Credit union plan for South Ribble

The authority will not be operating the lending facility itself, but will instead work with an existing organisation to enable them to establish a presence in the district.

Councillors will be asked to agree to set aside £150,000 for the project at the annual budget-setting meeting later this month.

Cabinet member for finance on the Labour-run authority, Matthew Tomlinson, said that the money was to cover set-up costs - and the council would not be loaning out any of its own cash.

“These costs would be [spread] over three years and then after that it would be self-sustaining and self-financing.

“Credit unions tend to rely on footfall and we see that the need is there. [It would enable] the most vulnerable in our borough to be able to access credit in a sustainable way,” Cllr Tomlinson told a cabinet meeting.

Conservative opposition member Damien Bretherton queried whether the facility would adopt the not-for-profit ethos of the credit union movement - or if it would be expected to make a small return for the council’s investment.

The meeting heard that the credit union was not intended to cost - or generate - any money for the authority beyond the initial start-up costs, which are likely to be spread over three years.

Credit unions are designed to create a financial community for the benefit solely of their members and not any third-party shareholders.

According to the website moneysavingexpert.com, most unions require members to share “ a common bond”, such as living in the same area or being in the same profession.

“Credit unions aim to help you take control of your money by encouraging you to save what you can - and borrow only what you can afford to repay. In essence, they're savings and loan co-operatives, where the members pool their savings to lend to one another and help to run the credit union,” the site explains.

Interest rates may be higher than some high street or credit card options - but are lower than those available to people who would usually be turned down for a traditional loan. Credit unions also offer smaller loans of as little as £50.

South Ribble councillor Chris Lomax told the cabinet meeting that he was “proud” to be a credit union member himself.

“It’s an excellent way of borrowing money, because it’s by the people for the people,” he said.