Our CEO, James Berry, tells us more about this investment opportunity, and our plans for growth.
1. James, this is the first time that Bristol Credit Union has done an external capital raise; why is this, what led you to decide to do it?
Bristol Credit Union has grown significantly over the last 12 years since it was formed, serving more than 10 times as many members now as it did back in 2006, but the Board of Directors is keen to do even more. This led us to draw up a comprehensive growth plan, to set out what it will take to more than double in size again over the next 5 years. As well as better systems, increased marketing resources and more team members to help us grow we will also need regulatory capital in order to continue to meet our capital to asset ratio target, one of the key measures of the long term health of the credit union.
2. Why is the Deferred Shares Offer important to Bristol Credit Union, its partners and members?
Deferred Shares are the highest quality form of capital, after our own retained earnings. Because they are permanent capital this means that they really help us out, as we don’t have to worry about having to replace the capital at some point in the future. With the Deferred Shares in place, we are able to be more confident that once we receive the institutional investment in growth that we’re also looking for, we can really start to build our services to partners and for our members.
3. Bristol Credit Union is very much centred around helping others who struggle to receive financial help from the usual resources; why do you do that? What does this mean and what is the impact you have?
Bristol Credit Union (BCU) is set up to help all of the people of our membership area make more of their money. It’s a sad fact that people with the least, often end up paying the most for goods & services, a phenomenon widely recognised as the ‘poverty premium’.
One of the most critical aspects of the poverty premium is the lack of access to affordable and fair credit. This means people can pay hundreds and even thousands of pounds more in interest to borrow than they would do with a fair alternative like BCU.
Usually, most people going to short term, high cost lenders or using unauthorised overdrafts can end up paying over double what they borrow in interest, but it’s not just smaller loans that can be a problem. I looked at a loan application the other day for someone who was going to repay over £22,000 having borrowed £10,000! As well as the lack of affordable credit, there’s also a need for basic banking facilities, which we’ve helped over 5,000 people access over the years, and most importantly of all, the ability to start saving small amounts. Building up savings is the number one way to make more of your money in the long term.
4. You’ve mentioned your growth plans - can you tell me a little more about them?
Yes, of course. We’re planning to grow loan balances by 2.6 times over 5 years. This means increasing the number of loans from around 3,000 a year now to over 6,500 by 2023, and increasing the overall number of members from 11,500 to over 19,000.
We achieve this by investing in better systems and processes to enable members to do more online (which they’ve told us they really want) as well as to become more efficient. Once we’ve got this foundation in place, we then have a number of initiatives for growth including working in a much more comprehensive way in a number of neighbourhoods across our membership area through a community organiser who’ll be there to help support local people in as many ways as possible as well as promoting the credit union. We’ll also be looking to work with more local employers to get even more take-up for our no-cost Employer Partner schemes which can save employees from borrowing from payday and other high cost lenders, and really improve well-being too. And we’ll be working on a number of other initiatives to increase the number of people from all different backgrounds who use us for their saving and borrowing needs.
5. Alternative finance is a term that is bandied about - what does it mean and do?
Alternative finance for me is about making sure that money works to serve people and planet rather than the other way around. It’s a way of thinking differently about how we organise our approach to money and finance. Without external shareholders, it’s about us not being constrained by the need to seek ever more profit, but trying to find new ways to support our members and help them make the most of their money.
It’s about asking how else can Bristol Credit Union as a member-owned financial co-operative be part of the solution to keeping more control of our money locally, doing good with money, rather than leaving our communities in high cost interest payments and returns to external shareholders.
6. Where do you see alternative finance going in the future?
Alternative finance, in its broadest sense, will only continue to grow as more people see that there is a positive difference that they can make by being careful with how they choose to save and invest as well as borrow, supporting ethical and fair institutions like BCU rather than the big for-profit banks. It can also be very innovative, particularly when coupled with technology which can help make broader and firmer connections with how money is used, and can help introduce new features and services that are designed to help people out rather than to rip them off.
7. What do you think is going to happen to the UK’s financing industry?
The UK financial services industry is going to be more tied to the health of the UK economy than we might have expected even 5 years ago pre-Brexit, particularly if the large international banks start to move to other jurisdictions post Brexit. There is an argument that says this is actually healthy for the UK as less of our economy is dependent on financial services, but it does come at potentially a high cost in lost economic activity and tax revenues.
A bigger question is probably just how much the UK banking sector continues to consolidate so that there are fewer and fewer but bigger banks. One of the potential outcomes from having challenger banks which are set up for private-profit is that no matter how fluffy and lovely their marketing might be, their investors are in it to make (a lot of) money, and the quickest way to do that is often to sell out to a larger bank once you’ve got a decent number of customers.
That said, there’s absolutely a place for Bristol Credit Union, for other credit unions, for building societies and for ethical banks like Triodos and Charity Bank who will remain committed not just to challenging the big banks to deliver better services, but who will also continue to put people and planet before profit and do good with money.
8.There is also a lot of talk about the need for an inclusive local economy - what does that mean to you and Bristol Credit Union?
An inclusive local economy means one where everyone is able to participate in work, leisure and other opportunities, and has the means to do so too. At a practical level, it can mean our lending for a scooter or a car so someone can get from central Bristol to work in a warehouse in Avonmouth. It can mean helping a local mum save small amounts each week so she’s built up a pot of savings to give her kids a lovely Christmas.
It can also mean our supporting other local community projects with investment, such as the South Bristol Sports Centre and Bristol Energy Coop, so we keep more money working harder in our local area. All of these things mean we can help more of our collective wealth to remain local, and to be recycled through our local economy, and therefore able to increase employment and deliver broader local benefits.
9. What actions are you planning to undertake to contribute to an inclusive local economy?
Through our growth to do more good with money we’ll be enabling even more money to go back into local people’s pockets in interest savings versus high cost lenders. Last year, we saved nearly £1m in interest for borrowers who were borrowing under £1,000, and as we greatly increase the number of those loans that we make then we’re putting even more money back into the local economy - up to £300 back in their pocket to spend for every family who borrow £500 from us versus a high cost lender.
I’d also like us to be able to do things like our sponsoring a coding club to encourage kids to get involved in tech, or a scholarship that could support a local student to further their education. Other actions could include working with employers to offer career development loans to help employees increase their skills, working with apprentices and providing more opportunities for work experience too. We’re also continually assessing our own procurement to see whether we can’t source even more of our supplies locally with suppliers who are as committed as we are to playing their part in building an inclusive economy.
10. Finally, if I wanted to invest, how easy is it, how do I do it and what would becoming a member of Bristol Credit Union mean?
If you’re not already a member of Bristol Credit Union then you can join online which takes around 7 minutes, and is really easy. Once you’re a member then there are a couple of online forms to complete in order to invest in Deferred Shares. Once they’re completed and submitted then we take care of the rest.
We take compliance with our regulatory responsibilities very seriously, which does unfortunately mean we have to use prescribed language, and collect some information in a very particular manner, especially for investment in Deferred Shares where capital is at risk, and I know that can be a little bit off putting for some people. However the team and I are always at the end of an email or the ‘phone and we’re glad to help anyone and answer any questions.
The first phase of our Deferred Shares Offer is now closed, but members can still invest, contact us to find out more.
Capital is at risk. Deferred Shares not protected by the Financial Services Compensation Scheme.