Historian Pat Starkey offers some context to the Archbishop of Canterbury’s intervention into the payday loans debate.
The initial impact of the archbishop of Canterbury’s attack on payday loan companies and their excessive interest rates has been overshadowed by the revelation that the Church of England’s investment practice is not quite as ethical as may have been assumed. Albeit at a distance, it benefits from money in payday loan companies. Moreover, its rules allow small amounts – up to 25% in some cases – to be invested in pornography, arms trading and other concerns whose moral base may be questioned when putting its funds into larger funding packages. The archbishop may well be reflecting on the biblical teaching that it is a good idea to get rid of the plank in your own eye before commenting on the speck in someone else’s. Nevertheless, his support for credit unions, has, quite rightly, been enthusiastically received.
However, without intending to do so, the archbishop has highlighted a problem that faces most of us. How ethical are ethical investments? What do we know about the deposit accounts in which voluntary organisations’ funds are held? Where are our pension funds and our personal savings invested? Many people deliberately chose ethical savings funds but are they, like the church, permitted to hold money in funds whose activities may include small amounts of undesirable investment? In his interview with an unusually deferential John Humphrys last week the archbishop was anxious to stress the complexity of financial life, and the need to live in the real world. His obvious embarrassment and the press obsession with his employment in the oil industry many years ago has led, perhaps unfairly, to an expectation that he should be more financially aware. It still left the question – is it possible to avoid dodgy investments?
But this blog is supposed to be about credit unions, and it is already slipping on to the path trodden by last week’s media. Inadvertently, the archbishop took the lid off a can of worms that will wriggle for some time. But that mustn’t detract from his support for credit unions, even though the way he has been reported gives rise to a number of observations.
For instance, Welby’s ambition that churches become involved in credit unions has been made to sound innovative and revolutionary. But it is nothing of the kind, as he would almost certainly agree. Churches of all denominations have been have been involved in such local initiatives for decades. And the movement has grown steadily in the last twenty or thirty years, often responding to particular local needs. No two communities are the same and each credit union will reflect local circumstances. To take just one example – in the 1980s, in Toxteth, an area of Liverpool that had suffered years of deprivation and unrest – a number of local people believed that a credit union might help members of the community to manage their money and enable them to borrow from time to time at a reasonable rate of interest. A small planning group included representatives of residents’ and community associations along with the clergy and other members of local Roman Catholic and Anglican churches. The clergy were able to make church buildings available for planning meetings and to lend equipment like photocopiers to help to get things off the ground. More than twenty-five years later, local people are managing a thriving community credit union. Church buildings have been, and still are, used for planning and occasional celebratory events, and church members are actively involved, but the credit union is quite independent of any denominational interest.
That independence is important. But the archbishop’s comments, as reported in some parts of the Press, seem to suggest that faith groups should consider running credit unions. Should they? The strength of credit unions lies in the fact that their membership represents whole communities – no one faith group, however important its contribution to local life, can claim that. And anything that suggests that membership might ever be limited to, or dominated by, one particular section of the community ought to be resisted at all costs. Of course, religious scruples may affect the ability of some people to take an active part and it is interesting to see that the London Community Credit Union, whose members live in Tower Hamlets and Hackney, is investigating the prospect of offering an Islamic type loan, consistent with the requirements of Shariah law. But at base credit unions are community based and their membership must share a common bond – that is they must live in an agreed geographical area – but not a religion.
There has also been some confusion about the sort of service that credit union members can expect, particularly about rates of interest received and paid. The Toxteth credit union operates from an office on a local shopping street. It has a small paid staff and a large number of volunteer helpers, all of them local people. It is welcoming, friendly and efficient. Its membership of more than 4,500 have between them more than £1m of savings (no one member can keep more than about £15000). It even pays members a dividend on their deposits – the latest, at 3%, was better than that paid by many banks. Those who have built up their savings may borrow at a rate of 12.6% APR. For any member who needs to borrow before she or he has had a chance to build up savings, the rate is 26% APR. But on the Radio 4 Today programme the archbishop claimed that his model of credit union would need to charge between 70% and 80% annual interest on loans. As he said, that is much better than 5,500% charged by some payday loan companies, but it is far in excess of that charged by established credit unions. No interviewer has appeared to give the archbishop the opportunity to explain that, but it would be interesting to know how such rates can be justified. Or even if that is really what he meant.
Clearly much more could be done by faith groups and other organisations to publicise the resources available to local communities through their credit unions. The Toxteth one operates in an area where there are payday loan companies operating in all the shopping streets, and a pawn shop occupying part of the local Tesco building, suggesting that there are many local financial needs that are still not being met. It may not have turned out as he planned, but if it has done nothing else, the archbishop’s intervention has given welcome publicity to organisations that, by their use of volunteers and their clearly defined community base, make important contributions to local neighbourhoods.