The Credit Union Difference: Responses to COVID-19 in Great Britain and Ireland
A fundamental principle of the credit union sector is ‘people helping people’. The COVID-19 health crisis, with its associated social lockdown and economic shocks, has presented operational and commercial challenges to credit unions that go way beyond previous experience. Credit union members are having to cope with social distancing and sometimes isolation, as well as potentially reduced income or unemployment.
This briefing paper series summarises the immediate actions taken by 24 British and 28 Irish credit unions and support organisations to help their members, staff and communities in response to the COVID-19 crisis in March, April and May 2020. This is not an exhaustive review or analysis of credit union operations in Britain or Ireland. The reports simply reflect the responses from credit unions to a request for examples of initiatives and experience in the face of the pandemic.
A comparison of the two reports reflects differences in credit union business models and their social and commercial environments as between Ireland and Britain. But it also shows the huge similarities in how the ‘credit union difference’ has, in both countries, manifested itself in exceptional service to members and their communities in a time of grave crisis. Some credit unions may find inspiration for ideas to help their own members; all can take pride in the values exhibited here.
We extend our thanks to the organisations – both CFCFE members and non-members – who contributed their stories for these reports.
Financial capability: Supporting credit union members to greater financial wellbeing
The new report is authored by Dr Lindsey Appleyard, Professor Sally Dibb and Dr Hussan Aslam at Coventry University’s Centre for Business in Society (CBiS). Community finance providers know that the financial capability of adults is key to their financial wellbeing, yet, for example, half of all adults in the UK are financially vulnerable. Credit unions, like other co-operatives, are committed to the education of their members. This paper examines the role of credit unions in improving the financial capability of their members, through the provision of financial education and resources for credit unions to support this process. The findings come from recent research at Coventry University that tested the effectiveness of practical education materials designed to improve financial resilience. Recommendations are included through a series of action points. Access the report here or click on the image.
The paper also shares details of a free-to-use MoneySkills app that offers money management guidance and provides an interactive budgeting tool. The app is available free in iOS from the App store or for Android from the Google Play Store, with a web-based version available at: https://www.moneyskillsapp.com/home.
CBiS is keen to hear from credit unions or other providers on the issue of financial capability: contact Lindsey via email@example.com. For other queries, contact Nick at CFCFE via firstname.lastname@example.org.
Current Research Programme
Credit Union Research Prize 2020 now awarded
We have inaugurated a new annual research prize for doctoral or post-doctoral researchers who wish to contribute significantly to the development of the credit union movement in the Republic of Ireland and / or the United Kingdom.
This Prize offers researchers the opportunity to publish (and potentially present) their work directly to credit union practitioners through CFCFE’s membership and wider network. The prize award is €4,000 to support time and expenses in the production of the paper (details can be downloaded here, or by clicking on the image to the right).
17 proposals were submitted, with tremendous diversity of topics and researchers, from England, Ireland and Scotland, as well as Brazil, Curacao and Spain. After due consideration, and taking input from the members of our Research Advisory Board, the Prize has been awarded to a team from the Financial Services Innovation Centre (FSIC) at Cork University Business School, University College Cork (UCC) in Ireland, who will be evaluating the opportunity for developing SME lending by credit unions, including the role of technology. Aaron Cashman will lead the work, together with Dr Fergal Carton, the Academic Director of FSIC, and Dr Huanhuan Xiong.
Further updates will be posted on our News page in due course, and the final report will be available on our Research page. Contact Dr Paul A Jones, Director of Research, with any queries: email@example.com.
Research to look out for
We have interrupted our planned programme of research in 2020 in order to respond to the impact of COVID19 on our sector.
However, in addition to focused publications on how credit unions are addressing the challenge of the pandemic, we have several projects between initiation and completion:
- Reporting ‘the credit union difference’ (CFCFE and partners)
- The changing use of cash (Dr Paul A Jones, CFCFE and the Research Unit for Financial Inclusion at Liverpool John Moores University)
- The experience of credit union international links (CFCFE)
- Guarantor loans and credit unions (CFCFE).
We will also be offering credit union board and director evaluation tools that we have enhanced since their first release in the Jones/Money/Swoboda report on Credit Union Strategic Governance from 2017 (available below, and which we will be refreshing in full in 2020).
Previous CFCFE Publications
Open Banking: An introduction for credit unions
This report is written by Marloes Nicholls, Head of Programmes at the Finance Innovation Lab, and includes case studies from three credit union Open Banking partnerships. Marloes’ intention is that “this guide supports more people to understand Open Banking, and the opportunities and risks it presents for credit unions and their members.”
It is now two years since Open Banking was introduced in the UK; some credit unions have incorporated it into their lending processes already while many others are evaluating it. Open Banking presents clear opportunities – and also risks – for credit unions, and this paper provides a guide to its implications.As Marloes comments, “As the case studies show, there are already exciting new ideas for how Open Banking could support responsible lending that are being tested and developed within the credit union sector.”
To access the report, please click here or on the picture. CFCFE and Marloes would be keen to hear the experiences of other credit unions with Open Banking – contact Nick at CFCFE via firstname.lastname@example.org or Marloes directly via email@example.com.
Marloes concludes “If the digital revolution underway in finance is to work for everyone, then it’s vital that organisations like credit unions, who are at the forefront of supporting people to manage their finances and access fair services, are involved in the design and implementation of changes.”
Summary of Proceedings, Manchester Conference 17th January 2020
This short report summarises the presentations and discussions from CFCFE’s Credit Union Conference. ‘Meeting the Needs of Members Today and Tomorrow’. We were delighted to welcome 96 delegates from England, Ireland, Scotland, Romania, the USA and Wales to a day of wide-ranging topics relating to adapting to change to meet member needs. The Proceedings can be downloaded here or by clicking the image to the left.
Paul Jones drew attention to the following points as he closed the conference:
- The importance of leadership within the sector. He said that wherever credit unions succeed, there are always people with effective leadership skills driving those credit unions forward, coming not just from ‘the top’ but from everyone in the organisation.
- The importance of technology. Success is also based, in the modern digital age, on technology, to deliver products and services and to build community and relationships between the members. Technology must now be at the forefront of the way in which all our credit unions do business.
Thank you to our presenters and attendees for their contributions. The conference programme and some presentations are available on our Events page.
Credit Union Values: Five steps to a co-operative culture
“What is the most overlooked quality of the world’s most successful credit unions? Answer: their values.” So opens this thought-provoking paper on credit union values by Ed Mayo, the Secretary General of Co-operatives UK and a member of the CFCFE Research Advisory Board. Ed draws on his long experience in the sector to offer practical advice on how to build and sustain a co-operative culture in your credit union. You can download the paper here or by clicking on the image.
If you are interested in exploring this topic further, which not read Ed’s book, Values?
Summary of Proceedings, Conference 21 May 2019
This is a brief record of the presentations and discussions that took place at our Successful Lending conference, in Dublin. Over 90 delegates from England, Ireland, Northern Ireland, and Scotland came together to share experience and best practice in meeting the borrowing needs of credit union members. The report can be downloaded here or by clicking the image to the left.
At the end of an information-filled day, Dr Paul Jones, Director of Research, noted some of the themes that had emerged, including the importance of:
- Good analytics to evaluate and anticipate the needs of members
- Rigorous analysis of loan performance to reveal effectiveness and profitability service delivery
- Realising that much can be done to improve loan products and delivery within current legislative and regulatory constraints
- Speed, efficiency and convenience of loan application and delivery channels
- Ensuring our credit unions have a modern, digital suite of services to compete effectively
- Working with Government and the regulator in the respective jurisdictions to ensure that legislation and regulation in relation to lending is fit for purpose.
Where does the CEO’s time go? Presentation of survey results
Earlier in the year, CFCFE members raised two issues that we decided to investigate through a survey. The issues were:
- The time and effort they spend managing regulatory and compliance issues, and
- The difficulty they have in cutting through day-to-day administrative tasks to focus on the future and moving the organisation forward.
The survey questions sought to bring out the information necessary to understand the scale of these issues across CFCFE members and other large credit unions in Britain and Ireland. We invited 62 CEOs from credit unions in Britain and Ireland to complete the survey, and received 44 complete responses (27 CFCFE members and 17 non-members).
The findings report can be downloaded here, or by clicking on the picture to the right. We present the findings largely without analysis, as they speak for themselves. The headlines we would draw attention to are:
- CEOs believe that lending and technology are the most pressing issues facing their credit unions
- CEOs spend more time on day-to-day administration than they would like, and the most important activity to suffer is strategy and planning
- The majority of CEOs actually consider the time they spend on compliance to be reasonable.
This report will be of interest to CEOs looking to understand peer perspectives, boards wanting insight into CEOs and compliance, and policy-makers seeking to understand how credit union leaders are managing their requirements. If you have any comments on this report, do contact us via firstname.lastname@example.org.
Measuring the ‘Credit Union Difference’ – a new Toolkit
The credit union difference is in part reflected in its social impact. A new Toolkit has been developed to enable credit unions to identify, measure and report on this.
The Toolkit is the result of a collaboration between Small Change, CFCFE and Liverpool John Moores University’s Research Unit for Financial Inclusion, funded by the Esmée Fairbairn Foundation, CCLA and CFCFE members. The project team worked closely during 2018/19 with GB credit unions to develop the materials, in particular CFCFE members Hoot Credit Union (Bolton) and Unify Credit Union (Wigan). The Toolkit comprises a Guide to reporting, a Framework spreadsheet to capture information systematically and Facilitator slide pack for leading a workshop on the process. This is a work in progress, and we aim to refine the Toolkit by working closely with more credit unions in the coming months.
For more information, click here or on the picture.
Summary of Proceedings, Members Conference 18 January 2019
This is a brief record of the presentations and discussions that took place at our recent conference in Manchester, attended by 100 delegates from the movement in England, Ireland, Northern Ireland, Romania and Scotland. The report can be downloaded here or by clicking the image to the right. The themes were Collaboration and Communities, with presentations from several practitioners.
A number of key points, practical insights and learning outcomes emerged during the day. At the close, Dr Paul Jones, Director of Research, picked out just a few, including the importance for collaboration of:
- Clarity about business outcomes
- Good and effective governance – and the role of the board in driving collaboration
- Coping with the loss of autonomy
- Recognising that there is not one sole path to collaboration – there are multiple models and approaches
- Developing relationships based on trust.
And in relation to ensuring the social and economic difference of credit unions, Paul stressed the criticality of:
- Ensuring a culture clearly based on co-operative values and principles
- Communicating those values and principles to the membership and the community.
Paul ended by thanking all participants for coming to the conference and making the day such a success. Go raibh míle maith agaibh! Mulţumesc mult!
Further conference materials, including presentations and brochure, are available here.
The Remuneration of Credit Union Directors, December 2018
This is a ‘hot topic’ in more ways than one. Historically, directors on credit union boards have not been paid, and this remains a strongly-held principle for many credit unions in Britain; in Ireland it is not permitted by law (apart from an honorarium for the treasurer). In Britain there has been a trend in recent years to bring one or more senior executives onto the board as directors. More recently, against a backdrop of increasing operational scale and complexity as well as regulatory demands, a small number of British credit unions have introduced or are considering introducing remuneration for directors who are not executives (traditionally, elected from the membership). This remains a contested issue.
Our paper does not explore substantively the pros and cons of this approach, but is aimed at credit unions who are seeking a robust and appropriate approach to setting the level of remuneration of directors. The report draws together lessons and best practice from credit unions, co-ops and financial services mutuals in Britain, and from credit unions in North America. The paper is based on a 2017 study, subscribed for by a CFCFE member credit union to inform thinking on its board. We provide some conclusions and recommendations for developing and implementing a director remuneration policy consistent with credit union principles and values. Click here or on the image to download the report.
Borrowing from a Credit Union: Messages from Members, September 2018
We are now making this short report publicly available here (or by clicking the image), following circulation to members in September. The paper summarises survey and focus group data from two large credit unions on the member experience with borrowing from their credit unions. It also includes mini-case studies on the initiatives and practices of five other credit unions who have been notably successful in getting loans out to members. All seven of the credit unions are CFCFE members, and we are grateful for their assistance in producing this report.
The paper offers actionable insights that credit unions can consider in developing their own lending strategies.
The Business Case for a Credit Union Central Finance Facility, August 2018
Movement-owned central finance facilities (CFFs) have been key to the success of credit unions around the world. Basically functioning as a ‘credit union for credit unions’, CFFs use the aggregate scale and buying power of the movement as a whole to obtain the best rates safely possible on investments, to assure credit unions of dependable access to liquidity at wholesale borrowing rates, and to employ the professional expertise to do so safely and profitably. Using case studies from the US, Canada and Australia, this paper shows how CFFs were instrumental for credit unions to evolve into full-service financial providers. The paper suggests possible ways forward to creating CFFs in Ireland and Britain, where they do not yet exist.
This paper is now available here for download.
Lessons Learned by US Credit Unions in Mortgage Lending, June 2018
Over the past 40 years home mortgages have grown to represent about half of credit union lending in the States. This paper was developed in the belief that the US experience would provide useful insights to credit unions over here that are looking to expand into the mortgage market.
Major lessons learned by the Americans: the need to mitigate interest rate and diversification risks by creating collaborative support companies to interface with secondary mortgage markets, obtaining affordable liquidity from credit union-owned central finance facilities, hiring and retaining staff with specialised mortgage lending skills, and developing win-win relationships with local estate agents (the major influencers of where people go to finance their new homes).
The paper is available here for download.
The Irish Credit Union Business Model: Is it still fit for purpose? November 2017
Our first publication was a review of the business model for credit unions in Ireland, and the case for change.
The key messages are that: the objective evidence demonstrates the case for change to the existing business model, international examples show an expansion of the proposition to members is a successful model, and that collaboration within the sector will be required to build the necessary capability. But first, we need a shared vision of the future, and an appetite for change.
It is available for download here, or click on the image of the report.
Relevant pre-CFCFE publications
Our subjects include co-operatives and mutuals (such as credit unions), social enterprises (such as the UK’s community finance development insitutions) and co-operative banks and building societies, as well as social businesses in other sectors that engage with community finance (such as housing associations seeking affordable credit to residents). The Centre’s current focus is Ireland and the United Kingdom, but in due course we will undertake research across Europe. In all cases, our work is informed by experience and knowledge from around the world.
We engage academic, professional and practitioner experts who are recognised for their expertise, integrity and quality of work in Centre-relevant areas. The Centre has a special, collaborative relationship with the Research Unit for Financial Inclusion at Liverpool John Moores University. Certain research papers and publications will be published in collaboration with the University.
We select research projects in consultation with our members, funded by subscription and / or external grants, and seek to engage and work with similar organisations throughout Europe and internationally. We are happy to discuss projects brought to us by interested third parties such as academics, consultants or sector agencies. Please contact us if you wish to discuss a research project partnership.