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Credit unions: a growing movement

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Democratic finance has lots of definitions, but credit unions are arguably one of the best examples. Tom Revell looks at why they’re becoming an increasingly attractive alternative in the UK, as International Credit Union Day takes place across the globe.

According to Prudential Regulation Authority (PRA) audited statistics from the Association of British Credit Unions (ABCUL), at the end of September 2012, 1,038,904 people used the British credit union sector, which held total assets of £957m.

In the six months between September 2012 and March 2013, the sector’s membership grew by 3.2% to 1,072,202, while its assets rose by 6.7% to £1.02 billion.

Around the world there are over 200m credit union members in 100 countries. Their recent rise is consistent, if steady. It seems there are many reasons that saving money in a credit union, rather than a bank or building society, is becoming an increasingly attractive option to consumers.

What is a credit union?

A credit union is a financial co-operative that is owned by its members. They exist primarily to provide savings and loans to these members. However, increasing numbers of credit unions now offer a wider range of services including cash ISAs, the current accounts and mortgages.

Their contrasting ownership structures means that unlike banks, they are not ultimately motivated to create profit for external shareholders. Abbie Shelton, policy and communications manager at ABCUL, says, “This also means that the services they provide are designed with the needs of members in mind; a credit union may exist, for example, for people who may work in a certain sector or live in a certain area.”

Institutionally, credit unions are of course very different from high street banks. Some of the larger credit unions have branches that operate like many banks, with collection points such as local post offices, while some smaller unions will have just a couple of opening hours a week. Credit unions are also managed by volunteers elected from the membership, by the membership.

Credit unions are small organisations and lack the enormous amounts of financial backing of the big banks. Many credit unions limit the total you can save with them to £10,000.

However, although credit unions often describe themselves as not-for-profit organisations, they do make small returns, or ‘surplus’. A credit union’s takings from loans and investments must exceed its operating expenses in order to maintain capital and stay solvent. This surplus is distributed among members as a dividend, or used to finance offers of higher returns on savings, more affordable loans, lower fees and new products and services.

It is also important to remember that credit unions are regulated by the PRA and its sister regulator the Financial Conduct Authority (FCA). Like with normal savings accounts, all members’ savings are also protected up to £85,000 by the Financial Services Compensation Scheme.  

Why choose credit unions over a bank or building society? 

Firstly, credit unions can offer great rates on savings and loans. Studies have shown that even at their highest loan rates, they offer best value in the UK personal loan market for loans up to £2,000 and £3,000 where rates for larger loans were kept at 1% a month on the reducing balance. For smaller, shorter term loans, a credit union member can borrow at a 10th of the interest rate of a doorstep lender, or a 100th of the interest rate of a payday lender.

A recent study found that, perhaps unsurprisingly, consumers prefer lending from credit unions than payday loan companies. The research, which was funded by Friends Provident Foundation and the Barclays Community Finance Fund, found that borrowers could take out a longer payment term whilst paying back less than they would from a payday lender. Borrowing from a credit union instead could have saved 1,219 people £145,000 in interest charges alone – equating to almost £119 per consumer.

Although much of the coverage came to focus on the Church of England’s unfortunate indirect investments, in July the archbishop of Canterbury Justin Welby declared he would be attempting to compete payday lenders “out of existence through church-backed credit unions. A spokesperson from ABCUL said that they were in discussions with the church over how this could be achieved.

But one of the most appealing aspects of credit unions is their willingness to make loans of as little as £50 to their members – something high street banks won’t do. Also unlike banks, when taking out a loan from a credit union, there are no penalties or charges if you pay the loan off early, and life cover is included in the loan at no extra cost.

Payroll deduction is another key reason to join for people who can sign up to a credit union through their employer. Savings and loan repayments taken directly from salaries make building a nest egg easy and provide convenient access to affordable credit.

But perhaps most importantly, people also value the ethics of credit unions. Rather than being held by profit seeking institutions and possibly being invested in immoral and unsustainable causes, as with a high street bank, with a credit union a consumer’s money is kept in the community and benefits only their fellow members.

Because of the broad appeal of credit unions, and the way each can vary so much in who they are set up to serve, there is no typical credit union member.

Shelton explains, “Credit unions are sometimes seen as being only for those who are financially excluded, but in reality they aim to provide inclusive services for anyone in the communities and workplaces they serve. 

“A successful credit union needs to provide a range of products that are attractive to a wide range of income groups if it is to be able to sustainably meet the needs of all the people it serves.”

The sector and government, Shelton says, recognises the need to modernise services in order to appeal to a younger generation of savers. ABCUL has been contracted by the Department for Work and Pensions to deliver the Credit Union Expansion Project. Up to £38m has been pledged to support project credit unions in becoming more attractive, convenient and efficient through collaboration and the development of new products and access channels.

ABCUL certainly hold ambitious hopes for the future of credit unions. The Credit Union Expansion Project aims to increase members in project credit unions by 794,000 by March 2015. 

Shelton says, “By March 2019, the project is expected to have brought an extra 1 million people into credit union membership and save up to £1 billion in loan interest repayments. 

“Making services more convenient and working with employers to bring the benefits of payroll deduction to many more people will help credit union cement themselves as a valued financial services provider for many more people.”   

If you’re interested in joining a credit union in the UK, www.findyourcreditunion.co.uk can help you find which ones you might be eligible to join. 

Further reading:

New scheme rolled out to assist UK credit union growth

‘We will compete you out of existence’, Archbishop tells payday lenders

Small is beautiful: why alternative banks need to step up to the mark

The Guide to Sustainable Banking 2013

Economy

How Going Green Can Save A Company Money

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going green can save company money
Shutterstock Licensed Photot - By GOLFX

What is going green?

Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.

The first step in going green

There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.

Making needed changes within the company

After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.

Reducing the common paper waste

paper waste

Shutterstock Licensed Photo – By Yury Zap

Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.

Make money by spreading the word

Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.

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Energy

5 Easy Things You Can Do to Make Your Home More Sustainable

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sustainable homes
Shutterstock Licensed Photot - By Diyana Dimitrova

Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.

1. Weather stripping

If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.

Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.

Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.

2. Programmable thermostats

Programmable thermostats

Shutterstock Licensed Photo – By Olivier Le Moal

Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.

Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!

3. Low-flow water hardware

With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.

Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.

Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.

4. Energy efficient light bulbs

An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.

New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.

5. Installing solar panels

Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.

Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.

From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!

These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.

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