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Credit unions

What are credit unions?

Credit unions are non-profit financial institutions owned by members who hold savings in the union. They historically offered simple savings and loan products to financially excluded individuals.

All credit unions in the UK may only accept members who have a “common bond”. That may be based on where they live or work, the type of occupation they have or their employer.

While the credit union sector in Great Britain has grown in recent years, use is still well below that in other Anglosphere countries including the United States, Canada, Australia and, most notably, Ireland.

Credit union use in Northern Ireland is well above that in Great Britain but below that south of the border.

Key challenges and legislative response

Some of the main challenges facing credit unions have stemmed from the fact that, being generally very small institutions, they may struggle to operate efficiently when it comes to providing services and dealing with regulation and administration.

As such, in recent years there has been extensive consolidation within the sector, with small credit unions merging. There have also been efforts by unions to collaborate more and share services.

Recognising the value of credit unions in providing responsible finance, successive UK governments have legislated to remove some of the restrictions on credit union law including allowing unions in Great Britain to:

• Offer a wider range of financial services
• Scale by having more members
• Charge more interest on loans
• Accept corporate members
• Invest surpluses in a wider range of products which may generate higher returns

The future

Various plans to further change the law governing credit unions are underway. Most significantly in March 2026 the UK Government said it would reform the common bond requirement which would allow a credit union serving people living in the same area to cover a population of up to 10 million. Currently, the cap is 3 million meaning, for example, a credit union cannot currently serve the whole of London, but would be able to under the proposed reforms.  

Additionally, credit union law is largely devolved in Northern Ireland. Many of the legal restrictions which have been relaxed for credit unions in Great Britain over the past twenty years have not been relaxed in Northern Ireland.

In April 2026, following consultation, the NI Executive announced plans to bring forward legislation later in 2026 to:

• Enable unions to provide a broader range of financial services
• Increase the flexibility for unions to lend to businesses, charities and community organisations
• Facilitate collaboration between unions.