Paper

Life Saving: Community Development Credit Unions

Community development credit unions as a development solution
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This paper argues for an institutional structure, similar to a network of credit unions in Britain, to provide small saving services to the needy. The authors recommend the regulatory agencies to initiate a program of development and support to develop a cluster of 100 Community Development Credit Unions (CDCU) and state that the goals of lifeline banking have multiple dimensions:

  • Encouraging savings among Britains low income households;
  • Providing localized means for the promotion of asset-based development solutions such as savings gateway and financial literacy services;
  • Taking over a substantial market share of the sub-prime lenders.

The paper also provides some quantitative targets for such an initiative:

  • Inject approximately £227 million GBP of affordable credit into many of the least well-off households in Britain;
  • Save an additional £36 million GBP in interest payments from hard-pressed budgets;
  • Bring a benefit to wider society and the taxpayer from the capital invested directly in low cost loans of £250,000, for an investment of £145,000 GBP in each credit union.

The paper concludes that the CDCU model:

  • Represents a practical and positive development model for credit unions that wish to address financial exclusion and poverty;
  • Offers innovative policy solutions to a government in search of ways to promote a more inclusive society.

About this Publication

By Brown, M., Conaty, P., Mayo, E.
Published