My last blog on the economy had the rather unsatisfactory ending that a Jubilee Year wasn't the answer to the credit crunch and offered no response to the unspoken question: so what do we do?

A hobby horse of mine came to mind. Surely Credit Unions were tailor-made to help meet the credit squeeze? On two occasions I've considered starting a credit union - once based at my then workplace and more recently at my church. On both occasions I've been discouraged because all the advice is that credit unions are very hard to start. The advice includes the warning that it can take up to five years to get one off the ground. Often the advice is to join an already existing credit union by getting them to widen their membership. Reading the Treasury's Task Force Report entitled Credit Unions of the Future, (admittedly an old report from 1999) the Treasury wants to encourage 'larger individual Credit Unions' with 'professional management'. Stewardship have a great document on their website with advice for churches wanting to set up a credit union. It says '.....many of the smaller Credit Unions around the country are planning to merge or have already merged with other Credit Unions to make larger Common Bonds [membership agreements]. This is because of the FSA (Financial Services Authority), who took over in 2002 as the Regulator governing Credit Unions, is looking for Credit Unions to become strong and sustainable businesses'.

The Treasury published 'Proposals for a Legislative Reform Order for Credit Unions and Industrial & Provident Societies in Great Britain' in July 2008. These proposals would introduce flexibility to some of the relevant legislation and I appreciate that any form of savings or loans activity needs to be properly regulated. However, the direction is still toward larger and 'more professional'. For example, the proposals include the ability to allow organisations to join a credit union.

This seems to me to be missing the whole point. Originally, credit unions were financial co-operatives set up by farmers to help each other or for people in a small locality. A group of people would form a membership agreement (or 'common bond') based on living or working in a particular locality or belonging to a specific organisation, such as a church. The Treasury report quoted earlier says that 'the common bond is unique to CUs [credit unions] and is based on the simple idea that members will know each other and will be able to exert moral pressure to ensure that loans are repaid. Its effectiveness is demonstrated by bad debts being, on average, less than 1% of loans.'

People lending to people they know at low interest is a responsible approach to debt. Perhaps within church-based credit unions it could be even more biblically-based and have no interest charged (see here)?

Perhaps the legislation, regulation and official encouragement for credit unions needs to be reviewed and pointed in a new direction?

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