There are 500 credit unions in Great Britain, with nearly 700,000 members and assets of over £500 million. 115 of these credit unions are in Scotland and 40 per cent of British Credit Union membership is in Scotland.
The report concludes that provision of low-cost, responsibly-lent finance is crucial to mitigating the debt crisis that causes so much misery in parts of Scotland: encouraging the practice of saving is equally vital to creating a generation of financially responsible people.
The credit crunch has led to a dearth of widely available credit for those with low-income; there has never been a better time for credit unions to build on their existing success and raise their public profile.
The Committee recommends that the Government supports credit unions in their aim of recruiting more affluent members and that it provides financial backing to enable more credit unions to provide current accounts - particularly in Scotland where 11 per cent of people do not have bank accounts.
Whilst credit union interest rates on loans are capped at 26.8 per cent APR, the Committee has been shocked by evidence of the rates of interest charged by other lenders. It urges the Government to introduce a cap on interest rates for the whole financial sector, rather than just credit unions.
The Committee also calls on HM Treasury to publish the legislative reform proposals as soon as possible which will include allowing credit unions to pay interest on savings, rather than just dividends, to allow groups to join unions, and changing the common bond definition to widen membership.
The Committee also expresses disappointment that ring-fenced funding for credit unions from the Scottish Executive now totals only £250,000, a sharp decrease from over £2.7 million before 2008, notwithstanding that the overall pot to which credit unions can now apply to is over £42 million.
The Chairman of the Committee, Mr Mohammad Sarwar MP, said:
"Never has it been more important for credit unions to be seen as a genuine alternative to mainstream banks. Credit unions can provide a valuable service to individuals, entire communities, as well as helping to encourage a culture of responsible saving. But Government support must be in place to enable this to happen and we urge the Government to do more, and to do it now."