Scotland’s £111 Million Credit Union Opportunity

Scotland faces a financial inclusion crisis. 43% of Scots cannot cover bills for 3 months without their main income. Approximately 730,000 people in Scotland faced credit rejection, representing nearly 1 in 5 Scottish adults. Scottish Illegal Money Lending Unit research found that up to 300,000 people in Scotland are at risk of turning to illegal lenders. 7 in 10 Scottish adults experience some form of financial distress.

Despite these shocking statistics, there’s a strong base from which to work. Scotland’s credit unions already demonstrate remarkable reach, serving 435,000 members with £765 million in loans. With 9% population penetration compared to 2.1% in England, Scotland boasts the fourth-highest credit union participation in Europe.

NestEgg has identified £111m of additional annual loan demand that could add an additional 50% to Scotland’s combined loan book by 2030. Providing an initial boost to achieve the government’s objective to double the credit union sector, this represents an annual demand that would save borrowers millions of pounds in excess interest.

During NestEgg’s webinar A Blueprint to Double Credit Union Lending by 2030, we’ll share data and strategies to help Scottish credit unions grow. NestEgg has the UK’s largest data set on credit union lending. We’re keen to share valuable insights.

£millions of small loans rejected every year; how to capture them

Small value lending reinforces the need for a First Loss Fund. NestEgg’s analysis of thousands of loan applications shows that while half of small value loan applications (under £1,500) are currently declined in England and Wales, in Scotland the accept rate is higher at 55%.

The decline rate rises to almost 1 in 2 for new members. However, NestEgg has identified a cohort representing 10% of declines where marginal riskier applicants could benefit from risk subsidies, unlocking £2 million in additional lending each year for 25,000 people. Clear evidence shows that this could be an excellent use of dormant assets, given the huge social impact such a scheme would have. Furthermore, this represents the declined population today. The numbers of declined applicants are increasing.

Funding this lending (sometimes referred to as a First Loss Fund) would prove transformative. Providing a backstop for credit unions to responsibly extend lending to applicants who fall just outside traditional risk parameters but when they can still demonstrate genuine repayment capacity. We’ll be sharing data about how such support could be targeted to get more smaller value loans over the line.

From £765m to £1.5b: A roadmap to double Scotland’s Credit Union sector

Fair4All Finance estimates that there are 12m people who cannot find suitable credit. If wider unmet demand and credit union conversation rates are in line with the whole UK, this represents an additional £111m of lending to Scotland’s credit unions combined loan book each year. This is in addition to the small loans that can be turned to accept with external funding to mitigate risk.

A total of £111m in new lending would generate around £19m interest income in the first year alone.

Why 90% of visitors leave your website in seconds (and how to fix it)

When people arrive at a credit union website, the majority will leave within seconds.

Interest rates, common bond communication and long application forms don’t help. Even the sequencing of questions asked in an application can influence conversion. NestEgg has been monitoring online behaviours for thousands of applications and we’ll share insights to maximise conversion of website visitors to borrowing and saving members.

Five strategies to unlock Scotland’s growth opportunity

The webinar A Blueprint to Double Credit Union Lending by 2030 arrives at a pivotal moment when Scotland can mobilise resources to build inclusive financial services. The convergence of government support, regulatory evolution, technological capability, a network for change and community need creates conditions for transformative change.

On this webinar we’ll explore:

• The data behind thousands of small, medium and larger value loans
• What’s really driving credit risk and arrears
• How some loan products attract more members
• Why people walk away from your website
• The highest impact strategies to increase lending

Register here.