People are turning away from casino finance and towards a more democratic system that isn’t just about money-making
Over the weekend I attended the London Community Credit Union’s (LCCU) open day in Hackney. Cake was eaten, finance was debated and new accounts were opened. It seemed like an inconsequential event; it was only a few hours long; but what I witnessed was a small part of a larger phenomenon that has been slowly spreading across the country since 2008.
According to Move Your Money UK, over 500,000 people have joined credit unions in this year alone. In the US, the figures are even more remarkable: from the start of 2009 to mid-2010, 1.5 million members joined credit unions in a year – the number of new members usually expected in a 14-year period. When you examine how credit unions works, it’s easy to see why.
Unlike big banks, credit unions don’t engage in any form of casino finance. When you deposit money into a credit union account, it isn’t invested anywhere or gambled in any way. The only time it is used by the credit union is when it is loaned to other account holders; and even then it is guaranteed by an FSA scheme, meaning that it won’t be lost if the loan repayments aren’t met. Those who join credit unions are not customers, but members – like a co-operative. This allows their interests to be put first, and gives them a share of the profit at the end of the year in the form of a dividend. In credit unions, there are no shareholders demanding more money, no dodgy loans or credit cards, no millionaire CEOs and no bonuses.
But there are also wider social reasons for joining a credit union, and indeed many do so because they value being part of a financial system that is not simply a utility or a money-maker, but something that improves people’s quality of life. I spoke to Rob, 24, who was opening an account at the open day, about why he’d decided to take the plunge with LCCU: “I like the fact that the money in a credit union remains in the local economy – that credit unions put the most vulnerable people first.” The members of a credit union must share a common interest with one another in order to join. In the case of the LCCU, members must live in the boroughs of Tower Hamlets or Hackney. The benefit of a community credit union like this is that members’ money remains within the community, and doesn’t end up in an offshore trust in the Cayman Islands or being spent on bottles of Bollinger in the City of London.
And yet, what surprised me about LCCU’s open day is how little banker-bashing there was. The event wasn’t intended to rail against a current broken system but to create something new, something better. “What I’ve found interesting about the new protest movements springing up lately is that they’re very much about democracy,” says Danielle Paffard of Move Your Money UK. “UK Uncut and Occupy represented people turning away from the big structures we’ve lost trust in and instead creating something autonomous that they can have a say in.”
Just as we saw people sitting on the steps of St Paul’s Cathedral, spontaneously holding general assemblies, those who join credit unions automatically become part of its democracy: having a say in its day-to-day activities and receiving a share of the profits. It’s instructive that the sudden spike in credit union deposits has occurred without the encouragement of a single frontbench MP or national newspaper. Perhaps people are losing faith in the democratic mechanisms society uses and are instead creating their own. The sudden rise of community organising in the Labour party, Citizens UK, and my own employer, Unite the Union, might also indicate a recognition that people are turning to self-organised, community-based structures when it comes to running their lives.
Unsurprisingly, the banks are taking the hint. Recent advertisements for the big four British banks are sprinkled with the words “responsible” and “local”. In 2010, Citibank set up a blog for its US customers, the first post of which somewhat pleadingly assured them: “We promise we’re listening.” The rise of credit unions, then, are not only beneficial for the members that use them, but for wider society as well. They can act as a “living alternative”, demonstrating to the big banks what the public expects and demands from them – a more egalitarian financial system that benefits the majority of people rather than generating profit for those at the very top.
Recent polling by YouGov shows 79% of us don’t believe the banks see themselves as being “in this together” with the British public. Perhaps that won’t come as a surprise to the bankers who have tolerated wave after wave of protest since the crash. But perhaps what they didn’t expect is that when they opted out of a reciprocal relationship with the public, the public would opt out too.
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