I call on Dawn Bowden to speak to the subject she has chosen. Dawn Bowden.

Diolch, Llywydd. I’m grateful for the opportunity to bring forward this short debate on the important role played by credit unions in helping tackling financial exclusion, a major issue in parts of my constituency and in areas of deprivation across Wales. I’m happy to give a minute of my time to both Jayne Bryant and Mark Isherwood in this debate.

Llywydd, the fundamental difference, of course, between credit unions and any other financial lenders is that they’re there to serve the members and not to maximise profits for shareholders. Credit unions are democratic, member-owned co-operatives focused on providing a genuine social benefit to local communities in which they are based. They vary greatly in size, ranging from the very small to some with over 15,000 members. Among their principal benefits, credit unions provide an affordable source of credit capped at 3 per cent per month—much lower than anything available from other sources. They secure savings: all savings up to £85,000 are protected under the UK financial compensation scheme and many credit unions offer life insurance at no additional cost. They are community focused and under the common bond arrangements they’re intrinsically linked to local communities—the money saved with and lent by the credit union largely staying within the local community.

The Deputy Presiding Officer took the Chair.

Credit unions make their decisions on lending money not on largely automated and impersonal procedures but more often than not on the basis of one-to-one interviews with members. Part of any assessment on a loan will be based on the experience of that person’s membership with the credit union. As a result, low-cost loans will be provided to many applicants who might well be excluded from receiving loans from other mainstream providers and who could otherwise be forced to turn to unscrupulous loan sharks or other extortionately high interest lenders who exploit the desperate, leading them into greater levels of debt.

Credit unions are, of course, recognised as having a central role in supporting the Welsh Government’s financial inclusion delivery plan. In these times of imposed austerity, we’ve seen a succession of cuts to welfare benefits, which have added to the number of people in Wales facing financial exclusion. The picture will not get any better as further planned cuts come into force.

For most of us, taking out a loan is about buying a new car or something expensive for the home, or perhaps a once-in-a-lifetime luxury holiday. For those who are financially excluded, often living in our most deprived communities and commonly hit by cuts to welfare benefits, a loan is likely to be about them being able to pay the rent, pay utility bills or even feed the family. For these people, a loan from a credit union could be a lifeline. Looking at the Merthyr Tydfil credit union in my own constituency, statistics for the last six months show that of 990 loans approved, over 400 related to helping people buy goods at Christmas, while nearly 70 related to paying urgent bills, rent arrears, buying clothes or debt consolidation, all of which indicates the crucial role of credit unions in helping those financially excluded in meeting their day-to-day living costs.

In Wales we have around 80,000 people who are members of a credit union. Membership in Wales has grown by 50 per cent in the last five years and the growth in membership, assets and loans to the public has been greater here than anywhere else in the UK. In the year up to September last year, loans to members reached a total of £22.3 million, an increase of 12 per cent from the previous year. Most significant for me is the fact that in 2015-16, credit unions in Wales made over 10,000 loans, worth £9.2 million, to the financially excluded. However, despite this growth in membership of credit unions in Wales, at 2.7 per cent of the population and a target of achieving 5 per cent by 2011, it remains below the level of membership in Scotland, at 7 per cent, and the Republic of Ireland, at a staggering 75 per cent. Although it should be pointed out that the growth that we have seen in Wales has been in no small measure due to the support provided by Welsh Government. As part of the Welsh Government’s support for credit unions, a fund of more than £420,000 has been set up for 2017-18 with the aim of assisting credit unions here to move towards securing their own long-term sustainability, so as not to be reliant on public funding into the future. And that, of course, is one of the real challenges for our credit unions in Wales. Because an analysis of the level of loans by credit unions to members shows that whilst there’s been a significant rise in the total value of credit union loans, this has fallen behind the rate of increase in credit union assets. So, unless credit unions are able to increase the ratio of loans, they will find it more difficult to be sufficiently profitable to build their reserves at a rate that will make them viable in the longer term.

The Merthyr Tydfil credit union that I referenced earlier is fairly typical of a number of others in Wales. It was established in 1998, and by 2008, its membership had reached 1,200, employing six members of staff. In the eight years since, membership has risen to 4,800, with the credit union now employing nine members of staff, with over 50 volunteers. They have seen a sharp increase in membership, but this still remains a small percentage of people who would be covered by the common bond area, and will not include many in the area who could be considered financially excluded. So, whilst membership of credit unions has increased, often it is amongst people like ourselves who are wedded to the philosophy behind credit unions, and membership amongst those who would benefit most has not increased at the same rate.

Llywydd, I was surprised to learn that, despite financial support provided to the credit union by Merthyr Tydfil council, it’s only recently that the credit union has been discussing setting up a payroll deduction scheme with them, and to date it only has a few payroll deduction schemes with local businesses. Not only do successful payroll deduction schemes lead to increases in membership, it’s often those in secure, reasonably paid employment who take out the larger, longer term loans that enable the credit union to be profitable enough to make smaller, often short-term loans to the financially excluded, who, of course, are the people who credit unions are best placed to help.

So, in recognising the importance of credit unions in tackling financial exclusion, what can we do as Assembly Members to ensure that credit unions are successful and sustainable into the future? Well, I see myself as having an important role in talking to public service organisations in my area about providing payroll deduction facilities for their own employees and promoting their local credit unions in their communications. I will also be asking them to use procurement processes to encourage any contractors they use to also provide similar arrangements. Similarly, when I meet with companies in the private sector, I will be encouraging them to look at promoting the local credit union with their employees, and as an Assembly we should be doing more to promote the benefits of credit unions at every opportunity.

Dirprwy Lywydd, as we continue to face the challenges of austerity policies driven by the UK Government, credit unions will continue to play a crucial role in tackling financial exclusion, and we have a duty to do all we can to ensure that they can survive and thrive.

I would like to thank Dawn Bowden for giving me a minute of her time in this debate. Credit unions can play an active role in the financial education of young people. Newport Credit Union, with nearly 1,000 union savers, runs school savers clubs in four primary schools. With the help of teachers, parents and school governors it teaches children the value and importance of saving money. This is absolutely crucial. It was my pleasure to welcome the Cabinet Secretary to one of the savings clubs at Pillgwenlly Primary School recently. I’m sure he’d agree that it was great to hear from the young people about their enthusiasm for saving and what they were saving for. Newport Credit Union intends to go further and set up savings clubs in high schools, where the pupils themselves run the clubs and take some responsibility for the collection points. These are fantastic initiatives that must be encouraged and supported to ensure the next generation understands the importance of savings and the dangers of debt.

As somebody who previously worked in the mutual building society sector, I welcomed the 2012 UK credit unions Act, freeing credit unions to work with housing providers, community groups, employers, social enterprises and charities to bring financial services to new groups of people.

Although credit union membership in Wales has grown 50 per cent in the last five years, now standing at 80,000, the Welsh credit unions are by far the biggest lenders of affordable credit to the financially excluded. Only approximately 2.5 per cent of people in Wales currently use credit unions, compared to 46 per cent in the United States. As Welsh credit unions state, the Welsh Government should continue to help them in their aim of establishing a fully financially independent and sustainable sector by 2021, building capacity, ensuring greater and more effective collaboration and supporting the development of shared credit union services. But Welsh Government should also examine the not-for-profit community banking model developed in Wales by Responsible Finance, working with credit unions where credit unions can’t.

Thank you very much. I call on the Cabinet Secretary for Communities and Children to reply to the debate—Carl Sargeant.

Thank you, Deputy Presiding Officer. I’d like to thank Dawn Bowden for leading this debate today. There is a clear recognition of the benefits credit unions can bring to individuals and communities.

Credit unions are ideally placed, through their relationships with local authorities, local employers, schools and community organisations, to help strengthen the financial resilience of communities through improved access to responsible credit and saving opportunities. I’m clear that money management skills are best learnt at a young age and many credit unions work on this principle and reach out to local schools to help to encourage a saving habit from an early age. Indeed, I visited Pill school in Newport with Jayne Bryant to see their school savers scheme run by Newport Credit Union. I was encouraged by what I saw—a really enjoyable visit, but with huge benefits for that community. I also visited Tredegar only last week, through the opening of a new credit union store in the town centre, which was very much welcome.

Credit unions are key partners in the financial inclusion delivery plan published in December 2016, and this sets out the actions needed to fulfil and achieve a well-functioning and comprehensive financial system in Wales that is accessible to all. The delivery plan sets out how we will work with partner organisations, both in Wales and at a UK level, and to help improve affordable credit and accessible financial services, as well as access to financial information, including debt advice.

Credit unions are directly delivering some of these actions and have a central role to play in the promotion of financial inclusion. I’ve been very clear that the support given to credit unions must continue to address financial exclusion. The funding I’ve made available to credit unions from this April will be used directly to support a number of these actions. These will support those more disadvantaged in our communities across Wales to access the help that they need. I’ve also agreed to a grant fund of £422,000 for 21 credit union projects in 2017-18, following an open application grant process. These include school saver projects and prison saver schemes. Credit unions will be notified of their funding awards shortly and the activities will be funded from 1 April 2017. This will help credit unions continue to support financially excluded members and to deliver our financial inclusion delivery plan, as well as aiding their long-term sustainability of operation.

A number of projects that will be funded may also contribute to increasing credit unions’ sustainability through increased membership, and Dawn raised the issue of businesses and local authorities being engaged in an opportunity to save with ease. I’m very happy to encourage that collaboration. We’ve invited collaborative projects from credit unions, which are prioritised in the assessment process.

We know the importance of credit unions in helping people who struggle to manage their money, also. The Welsh Government funding provided between April 2014 and December 2016 has helped credit unions support more than 29,000 financially excluded members, with just over £23 million provided in loans to help those who need this. This demonstrates the role that credit unions play, and I hope that we can grow that role, because I think they play a vital role in our community.

I want to see well-managed, effective and sustainable credit unions in Wales that are inclusive and accessible to everybody, developing credible and professional financial products and services, like they are in other countries, too—they are seen to be growing particularly in America.

The credit union sector in Wales has been transformed over the last 15 years. Since 2000, credit union membership has risen from around 10,000 to over 75,000, and I know that many Members in this Chamber are also members of credit unions, including myself.

In this time, many Welsh credit unions have strengthened and professionalised their services immeasurably. The ambition now is to build on these firm foundations. It’s a really important part of financial literacy—the opportunity to access safe saving and safe lending. We’ve seen the difficulties found by communities if they turn to loan sharks or other disreputable methods of borrowing money.

I’m very grateful to Dawn for the contribution she’s made today, highlighting the very successful programme of credit unions here in Wales, but much more work needs and can be done to support them. Diolch.

Thank you very much.