Building sustainable credit unions

We review how changes in the form of regulation since the passage of the Credit Union Act, 1979, have affected the activity of Scottish credit unions, and predict how proposals for a new, prudential approach to regulation will affect the sector. We compare the approach of the regulators with that of other public authorities, arguing that these still tend to treat credit unions as being primarily concerned with widening financial inclusion. We argue that the strength of the credit union sector lies in its ability to provide financial intermediation services more efficiently than other institutions. Public policy should therefore recognise that credit unions’ ability to extend financial inclusion is largely a by-product of their meeting members’ needs. The policy framework for credit union development might usefully be aligned current proposals for prudential regulation, encouraging credit unions to engage in product and service innovation, and to extend their collaborative working.