A decade of credit union experience

A BOARD member of Northumberland Credit Union Ltd (NCUL) recently updated Morpeth Rotary Club members about developments 10 years after his first speech.

Credit unions were a fairly new local development a decade ago, so Roger Hawkins’ initial talk was mainly about the theory of how they should work. Now they have had almost 10 years of practical experience.

At that time, the law had changed and jurisdiction moved from friendly societies to the Financial Services Authority.

A credit union is basically a financial co-operative. There are no shareholders as they are owned by the members.

It is a mutual organisation, operated in the interest of members and the members indirectly manage it. The credit union name itself is a difficult one to sell as both elements have connotations. A better title would be ‘community bank’.

The credit union idea was started in north Germany in the 1850s by an MP in the Prussian parliament and was mainly for small farmers. It was a society for advancing loans and it developed into a professional organisation with paid staff.

Ten to 15 years later they came to south Germany where the customers were mainly very poor peasants with little education. They tended to be run as voluntary community organisations where only the treasurer was paid with a small honorarium. Often the treasurer was the local Roman Catholic priest.

The movement later spread to France, Belgium and Italy. It had spread to Canada by about 1900 where it was called the people’s cash box. Again it was used by poor people who could not get credit.

A retailer and philanthropist, who travelled a lot, took it to Calcutta and Bengal in 1907/8 and to Massachusetts in 1909 where it was called a credit union for the first time.

In 1926, a credit union was set up at the White House and ever since, every US President has become a member of the credit union. In the 1940s and 50s it came to the West Indies and Ireland.

It provides basic retail banking services with safe savings and low-cost loans. There are two credit unions in Northumberland and although the other one mainly operates in South East Northumberland, both cover the whole county.

The other employs professional staff. NCUL has one part-time (12 hours a week) manager based in Morpeth and volunteers.

There is some financial support from Northumberland County Council.

The volunteers work in pairs as collectors. When first registered in 2003, it was the Morpeth and District Credit Union with 61 members. It now has 499 members.

Mr Hawkins added that you must be a regular saver with savings over six weeks to qualify for a loan. The first loan can be the amount you have saved plus £100. Loans then run in multiples of the first loan amount. Interest is one per cent per month (APR 12.6 per cent).

In the first year, there were 17 loans totalling £4,133. This year, loans total around £100,000. Interest is not paid and they do not pay a dividend.

You only get your own money back and the facility of a loan. Most members have a few hundred pounds saved. The largest is around £4,000. For more information, call 01670 503666.