Credit Unions (CU) are a type of bank that serve a closely defined group of people - such as living locally, or belonging to a specific organization. The depositors and borrowers all own and manage the CU and their vote is single, and independent of the amount borrowed or deposited. They exhibit co-operation, community solidarity, self-help and autonomy (no prizes for spotting differences from conventional banks). They achieve good interest for depositors and reasonable interest charges on loans. The movement started in 1852 in Germany (founders: FH Schulze-Deitzsch & FW Raiffeisen) and is successful world-wide including Germany, US, Australia, Canada, Ireland, although mostly with a much smaller market share of the banking market than banks.
In new research Richard Werner exposes what might be described as the 'Orwellian Doublespeak' that has enveloped CU legislation in the UK until very recent times and outlines further essential measures to bring real benefit to society. He shows that whilst apparently set up to benefit the poorest of society - for example those most needing credit who are most prey to loansharks - CUs have been so hedged about with restrictions that their help to these people is minimal. CU membership in the UK is 0.5% of the population compared with Ireland 45%; US 30%; Australia 20%; Canada 16%.
Although in 2002 new regulations in the UK brought a more liberal regime, they do not go nearly far enough. Werner says that the success of CUs elsewhere in the world derives from their ability to take deposits from a much wider field; the help given to small businesses as well as individuals; their virtually unlimited restriction of deposit amount and their ability to create credit in the ways that commercial banks do. Recent modifications mooted last year for the UK give specious solutions to spurious problems that German CUs 'solved' years ago.
Werner says that to allow Credit Unions to create credit is essential. He wonders why CU regulation has been so restricted for so long? Guess what? He fingers the UK banking sector which has: 'enjoyed a monopoly on the creation of the majority of the money supply and this has for decades been a most lucrative activity – both for the bank owners and the senior bank staff. This appears to have created a powerful lobby group that has been influential in the creation of legislation. Unfortunately what is good for the bankers is not necessarily good for the rest of the economy...'
Click on this link: Werner on Credit Unions for the whole paper, an informative read on credit creation and this aspect of banking reform, which would lead to greater economic justice. Why is the UK so behind the curve in these things? Are there any UK political parties out there listening? Election 2010??