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Local Support to Replace Community Care Grants and Crisis Loans for Living Expenses

Executive Summary

Credit unions are financial co-operatives, owned and controlled by their members and providing inclusive financial services to communities across the country. They have been heavily involved in supporting financial inclusion initiatives over the past several years most notably with the DWP’s Growth Fund which provided almost £100 million for on lending to those without access to an affordable source of credit.

The DWP recently announced a modernisation fund of £73 million which will be invested directly in credit unions in order to further assist their development and to enable the sector to serve many more people. Part of this fund, pending feasibility studies, has been earmarked for the development of a central banking platform for the credit union sector which has exciting potential to greatly increase the scale and scope of credit unions in Britain.

Furthermore, credit unions have a track record for innovation and development of new financial services which meet the needs of those on a low income. The best example of this is the Credit Union Current Account which, by charging a regular transparent fee to cover administration costs, avoids the need to levy punitive charges where customers go overdrawn or a regular payment such as a direct debit fails.

The credit union model, however, requires certain things to be successful. First and foremost it is imperative for credit unions to have a mix of people and income ranges using their services so that, through cross-subsidy, the less profitable lending to those on a low income at reasonable rates of interest can be continued in a sustainable manner. Similarly, as each credit union is an independent organisation, different credit unions operate on different principles and are at different stages on the road to full sustainability meaning that whilst some credit unions will be fully willing and able to engage as far as possible with this scheme, others may neither want to nor be in a position to.

Therefore, whilst the credit union sector is committed to supporting those on a low income through the provision of fair financial services, there are certain limitations to how far they can do so without support.


We are keen to work with DWP, local authorities and other organisations to develop best practice to assist credit unions and local authorities work effectively together and would be delighted to do so. Whilst in some areas there will be limitations to what credit unions can do, in the vast majority of cases credit unions are ready and willing to work with local authorities to support low income communities in any way they can.

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