A couple of weeks ago I spoke at the RTPI Successful Regeneration Conference on (get this) Innovative Financial Tools. It was their choice of title not mine! In the context of the current economic crisis such a confident title is misplaced. I therefore decided to ask questions of my audience in the light of this. All are related to one big question - what can we do as regenerators in the face of recession. I will come back to my talk in a number of posts over the next few weeks.
My first point is this: many of the problems we have been solving for the last 18 years have their source in the recessions of the 1970s 1980s and 1990s. The areas featuring badly in the Indices of Multiple Deprivation are often those areas where those recessions hit most - e.g. the coal mining areas and areas which had been the heart of heavy industry. The first question therefore is what areas will be hit this time? The second - what will the regeneration legacy be for us practitioners?
Monday, 22 December 2008
Sunday, 21 December 2008
The Credit Unions Controversy
Few news items have made me more annoyed than today's coverage of the possible transfer of the Social Fund to the credit unions. I nearly threw my shoe (a la Baghdad news reporter) at the tv when William Hague compared credit unions and their rates with loan sharks. This was cheap politicking at its worst. Don't get me wrong, I am not in favour of social fund loans having too much interest charged on them. But the comments about credit unions showed either a lack of knowledge of credit unions or total disregard for the well-being of an important community self-help institution.
I have worked with our local credit unions and they have been wonderful.
For anyone reading this blog who doesn't know what a credit union is, here is a brief introduction. Firstly what they are not - they are not loan sharks nor are they private businesses, as some commentators have suggested. They are not-for-profit cooperatives. They tend to operate in deprived communities where banks not only won't go but also won't lend. Without a credit union for many people in such a community the only option availabke is to go to a loan shark.
The reason the banks do not work in these areas is because they consider there is not enough profit in it. The loans are too small and require too much administration. Because of the deprivation the banks consider the risk of default to be too high. Credit Unions are able to go where the banks don't, because their aim is not to make profit but to break even, because being smaller and local they know the community and its residents and because they work with those they lend to to help them manage their money better. This does make the costs of adminstering a loan higher and hence a higher interest rate. But as the Credit Unions are owned and run by the local people, who often are also on limited means, interest rates have to be viable.
In East Oxford we ran a loan scheme to business start-ups for people who could not get normal bank loans. We did that through our local credit union. The scheme worked really well. The Union worked with us to lend to people who had a viable business plan and continued to support the start-ups throughout the loan. There were several advantages of using credit unions for us. Firstly being run by local people they knew the business involved and the market better than we did (we had no defaults), secondly administration costs stayed in the local economy and thirdly it boosted the credit union's other activities.
It seems to me that the Government's proposals for using the credit unions to manage the Social Fund share those advantages. Currently the scheme is run by civil servants who do not have the knowledge locals do. We all know there are abuses of the system right now, local people in a credit union are more likely to be able to see through false claims. Another key point is that Credit Unions encourage saving in its members, saving being their primary service. If that can be built in to the Social Fund through their involvement then we will be helping Social Fund recipients manage their affairs better.
All of this has been lost in the current debate - what a shame. Let us hope it does not do the credit union movement long-term harm. There appears to be a simple answer to the criticisms. The scheme costs money to manage it now, let the Credit Unions have the full management costs.
I have worked with our local credit unions and they have been wonderful.
For anyone reading this blog who doesn't know what a credit union is, here is a brief introduction. Firstly what they are not - they are not loan sharks nor are they private businesses, as some commentators have suggested. They are not-for-profit cooperatives. They tend to operate in deprived communities where banks not only won't go but also won't lend. Without a credit union for many people in such a community the only option availabke is to go to a loan shark.
The reason the banks do not work in these areas is because they consider there is not enough profit in it. The loans are too small and require too much administration. Because of the deprivation the banks consider the risk of default to be too high. Credit Unions are able to go where the banks don't, because their aim is not to make profit but to break even, because being smaller and local they know the community and its residents and because they work with those they lend to to help them manage their money better. This does make the costs of adminstering a loan higher and hence a higher interest rate. But as the Credit Unions are owned and run by the local people, who often are also on limited means, interest rates have to be viable.
In East Oxford we ran a loan scheme to business start-ups for people who could not get normal bank loans. We did that through our local credit union. The scheme worked really well. The Union worked with us to lend to people who had a viable business plan and continued to support the start-ups throughout the loan. There were several advantages of using credit unions for us. Firstly being run by local people they knew the business involved and the market better than we did (we had no defaults), secondly administration costs stayed in the local economy and thirdly it boosted the credit union's other activities.
It seems to me that the Government's proposals for using the credit unions to manage the Social Fund share those advantages. Currently the scheme is run by civil servants who do not have the knowledge locals do. We all know there are abuses of the system right now, local people in a credit union are more likely to be able to see through false claims. Another key point is that Credit Unions encourage saving in its members, saving being their primary service. If that can be built in to the Social Fund through their involvement then we will be helping Social Fund recipients manage their affairs better.
All of this has been lost in the current debate - what a shame. Let us hope it does not do the credit union movement long-term harm. There appears to be a simple answer to the criticisms. The scheme costs money to manage it now, let the Credit Unions have the full management costs.
The Eight Principles of Transformative Regeneration
• Psychology is at the heart of regeneration
• Change a bear community into a bull community
• The answer lies in the community
• Be positive
• Be rigorous
• Disadvantaged people are not a problem but part of the solution
• Support entrepreneurship —economic and social
• Use social capital
• Change a bear community into a bull community
• The answer lies in the community
• Be positive
• Be rigorous
• Disadvantaged people are not a problem but part of the solution
• Support entrepreneurship —economic and social
• Use social capital
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