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Democratic banking: the credit union option

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From March 2011, credit unions in England, Scotland and Wales added 77,000 members in 12 months, bringing the total number of people in credit unions in Britain (excluding Northern Ireland) past one million for the first time. In the US, the figures are as remarkable, with one and a half million people making the switch between the start of 2009 to mid-2010 – the number of new members usually expected in a 14-year period. Here, Joseph Iddison uncovers the credit union option.

This piece originally featured in B&GT’s Guide to Sustainable Banking 2012.

As uncertainty and scandal continues to surround our banking systems, and with further restrictions on public spending recently announced, it is little wonder why some are choosing credit unions over multinational banking institutions.

Credit unions differ significantly from banks. Generally, it operates with the purpose of providing prudent financial planning, credit at competitive rates and other financial services, only to its members. In having these members, as opposed to customers, their wellbeing is put first, giving them a share of the profit at the end of the year in the form of a dividend. Members also have the authority to elect the board of directors, which is run in a democratic one vote per person system, regardless of the amount of money invested, meaning members have a say in the day-to-day activities.

In the event that a credit union goes bust, all members’ money is protected up to £85,000 by the Financial Services Compensation Scheme.

And speaking to the BBC earlier this year, Mark Lyonette, chief executive of the Association of British Credit Unions Limited (ABCUL), highlighted that credit unions are now able to pay fixed interest on deposits.

“In terms of saving, for those people who are trying to make the most of their money, being able to know what rate your credit union is going to pay you is actually really important”, he said.

“This is going to put us on a level playing field with other institutions in the UK.”

Credit unions often describe themselves as not-for-profit, as they are ultimately created to serve their members and are not to maximise profit. However, they must return a small amount (known as ‘surplus’), as without it, they could not continue serving members.

According to the World Council of Credit Unions (WOCCU), a credit union’s revenues (from loans and investments) must exceed its operating expenses and dividends (interest paid on deposits) in order to maintain capital and remain solvent. Credit unions then use this surplus finance to offer higher returns on savings, more affordable loans, lower fees and new products and services.

By putting your money into a credit union, not only will you have more of a say as to where that money goes (unlike major banks) but you will also be helping others in your community. Several of the largest credit unions are now providing mortgage finance, too, and many will offer loans of tens of thousands of pounds in value.

But one of the most appealing aspects of credit unions is their willingness to make small loans of as little as £50 (and up to £7,500, with larger institutions offering much more) 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. Life cover is included in the loan at no extra cost, meaning, in the event of your death, the credit union’s insurer will repay the loan on your behalf.

“I save here because I feel it is very community-based. It is brilliant”, Vernella Dyer, a member of the London Community Credit Union based in Hackney, told the BBC. She has been a member for over a year, and supports the decision to build up the reserves of her local credit union.

Whilst credit unions have become more popular in recent years, with constant doubt and austerity in national and global banking systems, they are not a recent movement. According to the London Mutual Credit Union, credit unions and societies were created in Germany in 1852, where the principals and democratic beliefs of today’s institutions began.

Before 1979, however, no legal structure for credit unions existed in the UK. Some of the early credit unions chose to register under the Companies Act and some under the Industrial and Provident Societies Act. There were many who played a key role in getting a legal structure for credit unions on the statute book, and eventually, in April 1979, the Credit Unions Act was the last Act to be passed by the outgoing Labour government.

The UK’s involvement in credit unions only really began after witnessing their progress in other countries, particularly Ireland, Canada and the US. In Ireland, over 70% of the population belongs to a credit union. In the US and Canada, the figure is around 43%. Credit unions are also growing fast in Eastern Europe, parts of South America, Africa and the Far East.

Nowadays in the UK, many small-scale credit unions are established to offer a financial community, as many, such as the Police Credit Union, intending to support common benefits. Many also support community development, such as localised projects and investment.

There is more of an emphasis on mutual satisfaction for the members and community it may be targeted towards. For example, a credit union might be able to offer support to someone struggling to qualify for or access general bank services and products. Larger credit unions are at times able to offer better interest returns than some high-street firms.

What appears the most remarkable, though, is, while big banks cut lending in 2009, credit unions granted more loans, and since January, UK institutions have been able to lend to businesses.

“Our members are borrowing for productive purposes, so we have continued to lend”, Kellie Terhune Neely told the Huffington Post. She’s vice president of Hughes Federal Credit Union, which serves low-income neighbourhoods in Tucson, US, where in 2009, loan volume was up nearly 5%, supported by a 6.5% growth in membership and a 19% gain in deposits.

Back home, and speaking to the BBC, David Braithwaite, financial adviser with Citrus Financial Management, described a potential problem for credit unions trying to attract new customers.

“A lot of people in this economic climate are looking for somewhere safe to put their money. Now there is nothing wrong with a credit union, but a lot of people do prefer a high street brand, well-known names that they can trust”, he said.

At the beginning of the year, a new law passed, allowing credit unions in England, Scotland and Wales to offer fixed savings rates. Most credit unions have not set their interest rates yet; however, one has already offered 4% on a cash Individual Savings Account (ISA). But most credit unions will not be offering guaranteed interest rates in the immediate future. For now there appears to be no imminent change.

“Each credit union has a choice on whether or not it wants to offer the guaranteed interest rate. So they would have to vote on that procedure”, explained Jo Everest, community relations manager for the London Community Credit Union.

“For us here, it would be early next year before that came into effect.”

Almost everyone is eligible to join at least one credit union. By law, they must limit their membership to people who share a particular common bond. In the past, that has often meant people connected to the same employer. But today, more than three-quarter of all credit unions define that shared bond by location, so anyone who lives in the community can become a member.

If you’re interested in joining a credit union, visit www.findyourcreditunion.co.uk, which has details of all the credit unions around the country and lists which ones you might be eligible to join.

Joseph Iddison is a student in his final year of an English degree at the University of Leicester. He intends to do a master’s in geographical information science and human geography.

Further reading:

The Guide to Sustainable Banking 2012

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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