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London Capital Credit Union

Who benefits

London Capital Credit Union strives to design services and products to meet the needs of all people, regardless of their background. Their services continue to be of the greatest help to those most often excluded from mainstream financial services. These are typically lone parents, people with long term health issues, having been made redundant, or having gone through a personal crisis such as divorce/separation.

The Social Case

“It has taken me away from using high-interest payday lenders and put me on the right path. Thank you so much. You are a life saver.”
 

A single investment in non-transferable deferred shares provides ongoing benefits far beyond the amount invested. While London Capital Credit Union (LCCU) can raise loan capital through members’ savings, there is a regulatory requirement to hold capital representing 10% of their assets. For example, an investment of £100,000 of deferred shares will allow LCCU to release up to £1m to lend each year. With a typical loan repaid within a year the money can be lent out time and again multiplying its effect.

In 2013, analysts from a well-known City institution performed an assessment of the social and financial impact of LCCU's lending business. They concluded that on average for every pound that London Capital Credit Union lend to clear existing debts, members save £1.25 each year in interest, bank charges and fees.

So £100,000 of deferred shares allows £1m to be lent and leads to £1.25m in benefits to members in a single year, and over four years members could save some £5m of loan costs. This is money that is likely to be used within the community and therefore provide further benefit by supporting local business and creating local employment opportunities.

Members

"The credit union helped me to get my self esteem back after the illness and death of my wife. I had lost my business, my car and my savings."
 

In the UK, credit unions tend to operate in the areas of the market not well served by mainstream financial institutions. As members’ incomes are usually lower than average, a credit union’s main competitors are likely to be niche players offering high-interest loans to those with poor credit profiles.

Because credit unions are not-for-profit organisations and tend to have a low cost-base, they are generally able to offer loans at a significant discount compared to their competitors. As a result, successive governments have encouraged the growth of credit unions, both in terms of their national coverage and the services they can offer. There has been a marked increase in the size of the credit union movement in the past 20 years. London Capital Credit Union has shown growth in both membership and trading at very much higher levels than the UK credit union sector as a whole.

London Capital Credit Union conducts an annual survey of their membership, with a 15% response rate. Nearly 30% said they were lone parents, only 60% were in full time permanent employment, and the large majority describe themselves as something other than ‘White British’. The most startling figure shows that 25% of members saying that they have less than £15,000 total income to their household and 62% of their members are in homes where the total household income is less than £30,000.

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