million pound turnover and
influence and partnership working that extends
across Scotland and the UK RWCU membership has
grown by 79 in last 4 years
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Going the extra mileFighting Poverty

• Affordable financial products and services
• Grassroots, community-led regeneration projects
• Help through financial education and consumer
  training
• Informed choices through awareness raising
• Access to resources

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Credit unions Vs Sharks

• Credit Unions offer unique alternatives to Loan
  Sharks and High Interest Lenders

The poor and unemployed are targeted by credit
companies offering loans of more than 2500 APR.
Citizens Advice Scotland has seen a 10 increase
in clients reporting problems with consumer debt
in the past year, with the average debt now
around 20,000
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Ethical Credit Union Loans

• No Loan Set-Up Fees Or Early Repayment Penalties
• Interest Charged On Daily Reducing Balance Of
  Your Loan Credit Unions Dont Charge Compound
  Interest
• Member Money Is Not Used To Pay External
  Shareholder Bonuses

• Interest rate average only 1 APR a month

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PUNCHING ABOVE OUR WEIGHT

• RWCU has passion and drive to change the wider
  culture we live in and to influence peoples
  lives for the better
• RWCU works in partnership with public and private
  sector to achieve these aims ......

• Local Authorities
• Scottish Government
• Nurserys, Schools Colleges
• Anti-Poverty Strategy Groups
• Community Groups
• Tenants

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The best way to predict the future is to invent it

• RWCU aims to build membership levels and range of
  credit union services
• Contribute to anti-poverty initiatives
• Extend partnership working to deliver social and
  economic benefits for the people of Renfrewshire

RWCU Board Members Staff
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National Priorities and Community Plan Headline
Targets Credit Union Engagement

• National Outcome - We have tackled the
  significant inequalities in Scottish society
• Local Outcome - Reduced levels of deprivation in
  Renfrewshire
• Maximise income so that everyone, including those
  who cannot enter the labour market, is well
  supported by income maximisation services and
  have a decent living standard whether or not they
  are in work. Successful transitions into
  employment should never be undermined by
  financial uncertainty or the lack of financial
  skills (Low-cost loans Savings)
• Put in place measures to provide targeted
  financial inclusion activity to help people avoid
  falling into hardship, whether as a result of
  economic downturn, health, family or personal
  problems (Prepaid cards)

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National Priorities and Community Plan Headline
Targets Credit union engagement

• National Outcome - Our children have the best
  start in life and are ready to succeed
• Local Outcome - Our young people will enter into
  positive destinations on leaving school The
  health of our young children is improved
  Children have positive early years experiences
• Provide children with the best start in life, so
  that all can realise their potential and avoid
  poverty in later life (School Credit Union
  Project)
• Improved working and joint approaches to service
  delivery to support the needs of vulnerable
  families (housing benefit budget accounts)

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Grassroots Projects

• Prepaid Debit Cards
• Show Me The Money Consumer Training Workshops

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PREPAID DEBIT CARDS

• The Challenges
• Increase financial inclusion by offering access
  to mainstream banking services for the unbanked,
  those with a poor credit history, and an
  alternative to the (jam jar) cash economy, via
  the conduit of credit union membership.
• Replace traditional (cheque) payment methods with
  an auditable electronic solution
• The Credit Union Response
• Introduce prepaid cards, viewed as
  pay-as-you-go bank accounts
• Looks like a credit/debit card but doesnt allow
  member to go overdrawn, or be forced into credit
  no penalties or related interest charges which
  may accrue from a credit card
• Money loaded onto card from credit union account
  by customer (or authorised 3rd party) which can
  be accessed through ATMs worldwide, or to buy
  goods and services in-store, online or over the
  phone

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The Benefits Credit Union

• Strengthened budgets through increased
  efficiencies and lower cost to service, achieved
  through fewer counter transactions and lowered
  banking (cheque) charges
• Replaces cheque payments, made for all cash
  withdrawals over 100 where BACs payment not
  requested by member, with a secure, auditable
  electronic solution, incorporating bespoke
  management information reporting
• No debt risk member can only spend funds loaded
  onto card from savings deposited
• All funds on cards fully insured
• No buy-in costs (current account bank network
  set-up costs minimum 60000)

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The Benefits Members

• Financial inclusion increased flexibility to
  make the most of the Personal Budget
• Control online, over the phone and counter
  support and account management
• Secure chip PIN protected cards
• No credit checks 100 acceptance through credit
  union membership
• Instant access to funds prepaid card introduces
  ability to electronically transfer funds
  instantly to member, no need to go to a physical
  location to collect cash/cheque
• Freedom to purchase online giving access to
  discounts such as cheaper energy tariffs
• Bill management via Direct Debit/Standing Order
• Cards free of charge to members
• All card transactions free in UK
• Free cashback at participating retailers
• 14-18yrs minor card available with legal
  restrictions on use
• Card can be used wherever there is a VISA sign

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The Costs

• Load fee 1.00 per top-up on card
• Replacement lost/stolen card charge currently
  7.00 per card
• ATM charges- 75p fee applies

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Show Me The Money Consumer Training Workshops
The Challenges Successful transitions into
financial inclusion should never be undermined by
financial uncertainty or the lack of financial
skills The Credit Union Response SMTM workshops
provide targeted financial education information
and consumer training advice to young adults,
taking a comparative approach to a wide range of
credit products and private goods trading, and
focusing on the long-term impact of compound
interest on debt repayment schedules.   SMTM
takes an early intervention, preventative
approach by strengthening real world financial
skills with the aim of reducing future
indebtedness, particularly for those students
making the transition into young adulthood and
financial independence.
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Discussion Questions

• What is the role of credit unions in building
  financial capability?
• How does building financial capability impact on
  wider community outcomes?
• What are your experiences of joint work with
  credit unions?
• What do we need to do to strengthen partnership
  working with credit unions?