LONDON–Credit unions in the U.K. have seen a surge in growth, with loans to members surge by £1 billion to £2.6 billion, reflecting an increase of 64% between FY2020 and FY2024
Total membership of credit unions also sees growth of 8% between 2020 and 2024, rising to 2.3 million, according to data from the Bank of England, which regulates the country’s credit unions.
Analysis said “these institutions become an increasingly important component of the financial services ecosystem.”
According to Broadstone, an independent financial services consultancy, including on credit risk, the growth demonstrates the strong demand for affordable borrowing solutions and competitive savings rates amid continuing budgetary pressures facing households.
The Specifics
Specifically, in addition to the data above, the Bank of England reported:
Total income for credit unions, rising by 84% from £227 million in FY 2020 to £418 million in FY 2024.
“However, the total net liabilities of loans in arrears for credit unions has grown from £118 million in FY 2020 to £191 million in FY 2024, of which over £92 million is overdue for over 12 months,” the report stated.
Mind the Gap
“Credit Unions are capitalizing on the gap left on one side of the consumer credit market by a tightening of mainstream lending criteria and on the other from borrowers turning away from traditional banks,” Paul Matthews, senior director of risk at Broadstone, said in a statement. “Demand for borrowing remains high given the financial pressures that many households face, which is another key growth driver for the credit union market. Credit Unions can offer members a more personalized service with greater flexibility in underwriting which can be more accommodating for borrowers with limited credit history or irregular incomes. Many credit unions remain community-focused and their not-for-profit position differentiates them from other lenders in the eyes of some borrowers, who may be disenchanted with the wider financial sector.
Government Wants to Double Mutuals
Broadstone noted in its analysis that the U.K. government is seeking to double the size of the mutual sector, including modernizing the common bond requirement and amending the Credit Unions Act.
Common bond is interpreted much more narrowly in the U.K. than the U.S.
