Credit unions in Inverness and the Highlands set to share in £20 million support package to help deal with financial consequences of Covid-19 coronavirus crisis
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Credit unions across the Highlands and Islands are poised to share in a £20million support package as they battle to help vulnerable families deal with the financial consequences of the coronavirus pandemic.
They are often the only source of affordable loans for people in crisis situations, however the organisations themselves are also feeling the strain with many of their members struggling to meet loan repayments.
The Scottish Government has released details of two dedicated funds to ensure the sector can continue its crucial work during the Covid-19 pandemic and its aftermath.
A Third Sector Resilience Fund and a dedicated Credit Union Resilience Loan Fund provide practical support offering more than £20 million to credit unions and other third sector organisations.
Many Inverness families are members of local credit unions such as Highland Communities Credit Union, Inverness Credit Union, or rely on ethical loans and savings schemes through employee based credit unions, such as the NHS Credit Union, 1st Class Credit Union and the Scottish Police Credit Union.
All offer ethical financial services to many thousands of individuals and families across the entire region and they are among nearly 100 credit unions all over Scotland, providing a financial lifeline to a number of families, who can now apply for assistance from the Scottish Government.
The package recognises that many of the people worst affected by the effects of coronavirus – for example taxi drivers facing a fares slump or those in the retail, hospitality or leisure sectors – are often the people who rely on their credit union for affordable loans.
Some credit union customers will undoubtedly be struggling to make loan repayments either now or in the future and credit unions, by their nature, do not make big profits from lending to their members.
The margins are fine and so the threat to the credit union business model is greater than in other financial sectors where the business is geared to making bigger profits for shareholders rather than more affordable loans for customers.
Credit unions, together with Britain's largest credit union trade body, The Association of British Credit Unions (ABCUL), have been working very closely with the UK and Scottish governments to deliver effective support to those credit unions who need it most.
This includes liaison with the sector’s dual regulatory bodies – the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA).
Robert Kelly, ABCUL's chief executive, said: “ABCUL has hosted online conference sessions with credit unions from all over Britain to identify issues of emerging concern and ensure these are addressed and the business strengthened to deliver essential financial support to members and to staff.
“There have been tremendous examples of partnership working. The voices of our credit union leaders are being channelled to government in a robust and effective way and the response has been hugely encouraging thus far.”
The two specific support packages offered by the Scottish Government provide a mixture of grants and interest free loans.
Managed by Social Investment Scotland, the Credit Union Resilience Fund will support credit unions with their working capital as well as with their liquidity – it will offer interest-free loans of between £50,000 and £250,000 which are repayable over a period of up to eight years.
It will run alongside the Third Sector Resilience Fund, which is administered by Firstport, Social Investment Scotland and the Corra Foundation.
This fund will provide grants between £5000 and £100,000, with a further £5 million available in fully flexible, zero per cent interest loans starting at £50,000.
