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.