"The Archbishop of Canterbury made good headlines, in July, when he stated that he wanted to use credit unions to compete Wonga out of business.
He was right when he championed the cause of credit unions, who do a great job up and down the country to help people through tough times. But the key question is this: does a credit union have the muscle to take on the pay day lenders? In their present form, they do not.
But a local community bank 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. However, there remains a gap in today’s society that is being filled by Wonga and their payday cousins. What can churches and local communities do to protect and empower the most vulnerable in society? I believe that local banks are the answer, and the Church can do much to found, support, and drive them forward.
The Church has fought a long and determined battle to defend the poor from excessive interest rates. Indeed, The Archbishop’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.’
In other words, a local perspective on the economy requires a more compassionate approach to lending and vice-versa.
We may not be able to completely abolish interest, as in Leviticus 25:37 or Exodus 22:25, but we can harness the central message by doing all we can to abolish predatory interest.
The Archbishop wants to compete the payday lenders out of the market from a Christian perspective. This is possible, but credit unions will not do the job. It is right that there are many different practical and 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 opportunity to lead it win local communities.
In June 2013 I held a conference in Gateshead with 170 delegates looking to set up local community 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 local manager, will mean a return to relationship based banking - one which understands local people. The Archbishop calls for a "local and not London-based” financial system, and that this concentration in London is 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 local congregation. As such, the church is better placed than almost anyone to lead a local banking revolution. The Church has for millennia preached an incredibly powerful message of thrift and charity. But isn’t the message of Scripture also one of empowerment?
For far too long the UK banking sector has been dominated by the six largest banks which have over 75% of the UK current account market. Two recently went bust. In Germany, 75% of bank lending is by the 400 local banks - called Sparkassen, which have all 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 kind of long-term community banking that the Archbishop mentioned has disappeared from our high streets and rural communities. That has had a detrimental effect on the ability to lend and to get credit. As a result local people turn to pay day and high cost lenders.
Local banks would invest back into local businesses and initiatives, restoring a sense of dynamism and entrepreneurship to rural areas. The rebirth of rural communities depends on us addressing this head on. How can we love our neighbour, whilst leaving them at the mercy of a distant and uncaring banking system or worse in the form of pay day lenders? I am keen to see a Holy Alliance of church, community groups and credit unions come together to address the problems that we all see. For me, the choice for the church is one of action or assistance after the event. The latter has been the traditional role. My argument is that the church is uniquely placed to offer credit services and compete the pay day lenders out of existence.
The Government has done their bit by radically changing the 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 6 banking. The Government has cleared the way. If the Church feels that there is something wrong, something exploitative in the current system, they are now empowered to give body to that vision of a more compassionate, Christian economy.
Local authorities, churches and individual businessmen, with a philanthropic philosophy for their local community, are beginning to answer the call, giving everyone a stake in their own community. This is vital in restoring local pride.
To compete predatory credit providers out of the market the most effective way to live out this principle is for churches, which truly care for and understand the local community, to set up local banks. They represent a more comprehensive and accessible evolution from credit unions, empowering the church to protect the most vulnerable in society - who should only be indebted to the local community. This is not just rhetoric: I am holding a second conference on November 6 in Whitehall, bringing together businesses and local organisations with one clear purpose. We need local banks for our local communities. With God's good grace I have no doubt we can make it happen."
This is my Church Times article (although behind a pay wall): http://www.churchtimes.co.uk/articles/2013/1-november/comment/opinion/christians-should-step-in-to-found-local-banks
