Credit union growth.

West Sussex and Surrey Save

Purse (photo)

There are over 400 credit unions in the UK with one million adults members and 125,000 juniors. These valuable organisations provide loans of £602m off of the back of savings of £776m. They exist to provide three things in society:

  • sound financial education and thrift
  • ways to tackle poverty
  • economic regeneration

We have developed marketing campaigns to target over 500,000 people to encourage access to Credit Union services since our work started in 2009. In return, these organisations have provided real insights into the pressures upon the discretionary savings market for our product designers.

Here are some of the materials that we have created to get people to use the services of the credit unions:

Surrey Save Credit Union

West Sussex Credit Union

Our work together has been short-listed for the Financial Services Forum Awards for marketing effectiveness in 2012. And, recent discussions show a real parallel between the issues faced by our customers and those customers walking into a credit union.

Michelle Boundy CEO of Surrey Save gives us an update of how we have helped grow their business.

Surrey Save, in its first eight months of trading, has attracted 409 member accounts and between February and September received 329 loan applications and approved 55, amounting to almost £114,000. Excluding those applications we approve, but are not preceded with, we have an average decline rate of approximately 60%. The main reasons for declining loans are:

  • Over indebtedness – where a person’s current total borrowings are too high a proportion of their gross annual income.
  • Mis-management of current debts – where a person has several lines of credit and has a pattern of defaulting on these debts.
  • Unaffordability – if the minimum monthly repayment we can offer is going to be difficult for the applicant to meet.

Only 5% of our applicants had no debt at all. The total amount of debt our applicants have so far is a staggering £2million, with a maximum amount of £64,000 unsecured personal debt.

Almost half of our applicants have taken out payday loans. The maximum number (past and current) that any single person had was 57. With a collective total of 1,446, that’s an average of over nine loans per person of those people who are in the habit of using this type of credit. What we are finding is that payday loan take up is not solely the preserve of low-income households but is typical of a person who has not managed their borrowings up to that point, which would point to either a lack of understanding of the consequences of high APR and short-term loans or a restricted choice of credit options.”

Michelle goes on to say, “ We are extremely grateful to Legal & General for providing funding to assist our marketing efforts. As a small start-up we do not have the large marketing budgets our high-cost competitors have and the funding we have been given has helped us provide an alternative voice in the market. We are also very grateful for the professional and helpful service provided by Omobono – though we are small fry they have always been very responsive and generous with their time and experience, helping us to plan and produce our basic suite of marketing materials, and also providing technical advice on website development and campaigning above and beyond what we expected. With Legal & General’s and Omobono’s assistance we were able to introduce ourselves directly to the market as a professionally branded organisation and provide a good first impression to potential partners.”

What is Fair Finance?

In June 2012 the Corporate Communications team embarked on a series of projects with community organisations – not just as a volunteering initiative, but also to discover more about the markets that, traditionally, we have underserved.

These markets are:

  • Older people, living longer on low pensions
  • People living with, or at risk of, health problems
  • People who are partially or wholly reliable on the state
  • Ethnic minorities in urban areas on low incomes

For our Savings business we were very pleased to spend time with Fair Finance in London.

Mike Connolly, PR manager for Savings explains what he picked up from our work with Fair Finance.

“I chose to volunteer some time to the Fair Finance project as I had a real desire to understand what drives people to the sort of pay day loan companies that charge almost unrecognisably high interest rates for their loans.

The first thing I learned was that these people are not driven to such an extreme measure in desperation – that is, they have no money and so will accept any rate of interest. Instead, just like you and me, they occasionally find that they need a little extra financial help to cover an expense over the short term. But when they approach traditional sources of finance for some help that’s when the differences between us become apparent. Quite simply they are shut out of the conventional method of borrowing that we all take for granted, such as banks and building societies, and have to turn to the only sources available – payday lenders. The reason is often as simple as the fact they do not own a house or have a rent book with their own name on it.It doens’t mean that they represent a lending risk – far from it.

What I learned is that Fair Finance recognises that these people are not being served by the traditional financial services infrastructure and provides an alternative for this community, which gives them the chance to avoid the payday lender trap. Fair Finance offer much the same services that companies like us provide. They offer financial products that are accessible, simple and flexible alongside customer service that is honest and respectful and seeks to build a long-term relationship with the customer. Perhaps one day the traditional financial services sector may find a way to tap in to this market.”

Our team also provided support for the Fair Finance team to develop their communications and websites to attract more clients.

Muna Yassin – Managing Director of Fair Money Advicesaid “Everyone has been so generous with their time and input – underlining your commitment to help marginalized communities in the UK. I look forward to seeing how the project develops and we’ll keep you informed of our progress!”

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