MEMBERS of congregations in the diocese of Southwell & Nottingham have deposited more than £35,000 in two local credit unions over the past year. The diocese is now exploring a more ambitious model of philanthropy to run alongside. This is likely to be launched in the autumn.

"We very much support Archbishop Justin's desire to help non-profit lenders compete with payday firms," the chief executive of the diocese, Nigel Spraggins, said on Monday.

In September 2012, the Revd David McCoulough, director of Partnerships and Mission, set up a model of encouraging 100 people to put £100 into a credit union and leave it there for at least a year.

"There's a great need out there. It's not about giving your money away, but putting a bit of it somewhere else, where it can be used to benefit society," he said last week.

The scheme has the support of the Bishop, the Rt Revd Paul Butler. "There is real concern about payday loans, which charge very high interest rates, sadly legally," he said. "There is also real concern about loan sharks exploiting the poorest."

The scheme attracted fewer than the target number of 100, but those participating deposited larger sums. Both credit unions, the Nottingham and the 2Shires, had been keen to see how they could work with churches, Mr McCoulough said.

As an experiment this coming autumn, representatives have agreed to be present to sign people up after a church service at which Mr McCoulough is speaking, and they will also have a presence at the diocesan conference in October.

The credit unions pay an annual dividend of one per cent to savers, and charge interest on their loans, equivalent to those for a store card. "They have to make some money to exist, but the point is, people who come and borrow £500 over a year will pay back about £560. Otherwise, they're looking to £900-plus, and no choice of going anywhere else," Mr McCoulough said.

Corporate members of credit unions can put in up to £20,000. The diocese is now exploring a 20:20 scheme, whereby 20 church councils or trust funds put in such larger sums. Already being pioneered in Nottingham is a philanthropic account with the Nottingham Building Society, whereby four fixed-rate savings accounts come with a choice of interest rates.

If savers choose the philanthropic rate over the fair-value interest rate, the difference supports a local homelessness charity, Framework, in its strategy of raising £10 million through social investment to provide 150 units of move-on accommodation for homeless people. It partly offsets the cost of a loan of £800,000, which has been lent to Framework on commercial terms.