Noblesse Oblige

Posted: 20 May 2013, in Blog

Noblesse Oblige

Middle class snobs tend to look upon credit unions as only for poor folk and as a result, they don’t join up and use the services because of course they don’t perceive themselves as poor. This image problem has hindered the development of CUs for years and is actually partly the result of years of government support for credit union development in poor communities.

The policy intentions were laudable in wanting to develop fair finance for poorer people but the policy wonks and civil servants forgot that to be a social entrepreneur you also need to be an entrepreneur. The big mistake of focusing on poor communities only and restricting credit union membership and operating powers was to place a big fat block on their ability to capitalise their businesses with personal savings. Low levels of capital meant that there was little money to lend and a few bad debts could endanger the validity of poor folk’s personal savings.

This happened because poor folk do not have the savings capacity to build these businesses fast. Low capital bases and poor lending decisions also resulted in some CUs going bust and having to be rescued because they lacked the reserves and other assets to manage bad debt and poor repayment problems. A vicious cycle of low growth and periodic financial crisis (compounded by volunteer stress and burnout) could then ensue for some of the weaker CUs and that is partly why a process of merger and closure has featured within the CU sector.

Thankfully, a relative period of maturity and progress within the business life cycle for some CUs has emerged and they are beginning to grow, develop capital bases and adequate reserves, and recruit good managers and directors. There is still a long way to go however.

The Irish and Afro-Caribbean communities brought the community credit union idea to Britain and over time, many of these community credit unions were by and large surpassed by employee credit unions in terms of membership and turnover. These new CUs were mainly focused on public sector/local government workers who capitalised their businesses fast – through payroll deductions.

Now, some of these employee CUs have opened up their memberships to local residents and you can now find some CUs offering mortgages, payday loans and bank accounts etc.

I have a soft spot for some members of the aristocracy. Some of these nobs seem to like some working class folk more than they do some middle class folk. I think this is because nobs and the middle classes both have power and social capital and can clash over values and norms relating to society, the role of the individual, the role of the State, the limits of rampant individualism and whether or not a social contract exists between the classes. I’m not opening up a Marxist class analysis and discussion of the Royal Family and the inequities of history and land ownership here – so please, no letters in green ink!

Anyway, what got me going on about this is that the Daily Telegraph web link above shows that Camilla Windsor has joined a CU. I expect her to save and borrow because a CU member who does not borrow does not appreciate that saving is all well and good but CUs survive on loan interest. This pays the bills, builds reserves and provides working capital for new services. If you are lucky and the CU is well managed loan interest also pays for member dividends.

What does gall me however is that if Camilla Windsor can join a CU why do so many folk who earn their coin from the public sector and the social economy still refuse to join?  Given the state of the Co-op Bank this is the last social enterprise option for fair and equitable financial services folk have.

So, my plea is to urge all you folk out there to contact a CU and set up a Direct Debit or payroll deduction. Go on, put your money and your financial business where your principles (ought to) lie. We need lots of CUs with a million members each if they are to become sustainable in the long term. If you join and open up an account for your kids as well you and yours will be part of a progressive movement and force for good. You will also avoid high interest charges and build personal savings and get free personal insurance. Go on, what is really stopping you because I’m sure I’ve heard you criticising the banks.


NOTE: This opinion piece blog does not necessarily reflect the views or beliefs of Social Enterprise Scotland.