CREDIT unions received new powers this week which will allow them to deliver a wider range of financial services to many more members, communities and businesses.
The powers follow legal changes at Westminster which give credit unions in Scotland, England and Wales more flexibility to choose who can access their services. Credit unions will now be able to extend membership to more than one group of people, no matter where they live or work, to sign up organisations as members and to pay interest on deposits.
Paul Mcfarlane, head of operations at Glasgow Credit Union, one of the UK's biggest, says interest payment will enable consumers to make better comparisons: "We have already been able to advertise our Isa with a 4% interest rate, which has been hugely successful."
The Association of British Credit Unions (ABCUL) says it will allow unions to offer "a more effective alternative to high street banks on the one hand and high cost lenders and loan sharks on the other".
Credit unions have for some years been allowed to extend their "common bond" to members of a community as well as a workplace, but they have not been allowed to pay interest on savings, only a retrospective dividend.
Now a credit union providing services to anyone living or working in Glasgow, for instance, will now be able to serve all the employees of a firm too, even if they live or work elsewhere. A community group, housing association or local employer may be able to use a credit union to manage its money, with the added advantage that the money is kept in the community. Some credit unions may also start doing business lending, potentially opening an alternative source of finance for start-ups and existing organisations and businesses.
Mark Lyonette, chief executive of ABCUL, said: "These changes are a major breakthrough in the delivery of credit union services to communities in Scotland. The new rules mean credit unions can now compete more effectively with banks and other lenders to provide fair and affordable financial services to individuals and organisations. Credit unions will be able to reach many more people, helping them to develop a savings habit, which can only be good for Scottish communities."
Credit unions already offer services including savings accounts with payroll deduction, current accounts, prepaid cards and affordable credit. A survey by ABCUL last year found up to three-quarters of the UK's 428 credit unions intend to change rules to expand their membership.
Last month, two of Scotland's largest credit unions received a £1 million investment from the Scottish Investment Fund (SIF) to help them share a modernised operating and account management system. Social Investment Scotland which runs the SIF on behalf of the Scottish Government, said the grant to Scotwest based in Glasgow and Capital Credit Union in Edinburgh would enable the unions to cope with recent success in growing membership, to extend their reach to the financially excluded, and to improve the service to their current combined membership of 41,000.
Marlene Shiels, chief executive of Capital Credit Union, said: "Both credit unions are growing faster than our existing systems can cope with, and this investment will help safeguard our future operations."