The impact of the cost-of-living crisis on British credit unions and community-lenders

Vik, PM; Wallace, AD

Abstract

Credit unions are often hypothesised to be less vulnerable to crises than other types of businesses.
This paper examines the impact of the cost-of-living crisis on the British credit union and community
lender sector drawing on interviews with 25 managers and a focus group with four loan officers. This
crisis is affecting businesses and households through high inflation, declining real pay, rising interest
rates, and falling economic growth. The findings suggest that credit union and community lender
customers are experiencing a deterioration in their finances. They save less, have more unsecured
debts, are less likely to qualify for a loan, and are more likely to default on loan payments. Lenders are
grappling with a tension between supporting customers affected by the crisis and preserving their own
financial position. On the one hand, there is evidence of lenders providing additional support to their
members, including emergency loans and hardship payments. On the other, they are mitigating the
risks of deteriorating customer finances by tightening lending criteria and reducing lending to higher
risk groups. The findings underline the need for future research into the long-term effects on the sector
and its ability to provide finance to underserved communities.

Citation

Vik, P., & Wallace, A. (2022). The impact of the cost-of-living crisis on British credit unions and community-lenders. Journal of co-operative studies, 55(2), 29-34

• Journal Article Type: Article
• Acceptance Date: Oct 4, 2022
• Online Publication Date: Oct 31, 2022
• Publication Date: Oct 31, 2022
• Deposit Date: Jan 10, 2023
• Publicly Available Date: May 1, 2023
• Journal: Journal of Co-operative Studies
• Print ISSN: 0961-5784
• Volume: 55
• Issue: 2
• Pages: 29-34
• Publisher URL: https://www.ukscs.coop/pages/journal-of-co-operative-studies