The government should move quickly to transform the climate for community-based finance. The time is now right for this. Firstly, because the under-regulated free market banking model is in disrepute, and secondly, because that same model always argued that it could not support the provision of normal banking facilities to low-income groups, because it would never be profitable.
Substantial public funding has been put in place to underpin the banks – and rightly so. But because that investment has been made, surely now is the time to acknowledge that there are other banking models, which never take on the same unacceptable levels of risk, and which do find ways to provide credit and saving opportunities to those neglected by the conventional model.
The constituency which Labour could address here is substantial. There are probably around two million low income people who currently have no access to any conventional form of banking. Whether or not they have access, instead, to credit unions or similar institutions, will probably be a matter of luck. It depends where you live, because the network is so patchy.
After the recent results, Labour’s critics are to be heard saying we have deserted our core support. Of course it isn’t true, but the response should be first to remind people of what we have done, but second, to commit to do more. And to put renewed emphasis and resources behind community finance should be high on that list.
The government should build further on the Growth Fund investment. It should accelerate reform of the Social Fund, and combine this with establishing new community banking facilities through the post office network. It should give further backing to the Community Finance Development Institutions. By these means, it should seek to have in place before the end of the year, the means to expand access to affordable credit and simple saving into all communities. If it requires additional resources, take it from the sums that are being paid back, with interest, by the big banks. They were rescued. Now let’s rescue community finance and end financial exclusion.