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Credit unions “turn borrowers into savers”

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22 Feb 17

A  report from the Fairbanking Foundation shows how credit unions turn borrowers into savers.

The report – titled Save As You Borrow – Credit Unions Creating Good Habits was produced with the support of the Barrow Cadbury Trust and officially launched this week at Parliament.

The report uses research carried out by Ipsos MORI for the Fairbanking Foundation into the behaviour of over 1,200 borrowers from 7 different credit unions who accessed a “Save As You Borrow” product – ie, a loan where the borrower makes a small contribution to a savings account alongside their monthly or weekly loan repayment.

The research found that 67% of borrowers who had no savings and found it impossible to put money aside now plan on saving regularly as a result of using a Save As You Borrow product.

The positive long term impact of Save As You Borrow products is underlined by the fact only 26% of respondents were saving regularly before taking out their credit union loan, but 71% said they would continue to save regularly throughout the year after paying back the loan. 97% of respondents stated that they found the approach from credit unions helpful in encouraging them to save.

Fairbanking Foundation Chief Executive Antony Elliott (pictured at the launch with Chair of the All Party Parliamentary Group on Credit Unions Seema Kennedy MP) said: “We have proven that Save As You Borrow is highly effective in creating new savers and that it is so much more than just an abstract idea. Turning borrowers into savers is a concept that should be applied more widely among credit unions and beyond because the concept is a win-win for everybody - customers as well as the financial institutions that offer them.”

ABCUL Chief Executive Mark Lyonette said: “Credit unions have long known from experience that encouraging people to save when they take out a loan can have long term transformational effects for creating savers out of borrowers. This report puts hard quantitative evidence behind these powerful effects. In a time when we have a chronic problem of undersaving and overindebtedness which reaches right up the income scale, this report shows the hugely positive role of credit unions in improving financial capability. We hope that employers and other credit union partners will take note of this new evidence and the role credit unions play in supporting them.”

The new report was welcomed by the Archbishop of Canterbury Justin Welby, who said: “I hope that those involved in developing the use of credit unions (e.g. employers, churches and housing associations) will study this report carefully and make use of the evidence that it presents, and that other financial organisations will take note and consider how they can take a similar approach to benefit their customers and members.”

You can read the report in full here.

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