The union has also seen an increase in its membership rate
Credit union lending in the UK has surged by 42% over the past four years, a new analysis from Broadstone has revealed, highlighting the increasing ability and willingness of borrowers to seek out alternatives beyond traditional high street banks. This trend has been attributed to a combination of rising demand for affordable loans and the perceived value offered by credit unions during challenging economic times.
As of the end of 2023, credit unions have £2.3 billion in outstanding loans to their members, marking a significant rise from the £1.6 billion recorded at the end of 2019. The growth rate is notable, with a 21% increase in lending alone during 2023, making it the largest year-on-year change on record, according to Broadstone.
The demand of credit unions extends beyond their lending capabilities. Membership has also experienced a boost, with the total number of members rising by 4.6% to 2.2 million through 2023. This expansion in membership, alongside a quarter-over-quarter rise in income to £324.3 million in 2023, underscores the sector’s robust performance amidst a tightening lending landscape.
Interestingly, despite the surge in lending, the proportion of net liabilities from loans in arrears has only seen a modest increase, rising from 5.2% to 6.8%. This indicates that even as credit unions have broadened their borrower base, they have not faced a significant uptick in bad debt, reflecting prudent risk management.
Tom Cuppello, director of risk at Broadstone, emphasised the significance of these developments, stating, “The Bank of England data demonstrates the growing role that credit unions are playing in our financial ecosystem as the cost of borrowing has risen.”
Cuppello also highlighted the importance of credit unions for borrowers who may feel marginalised by mainstream lending institutions. “For members who may feel locked out of the mainstream lending sector, especially as demand for credit has risen following the pandemic and with tightening of lending criteria, these Unions offer an attractive alternative,” he said.
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