Credit union development: Financial inclusion and exclusion

Pergamon Geofonm, Vol. 29, No. 2, pp. 145-157, 1998

0 1998 Elsevier Science Ltd. All rights reserved Printed in Great Britain

0016-7185’98 $19.00+0.00

PII: s0016.7185(98)oooo!M

Credit Union Development: Financial Inclusion and Exclusion

DUNCAN FULLER*

Department of Geography, University of Hull, Cottingham Road, Hull, HU6 7RX U.K.

Abstract: For a special edition of Geoforum on socio-spatial exclusion, credit unions unexpectedly have it all-a financial institution currently at the margins of both the economy and society generally, rigid demarcation of boundaries, exclusionary territories and tendencies, power relations, and most excitingly the possibility for a geography of financial inclusion. Whilst most analyses have effectively treated credit unions as unsocial, uncontested spaces of purely economic considerations, this paper enters into the interrelational, and social space of the credit union study group. In so doing, it illustrates two interesting paradoxes at the heart of credit union operations. Firstly, it suggests a number of potential exclusionary effects recent deregulatory legislation has on the demarcation of common bond boundaries. Secondly, it illustrates how common bond boundary construction initiates a purification of financial space, but argues that the act of boundary formation itself is ultimately exclusionary in nature. Awareness of such issues on the part of the credit union development community of Kingston Upon Hull is highlighted through recent changes in the city’s overall credit union development strategy. 8 1998 Elsevier Science Ltd. All rights reserved

Introduction

Credit Unions, mutual financial co-operatives which provide convenient and accessible savings and loans to their members (National Consumer Council, 1994), are “Britain’s best kept secret” (Hugill, 1996). They have accordingly received relatively little academic attention (exceptions being the works of Berthoud and Hinton (1989), and the National Consumer Council (1994)‘. In this paper, however, I argue that credit unions, and indeed all other ‘alternative’ financial institutions are currently worthy of more attention, not least because of their place within a geography of financial inclusion.

l E-mail: D.Fuller@?geo.hull.ac.uk; Fax: 01482466340.

Exclusion, credit unions, and the agency of financial minorities

The late 1980s onwards has been a period of large scale redundancies and major financial losses within the financial services industry. This contrasts sharply with the preceding period of growth, when the industry was characterised by expansion and augmentation. In recent years within developed countries there has been an increase in the financial service firms ‘flight to quality’, together with the introduction of widespread elements of exclusion and closure (Leyshon and Thrift, 1993). The developed countries’ debt crisis has seen a redirec- tion of credit away from poorer social groups as a consequence of a general strategy of risk avoidance, with a concurrent withdrawal of financial capital

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146 D. Fuller

towards a middle-class heartland. These events are reminiscent of the early to mid-1980s developing countries’ debt crisis when banks abandoned developing countries and began to seek out new customers in the developed world (Leyshon, 1994). As Leyshon and Thrift (1993) note, “the multi-faceted process of ‘restructuring for profit’, which has afflicted parts of the United States for some time, is now increasingly observable in Britain, along with the escalating withdrawal of financial services from certain social groups and localities”. As a consequence, certain sections of the community find it increasingly difficult to gain access to the financial system.

However, Ford and Rowlingson, 1994; 1996) argued, in an influential paper, that work within the ‘financial infrastructure withdrawal’ debate (Ley- shon, 1994; Leyshon and Thrift, 1994; Conaty, 1993) had character&d the financial system in ‘narrow’ terms. A distinction had been drawn between what were viewed as ‘formal’ financial services, and a non-regulated sector to which people were ‘expelhA’. However, they argued that people possess, theoretically at least, a degree of choice and scope, with an ability to express a preference between mainstream sources, and those which are regarded largely as ‘informal’. They noted that only a partial view of the choices and services open to financial service customers had been documented, with the minority group who make use of the informal sector (and it could be argued, the informal sector itself) having been effectively sidelined in contemporary debates. As a consequence, institutionally-led processes of financial exclusion ‘may not be the whole story’ (1996, p.1347).

In a way this is analogous to an argument concerning the status of minorities, both within society and in academic work, as raised by Sibley in 1990. He states that, “it cannot be argued that the location and economic status of minorities is generally determined by the dominant forces in society”, as this neglects the agency of minority populations. Although Sibley is referring to Gypsies as a minority racial group, some of his ideas are useful in considering minority financial groups- those supposedly excluded by formal financial services (along the lines of Ford and Rowlingson’s ideas on choice and scope). Sibley begins (1990,

p.483) by arguing that, “[rlecent commercial and residential developments in the capitalist city have been seen by some observers as confirmation of the view that the social geography of the city is essentially determined by the ajluent and powerjkl, who carve out their own spaces and relegate low- income groups either to areas which have been characterised by disinvestment or to urban periph- eries” (my emphasis). This parallels certain facets of the financial infrastructure withdrawal debate, which elaborated a geography of finance and credit essentially limited to concern over the provision of facilities and finance from formal sources. The a&rent and powerful-the banks and building societies- were seen as holding all the power.

By holding this power, they were perceived to be able to relegate groups whom they considered to be a bad risk (for whatever reason) to areas outside of the ‘financial post-structuralist state’ as described by Leyshon (1994). While expressing concern for their predicaments, they would argue that they are ‘businesses, not charities’, and that they do not provide social services (Hunter, 1993). It has been argued that minority groups, as defined by a lack of credit-worthiness, suffer through lack of access to credit and 8nancial inf?astructure, and lack of power and control over the source and determinants of that credit-worthiness. Financial institutions were viewed as being proactive, excluding in order to ‘reduce risk, cut costs and repair profits’ (Ford and Rowlingson, 1994, p.5). However, when borrowers themselves avoided involvement with banks and building societies, they were portrayed as being reactive, responding to “an agenda and style of business set by these creditors; the nature of their cultures that alienate low income households or, more frequently, their formal credit assessment procedures that lead those with low incomes to assume they will be rejected” (1994, p.5, my emphasis).

Winchester and White (1988: 37) argued that, “the processes of gentrification, of marginalisation, and of polarisation...result in certain sub groups of the population becoming stigmatised as unacceptable as well as economically weak”, or supposedly in this case, stigmatised as unacceptable because they are economically weak in terms of access to formal sources of credit. However, as Sibley (1990, p.483) notes, “the status of some minority groups cannot

Credit union development: financial inclusion and exclusion 147

be explained adequately in terms of their domination by capital and the state”. So it is with financial exclusion, for as Sibley comments:

In the case of some minorities, the importance of agency may be underestimated, by academics and policy makers, because of a lack of knowledge and a failure to recognize other knowledges...which may be hidden from the view of the observer (Sibley, 1990, p.483).

This is particularly the case with alternative financial institutions, many of which are ‘invisible’ in the sense that they are constructed of networks of people, not based around visible points of reference within the city landscape such as mainstream financial services (although such high-street visibil- ity is clearly on the wane)‘. Hence, as Ford and Rowlingson note (1994, p.4), whilst “it may be that these other services are ‘slipstream’ services in the sense that they are used when potential borrowers are denied access to ‘mainstream’ services such as bank loans and overdrafts...it may also be the case that they are alternative services, at least for some people, at some times, and that there is scope for at least some households to express a preference” (my emphasis). Thus, direct exclusion from mainstream financial services may be complemented by a process of indirect, or self-exclusion.

Like Ford and Rowlingson, this paper argues that institutionally-led processes of financial exclusion are not the whole story. In a society where access to cheap, limited credit has perhaps become a mini- mum requirement of living in a western economy (Berthoud and Kempson, 1992; Leyshon and Thrift, 1995) I argue that these alternative financial services, what Gunn and GUM (1991) term alternative institutions of accumulation, are worthy of more attention since they appear, increasingly, to go where the mainstream financial services either fear or are reluctant to tread, and in effect therefore, may be important financial service providers within specific local spaces. Most specifically, the increasing new geographies of financial exclusion-the large areas of the United States (and now the United Kingdom) being faced with the closure and withdrawal of banking infrastructure+and the associated ‘catastrophic economic consequences’ and resultant deepening uneven development (Leyshon, 1995) present the most obvious opportunities for such alternative?. Although these institutions are varied in scope and scale, at least four main types have been identified (Leyshon and Thrift, 1996):

community development banks (see Bamekov and Jabber-Bey, 1993; Taub, 1988; The Economist, 1993); rotating savings and credit associations (ROSCAs) (see Ardener, 1995; Bomstein, 1996; Counts, 1996; Geertz, 1962; Ghazi, 1994); local exchange and trading systems (LETS) (see Lee, 1996; Thome, 1996; Williams, 1996), alongside credit unions.

The potential for such alternatives is also illustrated by reference to the latest work on the extent of financial infrastructure withdrawal within the United Kingdom.

Financial exclusion and inclusion

Recent research by Pratt, Leyshon and Thrift (1996) found that even after a period of expansion fuelled by a credit boom there are still 26% of the population who are denied access to even the most basic of mainstream financial service products. This 26% are now even more excluded than was previously thought, being ‘unwanted’ in an age when account applications by potential customers are subject to greater scrutiny, in a general period of controlled expansion. Pratt et al., (1996) note that the excluded include women, the young, the old, the unemployed, and those in semi-skilled or manual jobs (socio-economic classes D and E), with a regional bias reflecting the geography of retail financial services generally, with the likelihood of exclusion slightly higher in the West Midlands, North, Scotland and Wales, and lower in the South West, East Midlands, East Anglia, and the South East.

Conaty and Mayo (1997) have, in addition, pointed to what they see as a number of probable future trends within a financial services sector which has lost over 85,000 jobs and one quarter of all bank and building society branches over the last seven years. These include: the growth of electronic banking; increasingly sophisticated product development and marketing; the arrival of new entrants to the financial services sector such as telecom groups and retailers (such as Tesco); new customer technologies such as smart cards, Internet trading and electronic purses; and the international out- sourcing of key backroom services. As Conaty and Mayo (1997) note, “[tlhe effects of financial

148 D. Fuller

exclusion today are arguably widespread and disa- bling, in that financial services represent an essential component of life in a modem society”. They also acknowledge how the more traditional means of meeting financial needs, in terms of crisis loans or credit from family and community networks have also been eroded, with income from employment becoming more uncertain, and living on cash becoming more ‘expensive‘ (for example in the payment of bills). Importantly however, in terms of these problems, they argue (1997, p.12) that, “the issue of financial exclusion is one that credit unions are well placed to tackle”, in that, “the major impact of wider changes within the sector relate to the opportunities and growing market challenge created for credit unions to serve groups within society increasingly excluded or poorly served by the mainstream sector” (1997, p.10).

Whilst it should probably be acknowledged that, “credit unions are clearly incapable of solving all the problems caused by financial exclusion”, and neither are they a direct response to it in many cases, “they are certainly a means by which savings can be pooled and then distributed in line with local needs, and may even help to stem the process of fmancial dynamics which would otherwise recycle funds from poorer to richer areas” (Leyshon and Thrift, 1995, p.335). More specifically, “[wlhile credit unions do not want to be cast as a ‘poor persons bank’, their record is sufficient to demon- strate four key lessons: low-income consumers can save and want to; there are effective, mutual ways of organising the delivery and recovery of credit which reduces operational costs; low income communities understand interest rates and are prepared to pay an affordable cost for credit union loan services; and if given appropriate financial services, low income households are able to use these effectively to both reduce their economic vulnera- bility and increase incomes” (Conaty and Mayo, 1997, p.10).

Awareness and analysis of such services is now being fruitfully conducted within the new sub- branch of economic geography that is financial exclusion (Leyshon and Thrift, 1996), analyses which ‘focus upon embeddedness, and upon the inevitable mixing of social and economic relations’. However, aside from their potential within a geography of financial inclusion, most of the credit union literature to date has tended to concentrate

upon their economic characteristics (for example Barham et al., 1996; Barron et al., 1994; Desai et al., 1996; Fried et al., 1993; Kaushik and Lopez, 1994; McKillop et al., 1995; Spencer, 1996), and have at best underestimated, and at worst com- pletely ignored, the initial, locally and socially contested processes associated with credit union development at the study group stage (McArthur et al., 1993; Thomas and Balloch, 1992)4. They have concentrated instead on the development issues that have arisen once the credit unions have actually been registered’. Berthoud and Hinton (1989), and the National Consumer Council (1994) at least go some way towards acknowledging some of the intricacies, and important development decisions involved in the development process, but ultimately share many of the shortcomings of the other articles, as the following extract demonstrates:

Typically, one or two people who had heard about credit unions would suggest the idea to a small group who became the founder members.... The next stage was usually the formation of a steering group to discuss the aims of a credit union, its powers and limits, administra- tion, the legislation and rules, the role of the national organisations. Potential officers would be approached and support rustled up from personal contacts and local organisations: PI&s, mothers and toddlers groups, ethnic organisations, the church and so on. (Berthoud and Hinton, 1989, p.35-36)

In contrast to the emphasis on post-registration found in most works, it is the ‘rustling up’ at the early study group stage that I intend to focus on during the course of this paper. It represents a critical stage in the development of any credit union, in many cases framing approaches and directions taken at a later date. More particularly, this stage involves the demarcation of the common bond boundary’j. The discussions surrounding ‘where to draw the line’ illustrate the paradox between the inclusionary sense of belonging such a concept is intended to highlight, and the exclusionary tendencies that such boundary definition ultimately embodies. In addition, nothing written so far encapsulates the “bloody long hard slog” (as one member in Hull put it) that such ‘rustling up’ entails. For despite thirty or more years of credit .union history in the UK, and in the case of some credit union development workers, ten to fifteen years experience in their jobs, participation in credit union development is still a minority interest. This is as a result of a number of barriers, both real and


perceived, which stop people from becoming actively involved.

The remainder of this paper therefore hopes to fill such a gap in the literature by entering into the contested, interrelational, and social space of the credit union study group. It addresses some of the basic exclusionary barriers and tendencies, as observed during the progress of credit union development at its earliest stages within the City of Hull. More explicitly, this analysis is centred around the concept of the common bond, and the process of boundary definition. Finally, the last part of the paper documents a change in the approach to credit union development within Hull, borne largely out of increased awareness of the potential exclusionary nature of common bond definition and boundary construction.

Rustling up

Kingston Upon Hull is Yorkshire’s (and the old ‘Humberside’s’) only maritime city. Alongside its fishing industry heritage, key elements of its economy are its port and transport functions, chemicals, pharmaceuticals, caravans, and food- processing industries. The city currently suffers from serious problems of unemployment, low educational aspirations and achievements, and high crime levels (Hull City Council, 1994). Forrest and Cordon (1993) noted that, “poverty in its broadest sense is widespread”, with Hull having the 18th worst social deprivation and 20th worst material deprivation in England. Only eight local authorities ranked above Hull in both indices. A recent study of the image of the city (Spooner et al., 1995, ~7-8) noted that, “the city, at least as constituted within its present boundaries, is relatively poor; census data confirm that it is still a predominately working class city, characterised by serious levels of material and social deprivation”, and that “poverty and deprivation need to be tackled-a huge agenda in itself”. In addition, within the city a clear geography of inequality is apparent, with the highest levels of multiple deprivation found on the city’s outer estates and immediately to the west of the city centre. The 1994 City Regeneration Strategy goes on to note how “poverty blights the lives of many people living in Hull” (1994, p.20).

Hull currently possesses one fully-developed, and registered credit union (August 1996), one study

group, and a group moving towards the development of a council employees study group’. In addition, the city council currently employs one part-time, area specific, credit union development worker (reduced from an original three part-time workers (Fuller, 1997), and there is a Credit Union Forum, which is a strategic body comprised of representatives from all the groups within the city, and ‘interested others’, who are either working towards, or have already attained registration by the Registry of Friendly Societies.

The difficulties groups in Hull have faced, in reaching satisfactory numbers to form a study group, and ultimately a registered credit union, can be found throughout the credit union movement, alongside difficulties that are specific to Hull (Conaty and Mayo, 1997). I intend to illustrate such issues mainly through the concept of the common bond, as common bond definition is central to both the inclusionary and exclusionary potential of credit union development.

The geography of the common bond

Perhaps the most problematic aspect of credit union development is credit union image. This is mainly due to a general lack of public awareness of what credit unions are, and whom they are for. A central factor here is that no national organisation for credit unions has as yet developed an effective programme for raising the general levels of understanding within society’. For example, a National Consumer Council report (1994, p.37) noted that, without such knowledge, at a most general level, “[tlhe very name ‘credit union’ was felt by some to have negative connotations-‘credit’ has associations with debt, and “union” with trade unions”, to the extent that, “some CU workers (yet alone the volunteers) were demoralised by this image” (Crow et al., 1993).

A further barrier to participation in credit union development relates to a somewhat paradoxical position which credit unions face. Whilst their apparent best-hope market may be the 26% of the population without access to mainstream financial services, they are also aware of the problems associated with being labelled as the ‘poor peoples bank’ (NCC., 1994; Conaty and Mayo, 1997). Such issues are central to a debate within the credit union

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movement, where ‘diflicult decisions’ are taken by credit unions (or more specifically, by the study groups) as to whether to adopt either an idealistic approach with a concentration on small, self-help groups in the poorest communities, or an instru- mentalist approach characterised by larger credit unions among people (or at least including people) with ‘real’ money to save (Berthoud and Hinton, 1989).

Such issues have clear spatial implications and also affect the development and definition of the common bond. Ferguson and McKillop (1997) have noted how the common bond and its legal definition lie at the heart of credit union distinctiveness and define the scope of credit union operations. Com- mon bonds take three main types, with a fourth now possible as a result of recent deregulatory legislation (HMSO, 1996). The three ‘traditional’ forms are: the associational bond (based around a common organisation); an occupational bond (based around a common job); and the residential area bond (by far the most common); with the fourth being the ‘live and work’ common bond where someone is eligible to join because she/he works in the area to which the common bond refers. Of the two groups currently operating in Hull, both are area-based but have decided to opt for ‘live and work’ common bonds, whilst the proposed council employees study group will be employee-based.

Credit union development in Hull has traditionally begun with the slow development of a core group of interested individuals, usually interacting with members from other areas, with the Credit Union Forum, the local credit union development worker, and activists from that particular area (or group). The initial aim of these groups has been to determine exactly where the boundaries of any common bond may lie, in order to direct further volunteer ‘recruitment campaigns’.

Although there is a strong reliance on paid credit union development workers, much of the work is undertaken by non-paid volunteers, which has proved to be problematic because of difficulties in recruitment. The 1996 National Association of Credit Union Workers Conference (NACUW, 1996) identified a number of reasons for problems of volunteer recruitment, such as a lack of recognition of their work, a fear of handling money, the ‘I can’t do that’ syndrome, and that people just want to be

service users, not providers. However, the main obstacle to volunteer recruitment is the level of commitment that is needed, and the timespan over which such commitment must be sustained (which can range between anything from six to thirty-six months before registration). In addition to this time commitment, volunteers know that they have to undergo training in order to be able to fulfil any role expected of them in any of the credit union’s functioning committees!

In Hull it has been argued that the City Fathers mentality, and brand of socialism derived from an earlier period (1970s) still persists to this day, with a consequent lack at the grassroots level of people experienced in developing and running community- led organisations. A local councillor argued that he had seen this feature at first hand within his own ward, where three years ago a ‘vacuum’ existed in terms of community activism, with a great deal of apathy concerning the ability of local residents to change things (perhaps because they didn’t perceive any real need for change), and with the ‘big uncle’ tradition being dominant. However, he argued that these attitudes had been challenged in his area over the past three years, with the local population being ‘empowered’ mainly through the development of a number of residents’ associations (and other active bodies), and that his area was now ‘buzzing’.

However, the greatest problem with volunteer recruitment, both nationally and locally, relates to the basic fact that volunteers must come from the area defined through the common bond. Past arrangements regarding the demarcation of common bond areas were based on defining an area whose resident population could be character&d as having a common bond, a galvanising factor, or tie that “binds the members together” (N.C.C., 1994, p.6). As noted, this feature lies at the core of the credit union movements philosophy, in that, “[a] borrowers credit rating is not assessed on the basis of wealth and status, but on the proven ability to save. The common bond is therefore seen as an essential safeguard for a sense of mutual loyalty, concern and trust. Members are less likely to default on loans since they are accountable to friends, neighbours, or colleagues” (ibid.). However, recent deregulatory legislation has removed the need for such common bonds to be proven within the application for registration. Instead the group simply has to state that such a bond exists, although


at a later stage they may be called upon by the Registry in order to prove its existence. This is termed the ‘statutory declaration’.

It may be argued that such legislation has served to weaken the underlying philosophy of the common bond, as it has allowed the possibility of the over- zealous desire to incorporate areas that perhaps fail to display such common characteristics within common bond applications. Ironically, this can lead to a whole host of potential exclusionary tendencies (instead of the intended inclusionary sense of belonging). Such ideas can be illustrated through the discussions surrounding the process of common bond definition by one of the groups in the city, the Central and West Credit Union Study Group.

Central and west credit union study group

The ‘Central and West’ area (Figure 1) has seen two attempts to develop a registered credit union, the first of which began in early 1995. Originally the common bond area occupied an area to the west of the city centre, out westwards along Anlaby Road (its northern boundary) to the Railway line (acting as a boundary between this area and the area of Gypsyville further to the west), and south to the River Humber. This first attempt failed to gather enough momentum within the area, largely as a result of a variety of ‘pressures preventing participation’ within the study group. In 1996 a second attempt was initiated, but which included at the outset a change to the original common bond area. It is a common feature of initial study group development that, due to a lack of specific credit union knowledge amongst new volunteers, key decisions are often taken by a more experienced and knowledgeable core group (and sometimes key individuals). As such, this second attempt began with a ‘recommendation’ made by one of the city’s previous credit union development workers to extend the common bond area eastwards to include the city centre itself, and move the northern (Anlaby Road) boundary further northwards. The main reasons for this change were that the new common bond would ‘fit’ with a potential common bond boundary suggested by a group operating directly north of Spring Bank (and that the Spring Bank area itself would ‘fit better’ with the area to the south, than with that to the north). In addition, the new common bond would incorporate the abode of a

volunteer who had been instrumental in the development of a study group on one of the city estates. As a result of this extension in area however, a number of potential problems became apparent.

In local terms, the ‘additional’ area in the extended northern part of the bond, (between Anlaby Road and Spring Bank), represents a somewhat different community from that to the south, the south being the traditional heartland of the city’s now long-lost fishing industry whose inhabitants remain very proud of its history and heritage. At meetings it was sometimes apparent that its inhabitants felt separate from those to the north, with little apparent trust or an obvious galvanising factor between the two areas and it’s inhabitants. In addition, the common bond now includes the city centre area, and to the south of the centre, the regenerated ‘Docklands’ area, character&d by a mixture of Housing Association and private accommodation. Both these areas might be characterised as being inhabited by a somewhat transitory population, with little real feeling of community within these areas, let alone with the area to the west of the city centre. It could be argued therefore, that in relation to the tie that binds members together, this desire to cover larger areas, and ultimately to cover the whole of the city in a patchwork of common bond areas could lead to more barriers to the future development of any proposed credit union. In particular, it undermines the notion that pre-existing common linkages should be built upon, and not new ones imposed, and weakens the degree of mutual loyalty and trust that underlies credit union operations.

To an extent such problems were acknowledged at an early stage by the Central and West Study Group, who observed the exclusionary effects of holding their introductory meetings (even in the old, supposedly ‘tighter-knit’ common bond area) at the same community centre (west of the city centre). This was seen to favour one community centre’s ‘territory’ over others within the area, exacerbating local (political) grievances between the various centres. As a result the group embarked on a monthly ‘tour’ of the various community centres within the common bond. However, they soon realised that although such a strategy was necessary in order to be seen not to bias one centre over another, the effect of each community centre having its own ‘territory’ also meant that interested potential volunteers from outside whichever centre the

152 D. Fuller

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‘tour’ was visiting were unlikely to attend. This was largely due to the same information being presented at each centre they visited, in addition to the distance they would have to travel. Since the ‘tour’ occurred largely on a monthly basis, this lead to a number of potential volunteers losing interest, as either they would not want to sit through the same introductory material meeting after meeting, or, after attending the initial meeting, either lost interest or got involved in other community activ- ities.

In addition there were tensions regarding the inclusion of wealthier areas that (it was perceived by some members) ‘do not belong’, such as the ‘DockIands’ area to the south of the city centre, with the desire to include its inhabitants as ‘wealthier’ individuals. Such views are related to the pervading impression that credit unions are solely for the poor. However, as one worker argued:

If credit unions were just for poor people they wouldn’t work, because if everybody in your credit union is on a low income, and continually wants loans you would never have enough money in the kitty to give all the loans. You’ve got to have some people, all right if its cash that they want, but you’ve got to have enough people that are willing to save, and might, once in a blue moon, suddenly require a loan. But they’re the people that help to keep your assets built up.

A further and related tension was that it was sometimes assumed that the notion of the common bond as a galvanising tie cannot bridge class or wealth differences, and thus effectively combine poorer and more wealthy areas. More specifically, it was argued that people from wealthier areas would not feel any affinity to poorer areas if these areas are combined within the same common bond area, as in the inclusion of the wealthier ‘Do&lands in a largely poor area. However, as the worker again argued, even if this were the case, the more wealthy are likely to join credit unions for the social benefits or altruistic reasons associated with credit union development, and not for financial gain. As such, the question of the inclusion of ‘different’ sub-areas might not actually arise in relation to wealthier members’ participation in what they see essentially as an ethical decision, not one based on factors underlain by common bond features.

Despite such problems, others have argued that the deregulatory changes instead undoubtedly “provide new opportunities for growth” (Wylie, 1995), and

that the previous regulatory regime was in itself far too restrictive to the extent that it has hindered the strategic development and growth of credit unions. As Ferguson and McKillop (1997, p.59) argue, “[i]n the US, liberalisation of the common bond to a wider field of membership concept has been strongly associated with the large growth in credit union membership during recent decades” (Burger and Dacin, 1991). Indeed the Registry of Friendly Societies now admits (Registry of Friendly Socie- ties, 1996, p.10) that its tight regulation, as a ‘prudential supervisor’, of common bond application prior to, and including the early 198Os, led to early difficulties in the growth of the nation-wide credit union movement:

Evidence to prove the existence of a common bond had to be very strong, overwhelming in fact. This was the legacy from the formative years 1979-83. The Registry was not going to risk a further setback to the movement by being too generous with common bond approvals. Whilst some believed that goal posts were being moved, it seems, with the benefit of hindsight, that it was not the case of the Registry moving anything. It was simply that, as only the Registry knew the location of the goal posts, how could anyone else know that they were being moved?

Common bond definition and purified space

In spatial terms, the rigid demarcation of common bond boundaries, whether based around pre-existing common attributes, or what are perceived to be common attributes, is exclusionary in nature. This issue was demonstrated to members in Hull by a number of development problems, with two study groups losing members for a variety of reasons, alongside a general lack of available resources which had meant that only a small number of areas within the city could be targeted for development at any one time. Faced with the prospect of effectively starting the development process all over again, in areas that had been unsuccessfully attempting to develop for some time, debates were entered into regarding the best way forward for credit union development within the city.

In the wake of recent pathbreaking, city-wide common bond applications from credit unions such as Exeter City Credit Union, a discussion day was organised in Hull in order to produce recommendations that would help facilitate future credit union development within the city. During the day, a series of discussions and workshops were held

154 D. Fuller

around the theme of either continuing along an idealistic line, in terms of groups based around small, local community areas (as epitomised by the Central and West common bond area), or to move towards a city-wide orientation, whose common bond boundaries would effectively be the same as the city boundaries. In all of these discussions the current existence of the registered credit union had to be placed in context, alongside the implications and possibilities for live and work common bonds, which would ultimately vastly increase any potential catchment area.

The conclusions and recommendations taken from this meeting recognised both the critical nature of the current strategy, and the inherent problems of developing smaller-sized, locally specific common bond areas. However, in line with what Berthoud and Hinton (1989) suggested, for those whose commitment to credit union development was based around the notion of idealistic small, community- based credit unions, such a theoretical stance proved a very difficult notion to change. In the event however, a more city-wide vision was favoured by a majority of members. This strategy was sum- marised as being more inclusive, opening up areas of the city which, for one reason or another, had not previously been considered for credit union development, whilst removing the localised, sometimes if not always, artificial and divisive boundary formations. In addition it was also argued that such a strategy would build on current strengths that the movement in Hull possesses, in terms of immediate provision of enough committed members to form a city-wide study group, with representation from most areas of the city, alongside a highly developed community centre network, and supporting city- wide organisations.

Effectively, the recent events in Hull had led to a questioning of the whole process and benefits of idealistic common bond definition. There is an increasing awareness that through the creation of boundaries around one area, areas ‘outside’, and their inhabitants, are immediately excluded. There is no liminal zone in this respect-people outside these boundaries, whether by five miles, metres or inches are unable to participate. There is an interesting comparison with the form of ‘purified space’ achieved through formal checks on customer creditworthiness. Although everyone within a specific common bond is eligible to use the facilities of

a credit union, the definition of boundaries at the outset obviously precludes others outside from doing so. The space within becomes purified through ‘official’ boundary construction, because of the social links that have apparently been identified, in line with the common bond philosophy, between the members within the boundary, the trust those links supposedly engender, and the power of shame that ensues should that trust be broken. For those outside areas targeted for development in Hull, it was almost like being told by a local restaurant or post office, ‘sorry, you live outside of the area we have defined as our customer base-but you can try and start your own! ‘.

One community development officer even argued that the discussions concerning the future strategy had actually made him begin to question the overall community development plan he had been working within for several years in the city, in terms of sending workers in to spatially-defined ‘priority areas’. He argued that this merely replicated the same problems of exclusion for those left on the outside of these bounded areas. He noted that, as in the case of credit union development, there are far more areas in Hull that are worthy of some form of community development input than those currently targeted, and that perhaps what was needed was some form of overall city-wide strategy in this respect also.

Conclusions

This paper has argued that credit unions, alongside other alternative institutions of accumulation, have the potential to take their place within a geography of financial inclusion. However, through a focus on the credit union study group, this paper has suggested that credit union operations are underlain by two interesting paradoxes, both of which are based around the concept of the common bond.

Firstly, as a result of recent legislation, and more specifically the development of the statutory declaration of common bonds, the desire for credit unions to attain the widest possible coverage (specifically in spatial terms) can lead to the combination, within one common bond area, of sub-areas that perhaps previously would not have been deemed to have had such a common bond. Such combinations can lead to a number of


potential exclusionary effects and tendencies, either in terms of inhabitants who do not see the overall common bond area as referring to them, or in terms of the perceived domination of the bond area by any sub-area, leading to self-exclusion from credit union facilities. Secondly, there is the more general point that boundary definition at any scale, whilst being clearly inclusionary for those on the ‘inside’, is necessarily exclusionary for those ‘outside’. Aware- ness of such issues, combined with the current development situation in Hull, has lead the Hull credit union development community to contem- plate the possibility of a city-wide credit union, in order to maximise the inclusionary potential at least within the city boundaries. Perhaps the ideal situation would indeed be the (as near as possible) simultaneous development of smaller credit unions throughout the city. However, in Hull currently, the general lack of resources that would be needed to achieve such an aim, alongside the desire to allow as many of the city’s inhabitants to benefit from credit union facilities as quickly as possible, has led to such a change in direction.

In many ways it can also be acknowledged that such decisions have to an extent been precipitated as a result of the need to work within the current legislative requirements that in some cases have exacerbated (or again have been perceived as exacerbating) existing barriers to growth. However discussions are currently being entered into on a national level, between the various credit union trade associations, the National Association of Credit Union Workers, the Registry of Friendly Societies and the World Council of Credit Unions regarding the development of a new Credit Union Act, which, at least in part, will attempt to address some of these problems.

Notes

1.

2.

For an in-depth analysis of what credit unions are, I would direct the reader towards these texts, as they do go further than any others in providing an in-depth overview, despite the criticisms voiced in this paper. Clearly as Sibley argues, “if the world view of the group lies beyond the observer, it becomes necessary to use a method of analysis which allows a faithful representation of that world

3.

4.

5.

6.

7.

8.

view” (Sibley, 1990, p.484). In this sense, it should perhaps be noted at this stage,that, taking such views into context, I decided at an early stage to approach my work in ethnographic manner. Unexpectedly, six months into my ethnography, I was approached by the members of the Forum to take the role of Public Relations Officer, and hence turn my study from basic ethnography into participant observation. This has since allowed me unprecedented and privi- leged access to meetings, experiences, and information which otherwise would have remained local Forum or credit union group knowledge. However, clearly with such privi- leges lies the ethical question of affecting and effecting my own research agenda, an ethical question with which I continue to grapple. Clearly, such alternatives are not solely restricted to filling gaps in mainstream financial service provision. Prior to registration, the group is termed a ‘study’ or ‘working’ group. They have a con- stitution, a central, elected committee and under- take the necessary training and fundraising in order to become fully-operational as a registered credit union. Credit unions must register with the Registry of Friendly Societies, and operate within the 1979 Credit Union Act, in order to be able to call themselves a ‘credit union’. As such they must satisfy the Registry that they have adequate operational systems in place and that the group can show its ability to run the credit union effectively, and that the area or organisation possesses a common bond. After registration, quarterly financial accounts and annual returns are required within strict time limits to check on the credit union’s progress. The ‘common bond’ is the link that must exist between all members of a credit union. It’s intention is to ensure that members will keep to credit union principles and act reliably and responsibly, and, as such, showing that a common bond exists is a requirement of the Registry of Friendly Societies prior to registration. As recently as early 1997 there were three study groups operating within the city, but two of these are no longer operational, reasons for which are explored in the next section. There are two main national associations, the Association of British Credit Unions Limited

156 D. Fuller

(AEKZUL) and the National Federation of Credit unions (NFCU).

9. Any credit union has three main committees, the Board of Directors, the Credit Committee, and the Supervisory Committee.

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Documents

Credit union development: Financial inclusion and exclusion