case study

Angela Fulton saves with Glasgow Credit Union to help fund her voluntary work with children's projects in India, Nepal and Africa.

The 28-year-old office temp from Paisley opened an Easy Access Savings Account in 2008. She said: "I heard about Glasgow Credit Union through my work friends – several of them already had savings and loans and only had good things to say about its services. I already had a savings account with my bank, but was earning next to nothing in interest.

"I liked the sound of the mutual, member-led ethos of the credit union, and when I looked at the dividends they had paid on savings accounts in previous years, it made sense to switch."

Ms Fulton, who will be volunteering in Tanzania and Ghana this summer, added: "I like the flexibility my account gives me. I spent most of last year saving to pay for a three-month trip to India and Nepal.

"While I was there, I was able to reduce the amount I was putting away each month until I came back to the UK and started earning again."

The continuing revelations about the big banks' profiteering, incompetence and dishonesty have left many consumers dis-illusioned with the entire financial services industry, but there are providers that aspire to higher moral standards.

So-called ethical banks, building societies and credit unions aim to offer an alternative based on responsible lending that puts the needs of customers before profits or executive bonuses.

June Walker, chief executive of Glasgow Credit Union, said: "In the wake of the banking crisis, the Libor fixing scandal and the bonus backlash, there seems to be a real desire for change. People not only want a good rate of return on savings and low interest rates on loans, but also a sense that they're being treated fairly."

The Co-operative Bank and its internet arm, Smile, are part of the Co-operative Group with around seven million members.

They and fellow ethical banks Triodos and Charity Bank do not do business with companies linked to the arms trade, oppressive regimes or environmentally damaging practices.

In a recent Which? survey of current account satisfaction the Co-op and Smile were equal second with a score of 87%, after First Direct, 92%. Nationwide Building Society was fifth, on 76% after the One Account with a score of 85%.

A Co-op Bank spokesman said: "During the summer we saw 100,000 new customers open accounts. Customer feedback during this period highlighted that for those who had switched their account to us, trust and ethics were key factors."

While they may not always top the best-buy tables, ethical providers do aim to compete on value. The Co-op pays up to 3% annual savings interest (for a three-year fixed-term deposit) and offers tax-free individual savings accounts (Isas) through its Britannia Building Society subsidiary.

Co-op and Smile personal loans start at 5.8% and mortgages are available from 2.99%, for a two-year fix exclusive to current account customers.

Triodos, which uses its deposits to finance green enterprises, pays up to 2.3% on savings. Charity Bank, which lends savers' money to charities and social enterprises, has a range of accounts paying up to 2.05%.

Building societies are owned by their members so have no shareholders to cream off the profits.

At this year's Card and Payment Awards, Nationwide, the UK's largest, won more card categories than any other provider.

As well as taking top honours for customer service and product of the year, it was named most responsible lender. Nationwide's savings accounts, which pay up to 2.7%, are also available through its subsidiary Dunfermline Building Society. Personal loans start at 5.9% and mortgages at 2.69% – for a four-year fix – but to get the cheapest deals you must open a Nationwide current account.

Ecology Building Society offers ethical savings paying up to 2%. Mortgages that support sustainable building practices start from 4.9%.

Credit unions are co-operatives that operate purely for their members' benefit and are com-mitted to responsible lending. Their savings accounts pay an annual dividend in place of interest.

Ms Walker said: "Glasgow Credit Union has always put people before profit, and our 30,000 members are testament to the fact it is possible to be ethical and competitive.

"Profits are shared between members in the form of a dividend, all our loan decisions are made by a person, which means we're flexible in a way no computer scorecard will ever be able to match, and the only people with a say in how the union is run are the members themselves. You can't get much more ethical."

Glasgow, whose members must live or work in the city, paid Easy Access account holders 3% last year, while its mortgages start from 4.5% for a three-year fix. Personal loans begin at 7.9%, and its consolidation loan won the best new product category at the recent Social Enterprise Awards.

Capital Credit Union, which is open to anyone living or working in Edinburgh, the Lothians or Borders, offers a cash Isa paying 3%, loans from 6.9% and mortgages from 4.75%.