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Christians should step in to found local banks

by
01 November 2013

Community banks are better placed than credit unions to compete with payday lenders, argues Guy Opperman

THE Archbishop of Canterbury made good headlines in the summer, when he stated that he wanted to use credit unions to compete with Wonga and force it out of business (News, 26 July). He was right when he championed the cause of credit unions, who do a great job throughout the country to help people through tough times. But the crucial question is this: do credit unions have the muscle to take on the payday lenders?

In their present form, they do not. But local community banks would.

It is the state's responsibility to look after those who cannot look after themselves. This includes trying to protect the most vulnerable from financial exploitation. A gap, however, remains in society now, which is being filled by Wonga and similar firms. What can churches and communities do to empower the most vulnerable people? I believe that local banks are the answer, and the Church can do much to found and drive them forward.

 

THE Church has fought a determined battle to defend the poor from excessive interest rates. Archbishop Welby's comments promote a revitalised approach to the importance of the local economy envisaged in Deuteronomy 23.20: "You may charge a foreigner interest, but not a fellow Israelite, so that the Lord your God may bless you."

A local perspective on the economy requires a more compassionate approach to lending, and vice versa.

We may not be able to abolish interest completely, as in Leviticus 25.37 or Exodus 22.25, but we can harness the central message of such passages by doing all we can to abolish predatory interest.

It is right that there are many different relatively immediate measures currently being taken to address the problem of high-cost credit. We can restrict advertising, implement a greater degree of financial education, do more work on shared data, address interest rates, and improve debt advice. But this is not enough to address the fundamental problem. People often need short-term lending.

Local banks have all the flexibility, the clout, and the borrowing power of a bank, as well as all the sympathetic community approach of a credit union. The Church has done a commendable job in calling for banking reform: now it has the chance to lead it.

I held a conference in Gateshead in June, with 170 delegates who were looking to set up organisations to address the lack of community lending. They wanted to facilitate this through local, trusted providers rather than by faceless organisations, based in London, and run by computer models, not people.

A local bank, with a manager based in the area, would mean a return to relationship-based banking - one that understands local people. The Archbishop called earlier this year for a "local and not London-based" financial system (News, 26 April), saying that this concentration in the capital was one of the "great dangers of the current mess". He is right.

 

THERE are few things that greater symbolise our sense of compassionate community than the church congregation. The Church is better placed than almost anyone to lead a local-banking revolution. For millennia, it has preached a remarkable message of thrift and charity. But the message of scripture is also one of empowerment.

For far too long, the UK banking sector has been dominated by the six largest banks, which have more than 75 per cent of the UK current-account market. Two recently went bust. In Germany, 75 per cent of bank lending is by the 400 savings banks, Sparkassen, which have thrived in the recession because they are locally based. We need to be offering people a genuine choice away from the status quo, forcing banks to serve the people rather than the other way round.

The type of long-term community banking which Archbishop Welby mentioned has disappeared from our high streets and rural communities. This has had a detrimental effect on the ability to lend and to get credit. As a result, people turn to high-cost lenders.

Local banks would invest back into local businesses and initiatives, restoring a sense of entrepreneurship to rural areas. The rebirth of rural communities depends on our addressing this head-on.

I am keen to see a holy alliance of church, community groups, and credit unions come together to address these problems. As I see it, the choice for the Church is one of action now, or assistance after the event: the latter has often been its traditional position.

 

THE Government has done its bit by radically changing onerous regulation: we passed the Financial Services Act 2012, which allowed local organisations for the first time to set up and compete with traditional big-six banking. If the Church feels that there is something exploitative in the current system, it is now empowered to give body to that vision of a more compassionate, Christian economy.

Local authorities, churches, and individual businesspeople with a philanthropic approach to their community are beginning to answer the call, giving everyone a stake in their own community. This is vital in restoring pride in an area.

To compete with predatory credit-providers, the most effective way is for churches to set up local banks. These represent a more comprehensive and accessible evolution from credit unions, empowering the Church to protect the most vulnerable people - who should be indebted only to the local community.

This is not just rhetoric: I am holding a second conference next week in Whitehall, bringing together businesses and local organisations with one clear purpose. We need local banks for our communities. With God's good grace, we can make it happen.

 

Guy Opperman is the Conservative MP for Hexham, in Northumberland, and private parliamentary secretary at the Home Office.

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