Agenda item

Report of the Executive Director, Resources

The Cabinet Member considered a report of the Executive Director, Resources which provided information on supporting Credit Unions in Coventry.

During the economic downturn there has been a proliferation in the availability of expensive short term loan providers. Often it was the most financially vulnerable that have recourse to access the services of so called ‘pay day lenders’. In response to this trend and as part of the Council’s wider agenda to support financial inclusion, the Council was proposing to provide financial support to Credit Unions in Coventry to help ensure the effective provision of Credit Union services for city residents.

Credit Unions are regulated by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) and must be registered in accordance with the 1979 Credit Unions Act. Credit Union members are covered by the Financial Services Compensation Scheme (FSCS) which covers deposits up to a value of £85,000 per individual. The Grant Aid agreement would require the Credit Union to provide their registration details and maintain registration in future.

The Council is proposing to make funding available to assist Credit Unions in securing and maintaining accommodation which would enable them to provide effective Credit Union services to Coventry residents. More specifically it would enable New Central Credit Union to move from its current location in the City Arcade to more spacious and prominent premises in the centre of the city.

Funding would be provided to facilitate the move to new premises on a cost-neutral basis to the Credit Union – the grant would equate to the difference between the current rental and rates costs and the increased costs for the new property. The amount of revenue grant provided would not exceed £30,000 per annum. The Council may also consider one-off funding for refurbishment costs which would not exceed £10,000.

The funding would be allocated from the Cabinet Member’s policy contingency fund and would be for fixed period of three years. The expectation is that the Credit Union would increase their membership from their new, more prominent location in the city. At the end of the three year period the Council would review the financial position of the Credit Union to determine what level of growth has been achieved. At that point the Council would review the level of funding, if any, that would be required to support the Credit Union going forward. The expectation is that the Credit Union would have increased sufficiently its membership and operating surplus during the three year period to ensure future viability independent of Council funding.

The funding arrangements outlined in the report formed part of a wider commitment from the Council and partner organisations to support the work of the Credit Unions and bring about increased membership of Credit Unions amongst city residents. The Council and its partners would continue to support and work closely with Credit Unions in the city to improve access and membership and help to provide a strong sustainable community finance infrastructure for the city. 

RESOLVED that the Cabinet Member (Strategic Finance and Resources) approves the provision of grant funding to Credit Unions in Coventry for three years up to a level not exceeding £60,000 in any one financial year.