The Role of Credit Unions to Provide Finance for Developing Small

Businessmen: Economic and Societal Impacts in the Great Britain

By:
Muhammad Adeel Hameed
Student No. 204342
Checked and Supervised by: Ms. Chrishanthi

Word Count: 13443

19th September, 2016

A Masters Dissertation Submitted to:

The University of Northampton

Acknowledgments
First of all I am thankful to Almighty God, who given me courage to attempt this research along
with the degree. Nothing can happen without his support.
Secondly I am in great debt to my supervisor Ms. Chrishanthi (Business School, University of
Southampton), who is such an intellectual lady with remarkable research skills. Without her
guidance, timely feedback and support at each step of the dissertation, I could not been able to
complete this dissertation. She always has been a source of inspiration to me when it comes to
research.
I would also like to say special thanks to all the participants, who enthusiastically provided their
precious time and valuable information during the interview. It had been impossible without their
precious responses in interview. Moreover I would like to thank my family members and friends
who motivated me to complete this piece of research and supported me at each step forward.
Muhammad Adeel Hameed
Northampton Business School
University of Northampton

Abstract
This research was conducted to probe into the role of the credit unions in providing the finance
to develop the small businessmen in the UK, besides that the research also investigated the social
and economic impacts of provision of finance to the small businessmen. The research was
exploratory and the field of the study is still new and emerging. Less research has been
conducted on the subject; however researcher was motivated to conduct research on this topic
because of its need in the recent time when UK economy is expected to contract and
unemployment and poverty statistics are expected to be elevated. Economy faces a downfall after
the Brexit decision, the inflation rates are increasing day by day and value of the currency is
getting down as compared to the dollar. However in such a scenario government needs to focus
on the cheaper sources of finance available inside the country. For this reason government and
Bank of England can put some pressure on the local community based cooperatives, known as
credit unions to produce finance and contribute their efforts towards bringing the economy back
on the progressing terms. All that can be offered by credit union is the affordable finance to
develop small businessmen inside the country to reduce unemployment and poverty and to gear
up the economy in turn. The research used qualitative research methods; a semi-structured
interview was conducted to gather the primary data from the members and staff of the credit
unions. Convenient sampling technique was used and sample size was 16. Thematic analysis was
used to interpret the summarised interview findings and themes were created using the
highlighted identified themes within the dataset. Interpretive approach was using to make
analysis. The findings of the study revealed that though currently credit unions are proving loan
and saving products; still many of the credit union do not have special loan packages designed to
target the small businessmen to cater their existing and future financial needs. Very few credit
unions like London Community Credit Union, offers special package as the small business startup capital and expanding loan, along with offering the nominal interest rate and a long repay
period. Still a lot of improvement is needed in credit unions sector to cater the small
businessmens financial needs. Besides this, still all the credit unions help in promoting social
welfare and achieve financial inclusion for the low income communities. The research has
certain limitations which can be covered in future research along with secondary data analysis
and market analysis research targeting the many credit unions all over the UK, and expanding the
sample size of the study.
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Table of Contents
Acknowledgments...........................................................................................................................1
Abstract............................................................................................................................................2
List of Tables...................................................................................................................................7
List of Figures..................................................................................................................................8
Chapter 1: INTRODUCTION.........................................................................................................9
1.1.

Overview..........................................................................................................................9

1.2.

Research Background......................................................................................................9

1.3.

Credit Union Industry in the UK...................................................................................11

1.4.

Research Questions........................................................................................................12

1.5.

Research Aim and Objectives:.......................................................................................13

1.6.

Research Significance....................................................................................................13

1.7.

Research Rationale........................................................................................................14

1.8.

Structure of the Research...............................................................................................15

Chapter 2: PREIMINARY REVIEW OF THE LITERATURE.....................................................16

2.1. Overview.............................................................................................................................16
2.2. Credit Unions......................................................................................................................16
2.2.1. Financial Services Offered By Credit Unions.............................................................17
2.2.2. Procedures and Processes to Provide Finance through Credit Unions........................18
2.3. Significance of Small Businesses in UK............................................................................19
2.4. Role of Credit Unions to Develop Small Businessmen......................................................20
2.5. Significance of Provision of Finance to Small Businessmen for Economy and Society. . .25
Chapter 3: RESEARCH DESIGN AND METHODOLOGY.......................................................29
3.1. Overview.............................................................................................................................29
3.2. Research Philosophy...........................................................................................................29
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3.2.1. Positivist......................................................................................................................29
3.2.2. Interpretivist.................................................................................................................29
3.2.3. Justification of Using Interpretivist Approach.............................................................30
3.3. Research Approach.............................................................................................................30
3.3.1. Quantitative Approach.................................................................................................30
3.3.2. Qualitative Approach...................................................................................................30
3.3.3. Justification for Selecting Quantitative Approach.......................................................31
3.4. Research Strategy...............................................................................................................31
3.5. Data Collection Sources.....................................................................................................32
3.5.1. Primary Data Sources..................................................................................................32
3.5.2. Secondary Data Sources..............................................................................................32
3.6. Sampling Methods..............................................................................................................33
3.6.1. Convenience Sampling................................................................................................33
3.7. Technique of Data Collection.............................................................................................33
3.7.1. Interview Method.........................................................................................................34
3.8. Data Interpretation..............................................................................................................34
3.9. Ethical Considerations........................................................................................................35
Chapter 4: DATA FINDINGS AND ANALYSIS..........................................................................36
4.1. Overview.............................................................................................................................36
4.2. Demographic Profile of the Respondents...........................................................................36
4.2.1. Member/Staff...............................................................................................................36
4.2.2. Occupation...................................................................................................................37
4.2.3. Name of Credit Union Respondents take Services From............................................37
4.3. Summarised Interview Findings.........................................................................................38
4.4. Data Findings and Explanation...........................................................................................38
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4.4.1. Thematic Analysis........................................................................................................38

4.4.1.1. Respondents views about Credit Unions, their Purpose of Existence and Concept
of Trustworthy Banking.....................................................................................................39
4.4.1.2. Products & Services Offered by Credit Unions....................................................39
4.4.1.3. Procedures to be followed to get Membership of Credit Unions and Process Time
...........................................................................................................................................39
4.4.1.4. Loan Products (Evaluation of Provision of Finance by Credit Unions)...............40
4.4.1.4.1. Loans for the Small Businesses.....................................................................42
4.4.1.4.2. Interest Charges over Small Business Loans.................................................42
4.4.1.4.3. Average Interest Charges on all other types of Loans....................................43
4.4.1.4.4. Average Repay Period for Small Businesses and Other type of Loans.........43
4.4.1.4.5. Average Upper and Lower Limit of Loans....................................................44
4.4.1.4.6. Evaluation......................................................................................................44
4.4.1.5. Help Offered to Small Businessmen to Start or Grow the Business....................45
4.4.1.5.1. Criteria to Provide Loan................................................................................45
4.4.1.5.2. Hidden Charges to Repay Loans...................................................................45
4.4.1.5.3. Collaterals, Securities and Life Insurance Requirements..............................45
4.4.1.6. Other Facilities Offered, Guidelines, Business Establishment Advices, Financial
Literacy, ATM/Credit Cards, Accounting Checking Facility, Service Charges.................45
4.4.1.7. Challenges to Get Finance from Credit Unions....................................................46
4.4.1.8. Motivation behind Joining the Credit Union........................................................46
4.4.1.9. Provision of Finance by Credit Unions and Social Welfare.................................47
4.4.1.10. Views of Small Businesses Importance to Contribute towards Economy.........47
Chapter 5: DISSCUSSION AND CONCLUSION........................................................................48
5.1. Overview.............................................................................................................................48
5.2. Discussion of Results..........................................................................................................48
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5.3. Justification of Answering all the Questions and Achieving the Research Objectives......49
5.4. Reflection Report: Research Limitation & Future Research Direction..............................50
5.5. Recommendations for the Credit Unions...........................................................................51
5.6. Conclusion..........................................................................................................................51
References......................................................................................................................................52
Appendix-I.....................................................................................................................................57
Interview Questionnaire.................................................................................................................57
Appendix-II....................................................................................................................................59
Summary of Interview Responses.................................................................................................59

List of Tables
Table 1: Interview Schedule..........................................................................................................33
Table 2: Respondents Membership of Credit Union....................................................................39
Table 3: Loans Offered by London Mutual Credit Union.............................................................39
Table 4: Loans Offered by Credit Union, London.........................................................................40
Table 5: Loans Offered by London Community Credit Union......................................................40
Table 6: Interest Charges over Small Business Loan.....................................................................41
Table 7: Interest Charges on All Other Types of Loans.................................................................42
Table 8: Repay Period for Other Types of Loans..........................................................................42
Table 9: Upper and Lower Limit Loans.........................................................................................43

List of Figures
Figure 1: Member/Staff Ratio........................................................................................................35
Figure 2: Occupation of the Respondents......................................................................................36
Figure 3: Credit Unions Names, the Respondents take services from..........................................36

Chapter 1: INTRODUCTION
1.1. Overview
This chapter has illustrated that credit unions are can be crucially important to drive the economy
and promote social welfare in the hard time through developing the small businessmen. Small
businesses constitute a greater part in the economy and they can help to reduce unemployment,
poverty and increase business activity. Furthermore research along with outlining the
significance of the research idea, has also provided the motive of the researcher behind
conducting this research.

1.2. Research Background

Elliott and Fletcher (2016) described that UKs economy is contracting quarterly at rate of 0.4%
following the Markits PMI report since after Brexit decision. All the businesses including banks,
restaurants, gyms, pubs, hedge funds, hairdressers etc. are affected due to the shrinking of the
economy. Besides that financial services are expected to decline, inflation rates are expected to
rise as latest results for June 2016 shown that there was a 0.5% rise in consumer price index as
compared to the consumer price index of 2015. Due to these circumstances Bank of England and
Treasury have been facing increased pressure to avoid letting the UK sliding into the recession
since after the 23rd June, 2016s Brexit decision. Public expects the Bank of England to form
such economy supporting packages; which will enable the institutions to provide the financing
services on easy terms, and on lower interest rate: to individuals, and as well as to small and
medium sized businesses. Moreover the recent unemployment figures by the Government to be
1.65 million people being unemployed for March to May 2016. The figures are expected to
grow by September 2016 (Bank of England, 2016b; Belam, 2016).
Following the issues above it can be judged that unemployment figure are expected to rise
further after Brexits effect at economic/financial activity to fall at expected rate of over 0.4%
(Elliott and Fletcher, 2016), and following the 2013s supply of financial service to be short of
the demand, and public distrust in big five banks, and interest in community based financing
(CFDA, 2013); it becomes important to study the role of such microfinancing institutions which
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are self-supported and locally independent to provide finance to the community on easy terms to
tackle a lot of issues e.g. developing small and medium businessmen to achieve financial
inclusion by reducing poverty and unemployment in turn boosting economic activity and
promoting the welfare of the society.
British credit unions are the microfinancing institutions providing financial services on easy
terms to individuals with low income and small and medium businesses, supported and run by
the local communities. Credit unions grew in the UK nearly in Mid 1990s as a result of growing
awareness of the households who experienced the financial exclusion and poverty at that time.
Primarily credit unions were developed in the rural areas to tackle the poverty and enable the
people to achieve financial inclusion (Jones, 2008; Goth et al., 2006). Thus the role of credit
unions to provide the community financing services to build small and medium businessmen can
be crucial. Credit unions can: 1) contribute towards the economy through reducing the
unemployment and poverty 2) gear up the local business activity through providing finance on
easy terms, 3) microfinancing sources are more trustable to promote social welfare due to nonprofit organisational view, and 4) credit unions can build the small businessmen which can help
the local community development in turn increasing the business activity, 5) help in achieving
financial inclusion for people in middle and low middle class etc.
Investigating the role of credit unions to provide the finance for the local low income
communities, has remained the central focus of the researches such as Jones (2008), Wright
(2013) and McKillop et al. (2011). However Wright (2013) has developed a broader perspective
of credit unions to provide finance to develop the small and medium size businesses (enterprises)
or SMEs. Wright (2013) recommended a strong credit union sector to boost the financial market
towards the low income communities to tackle their financing needs to start small and medium
size businesses, which in turn will achieve financial inclusion, reduce the unemployment and
poverty, and will also boost the business activity in the country. Whether the credit unions
currently are working to achieve such objectives, and on what terms and conditions they provide
finance, how they are enabling the small businessmen to contribute their part towards building a
healthy economy and a cooperative society are few questions to be inspected in broader aspects.

10

Few researches have been made to address the role of the credit unions to provide finance on
easy terms to develop the small businessmen. Besides that, very few researches have analysed
that how credit unions can help achieving the financial inclusion for the people of middle and
lower middle class, what challenges the small businessmen have to face to reach the finance
through credit unions, and what role credit unions play in an economy to reduce the
unemployment and poverty and increase the economic activity. These questions have been
largely missed by many previous researches except for a few such as Wright (2013). Primary aim
of this research is to investigate the role of the credit unions in providing finance for developing
the small businessmen. Moreover research also has discussed; that how provision of finance
through credit unions to develop small businessmen can contribute towards the economy and
social welfare, and what challenges the businessmen have to face to reach the finance.

1.3. Credit Union Industry in the UK

Credit unions offer an alternate to borrowing or saving with the national banks. These
community based unions are owned by its members and they manage and control it. These
unions offer financial services e.g. loans and saving accounts. There were 342 credit unions in
the UK by 2015 which employed almost 15000 people, this figure grew in 2016 and today there
are 421 credit unions in the UK (ABCUL, 2015; Creditunions.co.uk, 2016). In the last quarter of
2015 there were 1,668,356 adult members and 237,010 junior members, which grew in the first
quarter of 2016 to become 1,675,811 adult and 237,544 junior members (Bank of England,
2016a). In 2015 following ABCUL (2015) statistics credit unions across UK had 1.37 billion
assets, 769 million loans, 1.17 billion deposits, annual turnover of 140 million. During the
same year only 22 credit unions across UK offered the current accounts, and over 35,000 people
had current accounts with these credit unions. Following these statistics membership grew by 6%
as compared to the previous year, assets grew by 11%, loans grew by 7%, deposits by 12% and
turnover grew by 8% as compared to the 2014; which shows expansion of the credit union
market over the time. During the June 2016, number of credit unions grew and their services too
(Bank of England, 2016a), however still unemployment figures are high (Belam, 2016) which
must be considered by the credit unions and they should extend their services to those
unemployed or unprivileged people so that to build more small businesses to gear up the

11

economy and promote social welfare after Brexit. The question is why this research has specially
focused the small businesses; the reasons have addressed in the next section of the research.
Following the statistics of credit unions it becomes obvious that it is important to study if how
community based financing through these unions can help in building local finance for the
people who in turn can build small businesses which are major sector of the country contributing
towards improving the business activity, and achieving employment targets. Besides that
financing small businesses through community finance (credit unions) would not require any
costly proposals of foreign investors on which people will have to pay/spend huge interest cost,
these are cheaper and more trustworthy sources of finance from inside the country; which will
not only achieve financial inclusion for the low income communities, but as well as will help in
boosting the economic activity inside the country, will promote social welfare and will help
reducing the unemployment and poverty by developing small and medium businesses especially
after Brexit.

1.4. Research Questions

Following the background of the study research will address the following questions:

What are credit unions and what services they offer?

What procedures/processes credit unions follow to provide finance to small businesses and

individuals?
What role the credit unions play in developing small businessmen in the Great Britain?
How developing of the small businessmen can promote the social welfare of people through
achieving financial inclusion for low income communities and help them achieving their

financial goals?
How does the provision of finance through credit unions to small businessmen contribute

towards the economy?

How developing small businesses can reduce the unemployment and poverty?
What prospective role British credit unions can play towards building a healthy economy
following the recent trends and changes in business environment after the Brexit?

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1.5. Research Aim and Objectives:

The aim of this research is to study the role the credit unions to provide finance for developing
small businessmen in order to promote social welfare and contribute towards economy in Great
Britain. Following are the objectives of the research:

To review the secondary researches related to credit unions, service offered by them and

what role they play in a community to provide finance.

To review researches elaborating that how credit unions provide finance to develop small

businesses and what are its results for welfare of society and economy.
To conduct Interview with the members of credit unions in Great Britain, to investigate the
services offered by credit unions, and processes /procedures and challenges, which small

businessmen have to go through to access the finance.

To investigate through interview that how British credit unions help to develop the small

businessmen.
To conduct Interview with the staff of credit unions to investigate that how credit unions

help to promote social welfare and contribute towards economy.

To analyse the interview data to draw conclusion about the role of credit unions to provide

finance and its impact over the society and the economy.
To develop some suggestions for future researches and credit unions and outline the

implications of the research.

To make recommendations about future possibilities for credit unions to work and
advantage the Great Britain.

1.6. Research Significance

It is important to study the role of credit unions provided the facts that credit unions can help in
developing small businessmen through providing them finance on easy terms; in turn achieving
financial inclusion, reduce the unemployment and poverty, boost the business activity, and help
the Britain to cope with the challenges caused by downfall in the recent times after Brexit. The
study will helpful for the credit unions to realise and direct their role towards building a better
economy through supporting communities, grow, and ease the access to the financial services to
build local support to the economy.

13

Previous researches contributed towards redefining the role of credit unions towards the
achievement of financial inclusion from the role to merely relegating the poverty, however only
few researchers e.g. Wright (2013) studied the role of credit unions in developing the small and
medium sized businesses. Wright (2013) also missed an important aspect of credit unions i.e.
credit unions as driver of the business or economic activity in the UK; as a source to reduce the
unemployment, and promoter of local community development through developing and
expanding the small businesses to serve the country in hard time. This research will address all
these aspects under the topic. This research will focus on the role of credit unions to provide
finance to develop the small businessmen to contribute towards the society and the economy,
along with defining that how this role can be crucial to reduce after Brexit effects on economy
through gearing up the business activity in the UK.

1.7. Research Rationale

This research will improve the academic learning of the researcher towards understanding that
how micro-financing independent units i.e. credit unions can help the economy to grow through
providing finance to develop the small businessmen which in turn can achieve financial inclusion
for the low income groups and as well as can elevate the economic activity along with
contributing towards the social welfare. On the other hand researcher ethnic background is of
great importance which driven the researcher to conduct the research on this topic. Researcher
belongs to a developing country where statistics show higher poverty, unemployment and hard
economic facts. People have lower or no access to the mainstream finance; thus such issues can
be handled through idea of promoting the community based financing through building
cooperatives like credit unions. It will help the general public to develop themselves and grow
through financing the small businesses, besides that it will elevate the business activity and
reduce the poverty and unemployment figures. Researcher might present such proposals to build
community based financing units or cooperatives to develop small businesses, before the
Ministry of Commerce and Finance in the near future.

1.8. Structure of the Research

In an ordinary fashion the research has been divided into five chapters, the first introductory
chapter has introduced the research problem, aims and objectives and significance of the study.
14

The second chapter is about review of the secondary researches in depth related to the topic, and
theoretical framework, the third chapter has defined the proposed research methods for this
research including the approach, techniques of data collection, sampling, ethical considerations
etc. The fourth chapter of this research is about the reporting the findings of interview and
analysing the primary data through thematic analysis and discussing the results in relation to the
previous researches. The final chapter will conclude the whole research to ensure the research
met its objectives and will make recommendations to further improve the research.

15

Chapter 2: PREIMINARY REVIEW OF THE LITERATURE

2.1. Overview
This chapter has explained the preliminary researches related to the role of credit unions, their
working, how credit unions help in developing small businessmen etc. Besides that what societal
and economic benefits the provision of finance to develop small businessmen brings are a few
objectives considered during this chapter. The chapter has provided the theoretical support to the
research problem, and the results of this study.

2.2. Credit Unions

Credit unions are not for profit, self-help financial cooperatives usually funded with the deposits
provided by its members. These cooperatives are operated to provide access to the savings and
loan service in order to achieve the economic and social goals of the local community members
(WOCCU, 2015).
Edmonds (2015) defined that credit unions are non-profit institutions exempted from IRD tax,
providing financial services based on cooperative norms in order to promote the social
wellbeing. Credit unions are autonomous units, including people who agree to bring their savings
together on this central platform to lend each other on agreed favourable interest rate. Some
credit unions can work under functional national organisations to work as financial promoters
and supply expertise who model the rules for financial lending.
Muqtadir (2013) defined in Bank of Englands report about credit unions; that credit unions are
the financial cooperatives, community based organisations mostly staffed by volunteers. These
credit unions are established to benefit a particular community group who share a common bond.
Common bond can be defined as a bonding based on living in same area or working in the same
company, same industry, or belonging to a certain organisation such as church etc. Only
members of credit unions have access to their services, a nominal fee is charged to get
membership. Roos (2016) elaborated that some credit unions are regulated by the state bank;
these are known as state charted credit unions. Some other are known as natural person credit
16

unions, these credit unions extend their services to the natural persons or individuals, besides
these there are corporate credit unions which serve the natural person credit unions, they provide
financial services to the natural person credit unions. Purpose of all these credit unions is
provision of finance on easy terms to the individuals and businessmen to support them and
contribute towards the society and economy.
MAS (2016) defined that the credit unions are the cooperatives which provide loans and accept
the deposits based on common interest of people; for the area they live in, or work with etc.
credit unions offer the loans on low interest rates, and savings and bank accounts. These
cooperative unions are run by their members. Besides that a few distinct features of the credit
unions are as follows:

To avail the services of the credit unions, one must become its member.
A criterion of the membership is the sharing of a common bond. Common bond means
people who want to become members must live in the same area, belong to a particular
trade union or a church, are in same profession or work in same company or for same

employer.
Credit unions are not-for-profit organisations. They encourage their shareholders through

a reward or a dividend.
Credit unions can be of any size large or small.
Credit unions can have many or a few members.
In UK credit unions are regulated under PRA (Prudential Regulatory Authority), FCA
(Financial Conduct Authority, and FSCS (Financial Services Compensation Scheme).

There are certain financial services offered by credit unions explained as below:

2.2.1. Financial Services Offered By Credit Unions

Muqtadir (2013) stated that primary objective of each credit union is to provide savings and
loans, however many credit unions have extended their services to offer basic bank accounts,
personal insurance, cash ISAs and funeral planning. A few offer mortgages as well. Jones (2008)
described that credit unions provide loans, remittances, insurances and savings to the people who
have limited access to the financial services otherwise, for sake of the societal gains.

17

According to Stennett (2008) credit unions today offer the basic transaction accounts, transaction
banking, and money spending advices, financial literacy, savings accumulations, and high risk
model with affordable credits. However some of them now also offer the current accounts.
According to Anowie (2014) credit unions offer many deposit/saving services such as saving
based on saving accounting, fixed time deposits, and savings for educational purpose, holidays,
maternity savings, voluntary withdrawal, retirement funds and also offer mortgages, small
business loan, microenterprise and medium businesses loans, rural production, car financing, and
life insurance etc.
There are many services offered by the credit unions like any other cooperative or national bank
such as they offer saving accounts, current accounts, money market and IRA accounts, credit
cards, ATM cards and account checking facilities, both types of personal loans i.e. secured and
unsecured, mortgages, personal car-financing, payday loans, travel cheques, currency exchange,
certified checks and money orders (Roos, 2016).
Furthermore what procedures individuals and small businessmen have to follow to get finance
(loans) from the credit unions have been described as follows:

2.2.2. Procedures and Processes to Provide Finance through Credit Unions

Edmonds (2015) stated that credit unions provide financial services to the members only. An
individual needs to satisfy the common bond to become a member of the credit union. However
one might need to pay a little fee to become a member, also one needs to buy minimum shares.
In credit union terms shares are another name for savings. Since members objective is to save
thus most members have higher shareholdings than the minimum. A member gets advantage
according to his shareholdings which the credit unions lend to some other individual member or
a businessman at modest interest rates. Savers receive life insurance equal to their shareholdings
and members receive loan protection insurance. Usually interest payment from borrowers is paid
to the savers in form of dividend. Thus the system works by using the saving amount for lending
and interest amount for dividends. These unions work with few staff, in which some work
voluntarily and they work in shared premises with other organisations on low rents. Thus lower
18

operating cost leads to the high efficiency. Credit unions provide financial funds to the
individuals with good credit history to develop their small and medium businesses; which in turn
helps the low income community members to start their small and medium size businesses, and
hence achieve their financial goals.
As described earlier that only members can obtain the services from the credit unions, potential
businessmen or existing ones need to fill an online or traditional application, has to identify
themselves through social security number or other identification means, have to show the
current employment status both being employed, already in business, or unemployed.
Subsequently potential small businessmen and other individuals need to show their income level
to determine the probability to repay the loan. Monthly payments on all the debts need to be less
than a certain debt to income ratio. The next step is determining the credit history of the
borrower, thus during this credit worthiness of the potential businessmen will be determined
using his previous history of loan repayment or credit scores. In case of no credit history or
applying for the first time individuals will be judged based on their income, financial situation,
and property, type of business to start, and even on level of acquaintance with the staff of credit
unions. Moreover they can obtain the secured loan providing some security or co-signer
(Pritchard, 2016). It means credit unions have made it possible to the starters of the small
businesses and existing businessmen to take the loans and help in community development even
with no previous credit history.

2.3. Significance of Small Businesses in UK

Small business statistics show that there were 5.4 million private businesses during the first
quarter of 2015, a total of 146,000 businesses were added since 2014. Businesses which employ
people grew by 35,000, and those non employing businesses grew by 112,000. In UK small
businesses accounted for 99.3% of the private business sector also 99.9% were SMEs following
the 2015 statistics. Small businesses employed 15.6 million people, providing 60% of the total
private sector employment; these statistics show the importance of the small businesses into the
economy to provide the employment and develop business activity in the country. Besides that
small and medium sized businesses had turnover of 1.8 trillion which was 47% of the all private
sector turnover of the businesses during 2015. During 2015 there were 1.3 million employing
19

businesses, 4.1 million non-employing businesses, 76% businesses were run by the single owner.
Even those 76% constitute greater population which means small businesses are mean of earning
to many people, and also small businesses provide employment to the 60% people who work
with private sector businesses (FSB, 2015).
Statistics above show that small businesses constitute major economic activity in the country,
they also help to address the unemployment and poverty side by side assist in elevating business
activity. Moreover they can be financed with small business loans from locally available cheaper
and more trustable finance through credit unions. Thus all these factors contribute towards
understanding that why they are increasingly becoming important for the UK especially after
Brexit.

2.4. Role of Credit Unions to Develop Small Businessmen

According to Boot (2000) small businessmen lack the record and are not very famous outside
their communities, provided these limitations they rely on their community based banking e.g.
credit unions for lending; due to their familiarity in a particular community. Credit unions find it
profitable to engage in lending relationship with the small businesses provided that their lending
offers are in direct interaction with the managers or owners of the businesses and besides that
they have knowledge of economic environment where they operate.
Wright (2013) developed a broader perspective of credit unions to develop the small and medium
size businesses (enterprises) or SMEs. According to the researcher lending services had been
poor after the financial crisis hit the UK lending market in 2008. Government put a lot of efforts
to develop a focal point for the small and medium businesses to contribute towards the economic
recovery. For example government persuaded the large banks to ease the lending to SMEs and
start-up businesses. These efforts comprised of a lot of growth funds, guarantees and lending
schemes. However large banks failed to address the needs of SMEs and demanded more capital
reserves to motivate them to provide extra funds to small businesses. The demand was
unjustified as it led to expanding of the lending market; making the finance unaffordable for
small businessmen (Bank of England, 2013). This situation led to the public distrust in large
banks and they started moving their money from these banks to the alternate options e.g.
20

cooperative banks, Nationwide Building Society (NBS). Thus cooperatives and NBSs account
holding increased (Stewart, 2012). There emerged financial cooperatives to supply the finance to
low income communities to develop the SMEs however supply remained shortfall of the demand
(CFDA, 2013). In such situation Wright (2013) recommended a strong credit union sector to
boost the financial lending, directed towards the small businessmen to tackle their financing
needs on easy terms. Credit unions are helpful in providing localised finance on lower cost. They
can help to start small and medium size businesses, which in turn can gear up the business
activity, reduce unemployment and poverty, and achieve financial inclusion for low income
communities. Developing small businesses through providing finance through credit unions will
promote the social welfare; contributing towards the economy.
Two important things considered while providing finance is the credit history of the member, his
income level to determine the payback time, and purpose to take loan. Credit unions offer ethical
savings and affordable loans. Ethical savings means savers can save as much as they like without
restricting them by time. Savers can deposit their savings through convenient branches, direct
debits, from wages, collection points, and local shops. They are paid a divided usually 8% of
their deposited amount, however the savers are informed that how their money will be invested
to benefit their colleagues, neighbours or some acquaintances. People trust their community
members more than the outside shareholders. On the other end members can get loan based on
their credit history, income level and propensity to pay off time period. Most credit unions charge
1% interest rate monthly if borrower pay offs the loan same month. Some credit unions charge
less and some charge more, however no credit union can charge more than 3% on monthly basis.
Credit unions usually lend for 10-25 years for personal secured loan, and 5 years on unsecured
loan. Members being small businessmen and individuals pay back the loans using either direct
debit, deduction for loan from wages through employer, face to face payment, through Paypoint
cards issued by some credit unions, direct payment from the benefits of the members. Usually
loans are secured through personal life insurance of borrower, FSCS and DGSD (The Deposit
Guarantee Schemes Directive) (Creditunions.co.uk, 2014; Findyourcreditunion.co.uk, 2016;
MAS, 2016; Bank of England, 2016c).

21

Mbroh and Anowie (2015) conducted a research related to investigating the role of cooperative
credit unions in financing the small businesses in Ghana. The study focussed two credit unions in
financing micro businesses through purposive and convenient sampling techniques. The study
collected data from the member-businessmen and also from the staff. The findings of the study
indicated that credit unions significantly favour the small businesses and have ability to influence
the capital formation, and to provide the financial assistance; following whish small businessmen
can start up or grow their businesses. Results also show that credit unions needed a lot of
improvement towards offering effective financial products to the small businesses. Due to the
lack of financial services by credit unions being just 25% of the operational funds; capital
formation and financial growth hindered. Results further revealed that credit unions provided
over 50% start up finance for small businesses following which most members established their
small businesses within 3 years. Moreover credit unions also lagged in other services important
to establish the small businesses such as financial counselling before obtaining the loan, and
providing financial management skills to the members etc. Researchers further elaborated that
credit unions are imperative to push the economic activity and reduce unemployment, as they
can be used to reduce the poverty and help the small businesses to grow large through providing
the effective financial services. They recommended the existing and prospective small
businessmen to join the credit unions. They also suggested that the credit unions should become
effectively responsive to address the needs of the small businessmen by shortening the
processing period to get loan, so that they can grow and contribute into the economic
development of the country.
Ely and Robinson (2009) conducted a research to explore the role of the credit unions in small
business lending. The researchers investigated the factors which affect the credit union lending to
the small businesses. Researchers also compared the response of small local banks and their
careful evaluation of the merger activity. The study found that credit unions are becoming
increasingly important to support the small businesses and as well as they have greater
propensity to support the mergers and acquisition of the large banks. The results revealed that
probability to lend by credit in cities is usually high to the businesses in those markets, where
greater acquisition and merger activity is high among the big banks, which means businessmen
trust the local credit unions more than the big banks. This effect becomes even more significant
22

when large banks are acquired by the foreign or non-local banks. On the other hand in large
markets, acquisition of local or non-local large banks is supported by the lending from the credit
unions. It means credit unions not only provide services to the small businesses but they also
have a greater tendency to support the large organisational mergers and acquisitions. It also
means that credit unions can help the small businesses to grow large by providing the subsequent
lending.
Carlsson (2014) conducted a research pointing that when small businesses and entrepreneurs
need finance, nothing can be more perfect choice than the credit unions due to minimal interest
rates and greater payback period. The credit unions in America are focusing to develop
healthcare and medical arena, wholesaler businesses, distributing businesses, professional
services, NGOs, small stores and franchises etc. through provision of cash mobs. The credit
unions in UK can also start targeting some high producing small industries and businesses
through providing them easy cash services to start new and promote their existing businesses.
Roos (2016) described that it is advantageous for the small businesses to get finance from the
credit unions as they charge lower interest rates. Besides that mostly account checking is
provided free of cost, and usually no annual fee is charged on the credit cards. Moreover a
nominal fee is required to open an account. Now many credit unions have started providing ATM
services and they have designed special schemes for starting small businesses e.g. providing loan
for long term from 10-25 years on minimal interest rate etc.
Principally credit unions are based to provide the public benefit i.e. developing thrift in
community environment to promote the welfare of the people. Individuals are assessed before
lending them loans, loans can be of any large or small amount at very competitive and affordable
rates and payback time period can vary according to the purpose of lone. For example for a small
business the payback period may be 10 years while for a personal car it might be for 15 years or
more. Credit unions provide easy and affordable finance to the people to encourage them to start
small and medium sized businesses, who otherwise have difficult or absolutely no access to the
expensive traditional financing services. Low cost operating and a non-for-profit objective of the

23

credit unions enable them to protect the people from being exploited for credits from the big loan
sharks or foreign lenders (Edmonds, 2015).
MAS (2016) described that primarily credit unions encourage their members to save on regular
basis. They evoke a sense of social responsibility in their members and ask to provide loans on
low interest rates, and also provide financial advisory and assistance services. Credit unions act
in best of interest of their members, they try to avoid exploitation of borrowers and as well as
lenders. In case of borrows, they set the lending cost or interest rate quite low. To benefit the
lenders they assess the history of the borrower to investigate that they can pay back based on
their income and other necessary details. The amount of interest which can be charged on the
loan cannot exceed 3% monthly or 42.6% yearly and also FSCS has limited the saving amount to
75,000 to protect the savers from risking their money in case the credit union fails. These all
positively contribute towards providing the finance on easy terms to start the small businesses;
thus credit unions can be crucial to promote development of the small businesses in the UK.
Non-banking organisations play a crucial role in providing the finance to the small businesses.
Credit unions play role like of a community bank in the United States, the research show that
23% credit unions lend to small businesses during 2006, small business lending increased by
25% in start of 2007. Credit unions recently have gained powers due to National Credit Union
Administration (NUCA)s step to redefine the common bond flexible enough to include more
potential and existing small businessmen, employer groups and large communities; which has
enabled the credit unions to get extensively engaged in small businesses lending. Moreover
NUCA also encouraged credit unions to explore opportunities in commercial and small business
lending segment. NUCA allowed the credit unions to offer unsecured loans in 2003, and as well
as government increased the lending limit for small business loans from 12.25% to 20.3% to
make it more favourable for the small businesses to get finance from the credit unions (MATZ,
2003; Ely and Robinson, 2009). Government of United Kingdom can also take such steps
through Bank of England, FCA, FSCS and PRA mutually to encourage the small business
lending through credit unions to develop the small business industry which in turn will promote
the social and economic welfare. Press (2015) also suggested the redefining of common bond for

24

UK based credit unions to expand the membership to develop the small business industry by
adding more businessmen and entrepreneurs.
Some other researchers evident the role of credit unions in providing the finance to develop
small businesses e.g. (Wilcox, 2011; Blake, 2013; Dobcheva, 2015; Co-op, 2016; Detweiler,
2016); however these all researches have been conducted in United States Context, very few
researches have contributed towards studying the credit unions in the United Kingdom e.g.
Wright (2013) and Jones (2008). This study may provide a literary foundation to the new
exploratory researches in the same discussion area. The next section will review the previous
research to explore the impact of provision of finance to the small businessmen at the economy
and the society.

2.5. Significance of Provision of Finance to Small Businessmen for Economy

and Society
From Cooperative Societys perspective of credit unions; these are the cooperatives owned and
controlled by their exclusive members, offering saving and loans at competitive interest rates.
Usually these services are provided on local, knowledgeable and ethical terms, considering the
needs of their members. Credit unions being the financial cooperatives have become the member
of the fast growing cooperative movement in UK. Primary objective of the credit union is to
promote the social and economic welfare to gear the economic activity in the country (Wright,
2013; Edmonds, 2015).
Mbroh and Anowie (2015) stated that development of small businesses through credit unions
help in reducing the unemployment levels in Ghana. Lending through credit unions can reduce
the unemployment as potential small businessmen and individuals can start their own businesses
with low cost finance from these unions. This can also help in achieving financial inclusion for
low cost communities. Some other researcher also stressed that credit unions provide loans to
small businesses, which possibly help in reducing the unemployment. Also these researchers
prescribed that UK based credit unions need to change their scope and expand its membership to
build small businessmen so that unemployment and poverty figures might be reduced in the UK
(Jones, 2008, Gatti, 2009; Wintch, 2014; Howard, 2015).
25

In 2004, 12m people were in income poverty including 3.5m children, which grew to 3.8m in
2007, from 2005 and onwards the poverty statistics grew persistently (Flaherty et al., 2004;
Palmer et al., 2005; HM Treasury, 2004; DWP, 2007; UNICEF, 2007), which became 4.6m
accounting 7.8% of the total population in 2013 (McGuinness, 2015). It means from 2010 to
2013 33% people in UK faced ultimate poverty. Many researchers suggests the establishing the
credit unions to motivate the people in poverty to start their own businesses and help themselves
to cope with the financial problems (Jones, 2008; McKillop et al., 2011; Wright, 2013).
Dobcheva (2015) elaborated that it was hard for the low income communities to access the high
cost finance from the traditional banks and other money lenders. Low income individuals
couldnt meet the demands of the banks to obtain the loan and also there were not financial
service packaged available for this class. Credit unions brought the concept of low cost finance
on easy terms and conditions to this class to reduce the poverty figures in and achieve financial
inclusion for the low income groups. Still poverty rate is expected to get higher by 2016 after the
Brexit as indicated by the Joseph Rowntree Foundation (2010), UK needs a strong credit union
sector to produce the local finance to cope with the situational variables e.g. unemployment and
poverty.
Stennett (2008) illustrated that primarily credit unions were established to tackle poverty, later on
they changed their role to achieve financial inclusion for more people; thus penetrated into the
lending financial market. It attracted more people towards credit unions to build independent
small businessmen. The small businesses improve the financial position of the low income
member of the society and also boost the business activity. To make credit unions more
participating financial institutions, today credit unions offer more competitive products to
improve the small business participation in the economic activity e.g. basic accounts, free of cost
banking transactions, credit and ATM cards, and high risk model affordable credits, new saving
schemes, and advisory services related to the financial literacy and spending. All these positively
contribute towards the active businessmen engagement in the market in turn gearing up the
economic development.

26

Credit unions lend to small businessmen for sake of social gains, they exist to promote
community development and social welfare to develop a healthy economy. These institutions are
the most ethical lenders, who provide finance to the needy and encourage the individuals to
reinvest their inactive money to promote the economic welfare (Wright 2013).
Credit unions satisfy the financial needs to the unprivileged ones to ensure their inclusion into
economy, their inclusion into the economy is necessary to ensure high economic activities as
they constitute a major part of population in the UK. Credit unions need to expand the bonds and
increase their assets, to extend their services to the more people who are interested in conducting
small businesses. Another way to extend their financial services and assets can be mergers with
other credit unions. Credit unions run on principal of self-help to promote the economic welfare,
thus funds from local areas can help in achieving the targets to improve the business activity
inside the country (Goth et al., 2006).
McKillop et al. (2011) described that every countrys economic development and regulatory
bodies are responsible to provide the easy access to the finance for the weak communities. Credit
unions can play crucial role, to support the community development through ensuring the social
justice and financial inclusion; practicing the cooperative principles to help develop the small
businessmen and medium sized enterprises.
It has been evident from the researches above that the role of credit unions to provide the finance
to build small and medium businessmen can be crucial, as they 1) contribute towards the
economy through achieving financial inclusion for unemployed people, 2) gear up the local
business activity through providing finance on easy terms, 3) build the small businessmen which
can help the local community development in turn increasing the business activity and economy
as a whole etc. (Goth et al., 2006; Jones, 2008; Wright, 2013).
Thus following the previous literature it can be concluded that formation of small businesses
through credit unions, can bring many fruitful results to the country; they can help providing
employment and can reduce the poverty through providing low cost finance to individuals to
start their own businesses. On the other hand it can help to boost the business activities in the
27

market through utilising the local savings from inside the country. It will also turn in equitable
distribution of the wealth and less money will remain the inactive leading to high economic
development.

28

Chapter 3: RESEARCH DESIGN AND METHODOLOGY

3.1. Overview
Following the research questions and objectives, robust interpretive, qualitative methods have
been chosen which can help in understanding the role of credit unions to develop small
businessmen in more depth. An interview technique can help in gaining descriptive insight into
the role of credit unions. Besides that data collection methods, sampling technique, technique of
data interpretation and ethical considerations have been discussed.

3.2. Research Philosophy

Research philosophy is epistemological position which provides answers of how to research a
particular issue or a phenomenon, what approach to follow and what methods to be used. There
are many choices for research philosophy as described by the researchers, such as positivist,
interpretivist, realism, and pragmatism, post modernism etc. (Howell, 2012; Holden and Lynch,
2004; Saunders et al., 2007). Out of these, two most widely discussed epistemological positions
are interpretivist and positivist.

3.2.1. Positivist
Positivist philosophy implies that use of scientific methods to investigate the social phenomena
is the best method. This philosophy usually makes use of deductive principles, and results are
obtained after applying positive verification, or objective, experimental reading or a sensible
observation turning it in mathematical equation or value. Mostly quantitative, experimental,
scientific, and functionalist researches follow this philosophy (Holden and Lynch, 2004; Bryman
and Bell, 2011, p. 15-20).

3.2.2. Interpretivist
Interpretivist philosophy implies that scientific methods cannot be used to study the social
phenomenon, and scientific and humanistic approaches are different in nature; thus social
sciences must follow the interpretivist philosophy. When it is required to study the social and
human issues in greater detail then interpretivist philosophy is followed. Using this philosophy,
29

researchers can use qualitative, quantitative or even mixed methods to investigate the
phenomenon. The results of the study are reported flexibly with human participation and
understanding of the issues and phenomenon. The results obtained using this philosophy, are
subject to change in different situation or time. Social sciences, humanistic, qualitative and
phenomenological researches follow this philosophy (Holden and Lynch, 2004; Saunders et al.,
2007; Bryman and Bell, 2011, p. 16-20).

3.2.3. Justification of Using Interpretivist Approach

This research will use interpretivist philosophy because the research is of social science i.e.
business and finances field. The research has to investigate the role of the credit unions in
developing small businesses through conducting interview survey with the members of credit
unions and their staff. Thus qualitative methods have to be used to interpret and carry the results.
Human participation is involved in data gathering and interpretation. Greater details are required
to study the process and procedures and working of the credit unions in provision of loans to
develop small businessmen thus interpretivist is the suitable philosophy.

3.3. Research Approach

Swanson and Holton (2005) illustrated two approaches being qualitative and quantitative.

3.3.1. Quantitative Approach

Quantitative research approach is widely used to estimate the results; using either algebraic or
mathematical, statistical, geometrical or numerical equations, tools, models, and expressions,
formulas, or projection etc. The results drawn using quantitative approach, are more accurate,
less biased and consistent. Studies defining causal relationship, correlational, regression,
comparison, or experimental estimations use this approach (Swanson and Holton, 2005).

3.3.2. Qualitative Approach

When research involve explanatory analysis of theory or an issue and need descripted results
then qualitative methods are used. This approach uses thematic and content analysis, verbal
reasoning and descriptive approaches to interpret the primary data. Qualitative approach is
flexible to address the research issues in greater detail. However besides flexibility the research
30

may become time consuming, lengthy, and might become prone to the greater chances of error.
Usually following this approach, researchers collect data using open ended questionnaires,
interviews, theories and observations of behaviours, descriptive models etc., and outcome is also
another theory, critique, conceptual results, any argument or explanatory conclusion (Swanson
and Holton, 2005).

3.3.3. Justification for Selecting Quantitative Approach

This research will use qualitative research approach as this research is exploratory in nature
about a descriptive phenomenon i.e. credit unions, and their behaviours i.e. developing small
businessmen. The objectives of the research require the issue to be interpreted in greater detail to
investigate that how successfully the credit unions are doing in providing the finance to the small
businessmen and how these indirectly contribute towards the social welfare and economic
development during hard time. The research will gather primary data through interview and
thematic and content analysis will be used to carry the conclusion thus it is more suitable to use
qualitative approach.

3.4. Research Strategy

Hunter and Leahey (2008) described the research strategy as defining the execution style of the
research. Researchers elaborated that research strategies involve research planning to measure
the factual and attitudinal data using some data collection tool. More elaborately these strategies
define that how researcher will collect the primary data. These strategies can include descriptive
research design or a case study, grounded theory, ethnography, experiment, a survey or an action
research etc. The strategies help to choose the way to reach primary data for example: in an
experimental research, researcher might conduct an experiment and test something, in an
observation, researcher might observe some behaviour of any object or entity, and in a survey
researcher might conduct an interview to gather the primary responses regarding some issue or
phenomenon or might collect data using some close ended questionnaire by visiting the
respondents etc. This research has applied interpretive philosophy with qualitative approach, and
inductive reasoning, besides that survey method has been chosen as a research strategy. Survey
strategy might constitute questionnaire surveys and interviews etc. The primary data for this
research has been gathered through interview with the members and staff of the credit unions
31

including savers, borrowers and workers etc. Face to face Interview survey with semi-structured
questions, is more flexible way to execute the research; as it helps the researcher to personally
observe the responses of the respondents in greater detail including their gestures, expressions
and behaviours to create a closer linkage of ideas and concepts in greater depth (Saunders et al.,
2007).

3.5. Data Collection Sources

Researchers define two data collection sources; primary and secondary (Hunter and Leahey,
2008):

3.5.1. Primary Data Sources

When data is collected from the sources initially for some research to draw a conclusion against
some research proposition then these sources are known as primary data sources. The primary
data for this research has been collected through interview from the members and staffs of the
credit unions in London, thus primary sources of data are the members and staff who use services
of the credit unions, based on their responses this research has reached the conclusion.

3.5.2. Secondary Data Sources

Secondary data sources are such information warehouses which are used to collect the already
existing data to review the broader research area and issues. These sources are also helpful in
providing foundation to the research background, existence of research problem, defending or
opposing the findings and results, and are used to compare the results with the previous research.
The secondary data will be gathered using the sources e.g.:

Journal articles related to the role of credit unions in provision of finance to small

business, small business lending, economic and social impacts of credit unions etc.
Latest news items about the recent market trends and after Brexit effect at UK businesses,

the role the credit unions can play in crucial time

Books available in library and online related to the credit unions and research methods
Statistical data from House of the Commons Library
Student papers
Websites portals related to the working of credit unions, processes and procedures
followed by credit unions etc.
32

3.6. Sampling Methods

Bryman and Bell (2011) elaborated that a sample is the representative element of the population
on which researchers are interested to conduct the study. Sample size must be such large to
represent the population, and also sample must hold the characteristics similar to the population
of the specific research to ensure generalizable results. There are different probability and nonprobability sampling techniques; such as simple random sampling, stratified sampling, quota
sampling, convenience sampling etc. However researcher has chosen the respondents randomly
applying non probability sampling and furthermore convenience sampling has been applied to
collect the primary data. The sample of the study included all the members and staff of credit
unions running different small businesses in London. Respondents were contacted through
friends and family contacts, and through personal acquaintances.

3.6.1. Convenience Sampling

Researcher has used convenience sampling technique following (Bryman and Bell, 2011);
provided the fact that it was more convenient to contact respondents based on their proximity to
the researcher and respondents willingness to participate in data collection. Population for this
research included all the credit unions of the UK and their members and staff. Researcher is
close to London and thus all interviews were conducted in the London to collect primary data.
Researcher contacted over 30 people, however interviewed 16 people, thus sample size is 16.

3.7. Technique of Data Collection

Silverman (2000) defined different data collection techniques such as interviews, observations,
administrative questionnaires, textual (books), visuals analysis (videos), and experiments etc.
This research has used interview technique to collect primary data. It is important to choose the
right technique as it directly impact the results, and it is not recommended to compromise the
reliability of the results.

3.7.1. Interview Method

Gill et al. (2008) interviews are effective means to collect the primary data, they help the
researchers to collect the qualitative, attitudinal and behavioural data and enhance the
33

understanding of the interviewee through guessing the responses from the gestures, facial
expressions and body language. Interviews can be conducted face-to-face, online through video
session, or telephonic etc. Interviews can be conducted with the individuals separately or can be
in groups known as focus groups. Moreover questions used in interviews can be open-ended,
close-ended or both; based on these interviews can be classified as unstructured, structured, or
semi-structured respectively.

Researcher conducted the semi-structured, face to face interview, to collect the primary data. The
interviews were conducted with the members and staff of the credit unions. Interviews were
conducted before taking the appointments on telephone though friends, relatives and personal
acquaintances. Interviews were conducted at two local restaurants in London and each interview
lasted for almost 35 minutes. All interview questions were given to the respondents 10 minutes
before the actual interview, so that if they do not understand the questions they might ask
researcher. Total 11 main questions were asked, questionnaire has been attached in Appendix-I of
this research. Following was the interview schedule:
Table 1: Interview Schedule
Data Collection Data

Number

of

Interviews

Time

Conducted
August, 7th
August, 10th
August, 13th
August, 14th
August 17th

4
1
3
5
2

10:00 AM- 2:00 PM

10:00 PM- 11:30 PM
4:00 PM- 8:00 PM
4:00 PM- 9:00 PM
5:00 PM- 7:30 PM

3.8. Data Interpretation

Primary data for this research was gathered through interview, researcher taken proper notes
during the interview and recorded the interview for further interpretation. Researcher heard the
interview recordings thrice to avoid skipping any important information. Besides that responses
were interpreted and summarised using the thematic analysis. Researcher need to extensively get
involved while interpreting the data using the thematic analysis. In thematic analysis Researcher
has to make implicit and explicit themes within data using the wide data sets. In content analysis
usually researchers count the words while in thematic analysis themes are identified for further
34

conversion into the meaningful codes, then these codes are summarised to deliver analysis.
However it is not imperative to draw codes, graphical presentation of relationship of codes, cooccurrence of codes and frequencies in the analysis, researcher can use his understanding to
make interpretations of textual data using themes. Thematic analysis is most popular technique in
qualitative researches, where data is widespread, descriptive or irregular like in interviews.
Thematic analysis extracts the complex meaning of a particular data within textual data and this
is the reason that most interview based researches follow this technique for analysis (Saunders et
al., 2007, P. 114-116).

3.9. Ethical Considerations

The research was conducted in order to investigate the role of credit unions to develop small
businessmen in UK. The research used interview technique to gather the primary data, all the
data was gathered prior taking the consent from the respondents and respondents were given the
right to withdraw their responses any time during the research. The data has been reported
anonymously to avoid any issue regarding the privacy of the respondents. Apparently no ethical
issues arose during the research. The research was proposed to enhance the academic learning
and to gain an insight about how to conduct bigger research projects. Besides that; researcher
discourages all plagiarised work and using of copyrighted work without permission, and
encourages acknowledging of the sources used in secondary data. Research isnt targeted to any
vulnerable groups, or isnt a fabrication of someone elses work, or doesnt infringes right of any
entity. Researcher kept into consideration the ethic codes provided by the University of
Northampton, British Educational Research Associations guidelines about the ethics, and
Academy of Management of the Market Research Society.

35

Chapter 4: DATA FINDINGS AND ANALYSIS

4.1. Overview
This chapter has provided the summarised interview findings and thematic analysis and have
addressed the specific objectives of the research related to investigating the role of the credit
unions in developing small businessmen and what results developing of small businesses can
bring to economy and society also have been discussed.

4.2. Demographic Profile of the Respondents

Following is the demographic profile of the respondents, it is important to discuss this profile as
it might be useful in providing future research direction.

4.2.1. Member/Staff
Figure 1: Member/Staff Ratio

Num of Respondents
70.0%
60.0%
50.0%
Num of Respondents

40.0%
30.0%
20.0%
10.0%
0.0%
Members

Staf

There were 10 members of the credit unions and other 6 were the paid staff of the credit unions
who were also its members side by side being employee. Staff of credit unions provided more
relevant information related to the financial products offered as they had more in-depth
knowledge of the products offered by their credit unions.
36

4.2.2. Occupation
Figure 2: Occupation of the Respondents

Occupation
60.00%
50.00%
40.00%
Occupation
30.00%
20.00%
10.00%
0.00%
Businessmen (small restaurants, franchisers, small accounting consultancy, business consultancy, bakery etc.)

There were 8 respondents who responded job when asked for occupation, out of which 6 were
the employed by their local credit unions. The other 5 people were running small businesses and
only 3 of the people were running small businesses as sole proprietors.

4.2.3. Name of Credit Union Respondents take Services From

Though it optional and left at the respondents whether they wanted to answer this or not,
however still many respondents (75%) replied this question and a few of them skipped it (25%).

Figure 3: Credit Unions Names, the Respondents take services from

37

Name of the Credit Union Respondents take Service From

50.00%
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%

Name of the Credit Union

Respondents take Service
From

Some 4 respondents didnt show the name of their credit unions, however most respondents for
this study were member of London Mutual Credit Union accounting 7 people, out of which 3
were also staff members of the credit union. The other 3 were member of London Community
Credit Union, out of which 1 was the staff member and just two were members of Credit Union.

4.3. Summarised Interview Findings

There were total 11 main questions, along with follow up questions to get the answers in greater
details. Summary of responses against each question has been provided into the Appendix-II.
Researcher first summarised the interview findings and then highlighted the important contents
in the summarised data set to identify the themes.

4.4. Data Findings and Explanation

4.4.1. Thematic Analysis
Thematic analysis has been discussed, after making the summarised interview findings and
identifying the themes within the interview datasets. Only significant results have been discussed
to keep focus on the objectives.
38

4.4.1.1. Respondents views about Credit Unions, their Purpose of Existence and Concept of
Trustworthy Banking
It is obvious from the summarised responses that most respondents are aware of the credit
unions institutional purpose i.e. offering affordable finance to promote social welfare.
Moreover respondents showed greater level of trust for their credit unions, because of not-forprofit and affordable finance provision view. All the respondents acknowledged the concept
of localised financial help through credit unions. One important thing to identify is that
respondents acknowledged that savers are the caring members of the society, thus their savings
must be utilised in a better way; this might also create a sense of responsibility in the members of
the credit unions. The only difference the respondents find among the banks and credit unions is
the affordable products offered by credit unions.
4.4.1.2. Products & Services Offered by Credit Unions
From the summarised responses, it is safe to conclude that members have greater knowledge
about the products and services offered; provided the fact that the sample included 7 of the staff
members of the credit unions. Respondents highlighted the following products offered by their
credit unions:

Accounts (saving and loan)

Personal insurance

Cards (credit card, ATM, current account credit cards, pay point cards etc.

Remittance services

Travel checks

Currency Exchange services

Cash ISAs

4.4.1.3. Procedures to be followed to get Membership of Credit Unions and Process Time
From the summarised responses it is obvious that all credit unions require the individuals to be
from a particular community, employer, trade union or member of a certain church etc.
39

Following is the division of the respondents based on the reason of joining a particular credit
union:
Table 2: Respondents Membership of Credit Union

Respondent Percentage

Reasons to Join Credit Union

50%

Relationship with certain employer

31%

Area of residence

Others

membership of a specific trade union

On average summarising responses of all the respondents; it takes 1-7 maximum days to get the
membership of any credit union. However the fastest process time to get membership is from
London Mutual Credit Union i.e. 24 hours. To become a member of any credit union, individuals
follow almost similar procedure i.e. form filling (both online and in-person), providing necessary
details about credentials, current income, expected amount of loan, expected repay time, purpose
of loan, address, work details and telephone contact. All credit unions take these details and
evaluate the capability to repay then take decision over the loan.
4.4.1.4. Loan Products (Evaluation of Provision of Finance by Credit Unions)
Generally all the credit unions unanimously offer saver loans, flexi loans, payday loans, the other
important loans types from the summarised responses of the interview have been listed below for
each credit union.
Table 3: Loans Offered by London Mutual Credit Union

No.
1
2
3

Types of Loans
Premium loans
Payday loans
Saver loans

Purpose of Loans
for working members based on their credit history
To cater any urgent needs until the next salary
Most secured against the saving in the account of the

4
5

borrower
Gold and Platinum loans Used for multi-purposes e.g. to borrow house etc.
Plus loans
For those on benefits and poor credit history

London Mutual Credit Union (LMCU) constituted 44% of the sample, 7 in total including 3 staff
members, the information obtained from the summarised interview responses have been given
40

above in Table 2. LMCU is one of the top ten credit unions of the London. Surprisingly the credit
union does not offer any loan specifically to small businesses.
Table 4: Loans Offered by Credit Union, London

No.
1
2

Types of Loans
Instant saver loans
Flexi loans

Purpose of Loans
Urgency based loan, interest depends on the repay period
Unsecured loan, offer small amount of loan against a high interest

Saver loans

rate which falls as the borrower saves more

Basic loan offered against saving account, transferrable to instant

Security Loan
Home loans

saving loan as the balance of the loan amount falls

To encourage savers, low interest loan against savings
For buying homes, dependent on repay period: lesser the repay

4
5

period less interest is charges, longer is the repay period more

interest is charged
The total sample included 25% of the members from Credit Union (CU). Besides using
summarised interview findings; researcher also checked the web of the credit union to explore
the purpose of the specific loans, given that the respondents did not given much detail about the
purpose of the loans offered by their Credit Union. It has been analysed that Credit Unions offer
all loans against some minimum saving amount except for the flexi-loan. The purpose of the
credit union realised from the responses of its members is encouraging its members to self-help,
and save and establish. Credit Union like the London Mutual Credit Union, also doesnt offer
any loan specified to small or medium businesses.
Table 5: Loans Offered by London Community Credit Union

No

Types of Loans

Purpose of Loans

.
1

Standard loans

Includes a long list of loans for multi-purpose including start-up small

business loans, expanding business loans, saving loans, buying new

Flexi loans

home, insurance, travelling abroad etc.

Event celebration, planning festivals, unexpected bill,

furniture,

appliances, to cover payday loan etc.

41

25% respondents in the sample were members of London Community Credit Union; this is the
only credit union to provide both start-up and expanding capital to small businesses. The credit
union according to the summarised responses provide a variety of the loan products on flexible
interest rates.
4.4.1.4.1. Loans for the Small Businesses

Following the summarised interview findings it is obvious that only few credit unions offer the
business loans including the London Community Credit Union. From the responses of other
credit unions member it has been analysed that individuals and potential businessmen might use
the premium, gold and platinum or security loans to start some small business, however no
specific loans other than these are offered from the two famous credit unions. However London
Community Credit Union (LCCU) offers small business loan and it also provides help in
expanding the already existing business by offering specific low cost loans.
4.4.1.4.2. Interest Charges over Small Business Loans

Following interview responses many respondents implied that security, gold and platinum and
premium loans can be used to start business, thus along with listing the interest charges offered
by LCCU, researcher also has listed the charges on these loans:
Table 6: Interest Charges over Small Business Loan

Credit Union Name

LCCU

Type of Business Loan

Interest Amount
Standard loan, Small business start-up 0.75%-3%

LMCU

capital and expanding loan

Premium loan

13.68%

Gold and Platinum loan

5.9%

Security loan

Approx. 5%

CU

Though LMCU and CU do not offer specific business loans, still their interest rates are quite
higher than the LCCUs interest rates for specific business loan. The interview data shows that
LCCU already has realised its economic responsibility to develop the small businessmen through
offering quite nominal interest rates along with other financial advices.

42

4.4.1.4.3. Average Interest Charges on all other types of Loans

Table 7: Interest Charges on All Other Types of Loans

Credit Union Name

LCCU
CU

LMCU

Other type of Loan

Flexi loan
Instant saver loans

Interest Amount Approx. Average

2-3%
27-20% reduces as the loan balance

Flexi loans
Saver loans
Home loans
Payday loans
Saver loans
Plus loans

gets lower
26.8%
12.7%
3-10%
43%
4.5%
43%

Following the table above formed from summarised interview responses, it is obvious that
interest charges on other types of loans are quite high especially in case of payday loans, plus
loans, flexi loans, and instant saver loans. For remaining types charges are nominal; still it can be
analysed that LCCU is offering quite competitive rates as compared to all other credit unions.
However regarding CU interest charges for the other loans, responses showed that these interest
costs gets lower as the borrowers loan balance falls,
4.4.1.4.4. Average Repay Period for Small Businesses and Other type of Loans

Table 8: Repay Period for Other Types of Loans

Credit

Union Minimum

Average

Repay Maximum Average Repay Period

Name
LCCU
LMCU

Period
Negotiable -1 year
30 Days (for unsecured loans)

Up to 7 years
10 years (120 months on secured

CU

12 Months

loans)
5 Years

The loan repay periods for all the credit unions are quite flexible, however LMCU provides most
flexible span of payback.

43

4.4.1.4.5. Average Upper and Lower Limit of Loans

Table 9: Upper and Lower Limit Loans

Credit

Union Loan Lower Limit

Name
LCCU
LMCU
CU
Others

100- 1000
500
1-600
500-600

Loan Upper Limit

15000
15000
15000
15000

Though all credit unions have same upper limit, however the minimum amount provided by CU
are quite flexible to include many individuals including young children, college youngsters and
low income communities to achieve financial inclusion.
4.4.1.4.6. Evaluation

For now very few credit unions provide finance to small businesses, though credit unions offer
some loans which can be used for multiple purpose, still they are not enough to cater the needs of
the small businessmen. The loans offered by most credit unions are not competitive, and also the
interest rates are quite higher; which might not enough to encourage the small businessmen to
start new businesses or expand the existing ones. Only London Community Credit Unions
provides competitive business loans on quite nominal rates to develop small businessmen. LCCU
also offer free loan protection insurance on loans over 15000 for businessmen, and as soon as
they start repaying their loans, the interest amount further falls. Respondents showed great
satisfaction with the working of LCCU and its loan policies e.g. low interest rates and negotiable
repay terms and interest rates over reducing loan balance.
4.4.1.5. Help Offered to Small Businessmen to Start or Grow the Business
From the summary of interview responses, it is obvious that no such financial help is provided to
the small businessmen from most of the credit unions to start or establish their businesses;
however things can be left on staff to help the individuals to decide that which loans will suit
their needs.

Only a few credit unions, including LLCU offers loans to cater the small

businessmen needs to start new businesses, or to expand the existing ones on low interest with

44

large time span, and it also provides the financial consultancy free of cost to establish small
businesses.
4.4.1.5.1. Criteria to Provide Loan

Criteria to apply for a business loan are based on the credit history, level of saving in account,
annual income/monthly income, capability to repay the borrowed amount, beneficiary guarantee
if available, and traditional credit scoring on all the secured business loans. If someone doesnt
meet the criteria then he/she might need to apply for unsecured loan, and interest charges on
unsecured loans are quite high.
4.4.1.5.2. Hidden Charges to Repay Loans

There are reported no hidden charges by any credit union, all transaction charges are very
transparent.
4.4.1.5.3. Collaterals, Securities and Life Insurance Requirements

Some credit unions requires the individuals to put up something collateral on a loan e.g. property,
jewellery etc. especially when they go for large amount of loans.
4.4.1.6. Other Facilities Offered, Guidelines, Business Establishment Advices, Financial
Literacy, ATM/Credit Cards, Accounting Checking Facility, Service Charges
From the summarised interview responses, it has been analysed that regarding guidelines, all the
credit unions offer detailed help regarding their products/services for both the members and nonmembers for free of cost; through internet web portal, telephone helpline and as well as on
visiting the credit unions. Business establishment advices are available from very few credit
unions, other than those small businessmen have to rely on business consultancies for such
advices. LCCU provides such advices related to market analysis and start-up capital; as is
obvious from interview responses of its members.

Financial literary is offered at almost all the credit unions as is evident from the summarised
interview responses. Members and non-members are offered with pamphlets, broachers,
newsletters through email, and show cards; to thoroughly understand the particular loan or
45

saving products. All credit unions offer ATM, credit cards and account checking facility;
however most of the credit unions nominally charge for these services, except for ATM if it is
used from the particular branch of credit union. Some other facilities offered by the credit unions
include retirement funds, rural production loans, voluntary withdrawal savings and instant text
message service over all types of transactions.
4.4.1.7. Challenges to Get Finance from Credit Unions
From the summarised responses of interview findings; respondents did not show any challenges
faced to join the credit union to access finance, except for a few respondents who implied that it
is hard for the members with no credit history to obtain the secured loans. Such members have to
rely on the unsecured loans, on which the credit unions charge higher interest rates. Respondents
also recommended expanding the common bonds of the credit unions, towards adding the
inhabitants of particular city, where the credit union operates from; to include more people.
4.4.1.8. Motivation behind Joining the Credit Union
From the results it in evident that most people join the credit unions either because of:
1)
2)
3)
4)
5)
6)

low cost affordable finance,

easy loan terms,
Not-for-profit institutional view,
Trust,
Detailed loan and saving products to cater needs of multiple people,
And customised products etc.

Credit unions motivate the individuals to self-help; they encourage their members to save. When
they repay the loan earlier then they pay lower interest, thus leading to the gradual self-financial
establishment through saving.
4.4.1.9. Provision of Finance by Credit Unions and Social Welfare
It is obvious that credit unions promote the social welfare through offering affordable financial
products. Accessing similar products from the banks may result in greater exploitation of the
individuals as prescribed by the respondents in the interview findings. The low cost financial
help is the actual social welfare which reduced the poverty and unemployment. Most of the
members agree that credit unions serve even those members with no or poor credit history, and
they also encourage them to save through offering saving accounts to keep their amount reserved
46

for them for a rainy day in flexi or security loans. Most credit unions encourage savings and
they dont lend the members until they show some level of savings in their accounts. If the
borrower strives to save more, their interest rate on loan is reduced to acknowledge their efforts
to establish; so that to encourage to finally get over with borrowings and loans. It results in
fulfilling their financial needs and finally achieving financial inclusion for them; hence reducing
the poverty and unemployment.
4.4.1.10. Views of Small Businesses Importance to Contribute towards Economy
From the interview findings it is obvious that respondents understand the importance of small
businesses in providing employment to many people, and pay tax and interest amount; which
further can be used to lend to other members to keep the money active and enhance the business
activity. Provision of affordable finance can result in: provision of employment, motivation to
save, and reduction in poverty level. Results depicted serious concerns of respondents about the
Brexit effects; as economic downfall affects everybody. Though credit unions are receiving much
pressure from the government and non-governmental organisations to target the potential small
businessmen through offering effective loan packages on easy terms, to control the
unemployment and poverty; still the efforts are not enough as is obvious from the interview
results.

47

Chapter 5: DISSCUSSION AND CONCLUSION

5.1. Overview
This chapter has concluded the results analysed using the thematic analysis. The results have
been discussed in comparison with the previous researched in this chapter, along with
justification that all the questions of the research have been answered and all the objectives have
been achieved.

5.2. Discussion of Results

The study has found through secondary review of the researches and interview thematic analysis
that credit unions can prove to be the effective sources to develop the small businessmen through
providing finance, which in turn can bring fruitful results to the economy and the society. Most
results of the study closely match with Mbroh and Anowie (2015); they too found that credit
unions have ability to influence the capital formation for the small businesses through offering
start-up capital or offering expanding loans. LCCU is very effectively working to provide the
small business loan; to provide the start-up capital, and to further expand the businesses. The
credit union also offers free of cost business consultancy, providing free market analysis and
business cost estimates. However merely few credit unions like LCCU are not enough; UK needs
many such unions to effectively cater the financial needs of small businessmen.
The results depicted that members shown greater satisfaction with the credit union which offers
detailed loan products on nominal interest rate as in case of LCCU. Individuals being the
potential businessmen need effective loan packages, which encourage them to start new business
or expand the existing ones, with favourable interest cost and repay span. These results closely
match with the views of Wright (2013) who recommended the credit unions to bring effective
affordable packages for small and medium business enterprises in order to contribute towards the
economy.
The interest cost on different loan products are higher, they are not as lower as 1-3% in most of
the credit unions as reported by Bank of England (2016c) and MAS (2016), except for a few e.g.
48

LCCU, which offers standard loans products at nominal rate of 0.75% to a maximum 3%. All
other credit unions charge nominally at 4.7% and highly at 43% on unsecured loans on average.
Non-provision of loan products specifically designed for the potential small businessmen on low
interest cost might discourage individuals; in turn leading to the unemployment and poverty.
The results of this study also closely match with that of the Jones (2008) as this research found
through the interview data that provision of affordable finance results in financial inclusion for
the low income communities and side by side it reduces the level of the poverty and provides the
employment to the people. People after accessing the affordable finance strive to establish their
small business which helps them to achieve financial inclusion gradually. Stennett (2008) and
Edmonds (2015) are of the similar views that credit unions reduce poverty and unemployment
and can gear up the business activity. The results of this study also closely match with (Wilcox,
2011; Blake, 2013; Dobcheva, 2015; Co-op, 2016; Detweiler, 2016), who implied that low cost
affordable finance can cater the financial goals of people and in turn can reduce the poverty and
unemployment and can also help them establish to achieve financial inclusion through
encouraging the savings.
Though the credit unions offer multi-purpose loan products, however very few of them like
London Community Credit Union offers specific loan packages for the small businessmen on
very competitive interest rate with very flexible repay period. However these efforts by few
credit unions are not enough to take the economy on the developing terms; credit union sector
still needs a lot of improvement. All credit unions should start some small business loan
packages with attractive interest rates like LCCU, and expand their common bonds to add more
people. The results closely match with the findings of the Wright (2013) and Press (2015). Who
also recommended improvement in credit union sector and implied that expanding of bond can
make more members in turn access to finance can be expanded.

5.3. Justification of Answering all the Questions and Achieving the Research
Objectives
The research has addressed all the objectives in chapter 2, 3, and 4, and has answered all the
questions in chapter 2 and chapter 4 of this research. Credit unions can crucially impact the
49

development of small businessmen through providing them affordable finance; which can help in
promoting the social welfare and economic development. However the current efforts and
business loan products offered by the credit unions in London are not enough to cater the specific
needs to the small businessmen. Though they still help in achieving the financial inclusion,
poverty and unemployment reduction; still they are not enough to encourage the small businesses
to grow large or even start new small businesses. The sector needs a lot of improvement
especially following the Brexit effects.

5.4. Reflection Report: Research Limitation & Future Research Direction

After conducting this research, researcher has learnt many things through the identified
limitations and weaknesses; which the researcher found at different phases of this research. First
of all the topic is very emerging, very few journal articles were available to develop an effective
literature; however researcher used most of the contemporary data from the Telegraph, Guardian,
The News, House of Commons Library, FSB, Creditunions.co.uk, WOCCU, Bank of England,
PSE, ABCUL, Forbes etc., and all latest articles were used to develop the literature as no old
theories were found regarding the emerging credit unions role to provide finance to develop
small businesses. Researcher tried to create a link between the development of the business and
economic and social welfare through these researches. Secondly research could be improved by
adding people from the different locations of the United Kingdom, as merely London might not
represent the whole UK. However because of limited word count it was impossible to provide
such a vast analysis. Moreover researcher did not make this research a case study; because it was
not known whether the respondents will be agreed to provide information while disclosing the
name of the credit unions or not. This is why researcher did not focus on two three credit unions.
Researcher also realised another option to research rather than interview i.e. secondary data, all
the information regarding the credit unions is available over their web portals thus a secondary
analysis was also a suitable option for this research.
Along with qualitative approach, researcher could also have used market analysis involving
impacts at the economic development, however researchers knowledge about the economics is
limited; however a future research direction can be provided to the interested researcher or along

50

with another research partner. Future researches can explore the same topic with market data
analysis, along with adding more cities into the sample.

5.5. Recommendations for the Credit Unions

Credit unions are important sources to provide affordable finance; thus they should understand
their importance in providing effective financial services towards developing the small
businessmen. Small businessmen constitute a great market share and also provide employment to
a large number of people. Thus credit unions should design some special packages; to cater the
needs of the current small businessmen, and to attract the potential small businessmen who can
help in developing the economy through keeping the social welfare intact. This can be done
through charging nominal interest rates, providing longer repay period, and offering free of cost
facilities and value added services along with free consultancy to establish business.

5.6. Conclusion
Currently all credit unions in UK are providing multiple loan and saving products, accounts and
other necessary facilities provided by modern banking, however most of the credit unions are not
offering any effective packages for small businessmen. Most credit unions are charging a
minimum rate of 4.7% on secured and maximum rate of 43% on unsecured loan, very few of
them are charging nominal rates e.g. London Community Credit Union (LCCU) is charging
0.75% to maximum 3% interest on flexi-loans. Most credit unions do not provide any special
financial package for the small businessmen. Only few of the credit unions provide such
competitive packages such as LCCU. LUUC besides offering nominal interest rate; also offers
complete business establishment consultancy for free, along with providing free loan security
insurance, repay period of up to 7 years along with easy terms and negotiable interest subject to
change in case the borrower pays the loans earlier or starts saving more. Other loan products
offered by all the credit unions are not enough to meet the financial goals of the potential small
businessmen, as interest charges are quite high. However all the financial products by all the
credit unions, regardless of the terms on which they are provided; are designed to encourage the
individuals to save and finally get established. This in turn helps the individuals to achieve their
financial goals, reduce poverty and achieve financial inclusion for them. This all leads to the
reduced unemployment and high economic activity especially in hard time.
51

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Appendix-I
Interview Questionnaire
Gender: __________
Member/Staff: __________
Occupation: __________
Name of Credit Union (optional):__________
1. How do the credit unions work? What are your views about credit unions? Do you find
them like real banks which are helpful in providing finance?
2. What products your credit unions offer to you?
a. What are the accounts and other products/services offered to you?
3. What procedures you have to follow to become the member of the credit union and how
long the process takes?
4. What loan products are offered? Both Secured and unsecured?
a. Is there any specific loans especially designed for small businesses offered by
your credit union?
b. How much interest is charged to you over the specific small business loan?
c. How much on average is charged on the other types of loans?
d. What is average payback time period for small business or relating loans?
5. How much help is offered to potential small businessmen, and how the criteria to provide
the loan are evaluated?
a. Are there any hidden charges with the credit unions to repay the small business
loans?
57

b. Do credit unions require someone to put anything as security to take loan e.g.
personal life insurance, put up house or any property as collateral, jewellery etc.?
6. Does your credit union help in establishing/growing or expanding the small new or
existing businesses?
a. How do they help regarding expanding of business?
7. What other facilities your credit unions offer to you?
a. Are you provided with proper guidelines
b. Are you provided with any financial support and business establishment advices?
c. What type of financial literacy is offered by your credit unions?
d. Does your credit union offer ATM and credit cards?
e. Does your credit union provide you accounting checking facilities?
f. How much they charge for account checking facilities and ATM service?
g. Any other facilities you want to mention specially?
8. What challenges you might face to get finance from the credit unions?
9. What attracted you to become a member/staff of the credit union? What are your
motivations?
a. Did your credit union motivate you to self-help?
10. Do you think that provision of finance through credit unions; can bring any social
gains/welfare?
a. In your view, do you think that credit unions can be helpful in reducing the
poverty and unemployment rate?
b. Do you think that credit unions help to achieve financial inclusion for low income
communities?
11. Do you think that small businesses are important to make some contribution towards the
economy?
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a. In case of Staff: What are your views about the future of credit unions after the
Brexit effects?

Appendix-II
Summary of Interview Responses
Q-

Summary of Interview Responses

No.
1

Most of the respondents shown the familiarity with the purpose of credit unions, all of
them agreed that Credit unions are formed with the concept to promote social welfare;
through utilising the savings of the members of the communities to make loans towards
those who need it. All of the members shown greater level of satisfaction with their
credit unions. They understand that credit unions work with the funds provided by caring
members of the society, and credit unions provide those funds on easy terms to the other
members of the society, who generally cannot afford expensive finance from the
traditional banks. 75% of the respondents find them just like banks, as they have greater
similarity of products with banks and only difference is they are more trustable and
cheaper sources of finance. All members had views that they trust their credit
unions more than the big banks, because credit unions care and help people and are

established with a view to promote the social welfare thus they dont exploit the people.
Almost all of respondents implied that their credit unions offer deposit, multi-purpose
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loans, cash ISAs, personal insurance, credit cards, ATM cards, Credit Union Current
Account (CUCA) card, mortgages, pay-day loans, Basic bank accounts both saving and
current, remittances etc. A very few responded that their credit unions also offer currency
3

exchange services, travel checks and money orders etc.

Respondents implied that to become a member of the credit union, you need to work with
a particular employer, 8 respondents said that they joined the credit unions based on their
relationship with the employer. The other 5 members said they joined the credit union
because it is located in their area and thus they offer membership to the local community.
The remaining 3 members joined the credit unions because of the specific trade union they
have joined which has links with the credit union. Some 7 respondents also implied that it
is real quick to become a member, just a game of 24 or 48 hours. The other few (3)
responded that it takes 1-7 working days to complete the process. The remaining
respondents said that usually it takes 3-4 working days to complete the process. One
important thing to mention is summarised view of all the respondents; that anyone who
wants to get membership of their credit union can fill a form either online or through
visiting the credit union, provide the necessary details about the credentials, current
income, expected amount of loan, expected payback time, purpose of loan, address,

work details and telephone contact.

Regarding loans 44% people (including 3 staff members) implied that their credit union
(London Mutual Credit Union) offers multipurpose loans e.g. premium loans for
working members based on their credit history, payday loans to cater any urgent needs
until the next salary, saver loans which are secured against the saving in the account of
the borrower, Gold and Platinum loans can be used for multi-purposes, Plus loans for
those on benefits and poor credit history etc.. Other 25% respondents (members of
Credit Union) implied that their credit unions also offer loans based on urgency and
interest is decided on the payback time, the earlier you pay the less is the interest
amount, it is known as instant saver loan. These respondents also implied that their
credit unions offers all the loans based on the level of the savings, without minimum
saving amount, no loan is offered except flexi-loan; the particular reason behind this
concept is encouraging the individuals to self-help, and save and establish. They also
implied that other loans include saving loans, flexi loan, home loan at higher interest and
home loan at lower interest. Some other respondents (members of LCCU) also implied
60

that their credit union (London Community Credit Union) offers the standard to flexi
loan and then asks the purpose of the loan, payback capability, and how much loan is
needed; then interest rate is applied based on the choices of the member. Only 25%
respondents replied that their credit union (London Community Credit Union) offers a
particular loan to a start-up business, besides offering a large list of multi-purpose loans
such as loans for insurance, wedding, utility bills, holiday planning, travelling abroad,
celebrate special festivals like Christmas and Eid, and reply some other loan etc. The other
remaining respondents implied that the premium and Gold and Platinum, and saver loans
can be beneficial to start small businesses; however they are not particularly designed for
starting or developing businesses.
Regarding the interest charges most respondents implied that charges depend on the
type of loan you purchase and the level of savings you have in your saving or flexi
account against the loan and the payback period. Respondents from London
Community Credit Union implied that their credit union offers the specific small
business start-up capital loan; the maximum amount that can be borrowed is up to
15,000. However the lending amount also depends on the credit history and the level
of savings. The interest payment on this amount is very low i.e. 0.75% a month, which
is subject to change; however, on average the rate is not over 3% approx.. Besides that
respondents also informed that all loans including the business loans over 15,000 are
secured through free loan protection insurance from the credit union. Also all types of
loan interest fall as the members loan amount falls. Respondents told the researcher that
on minimum payment their credit union charges a very nominal interest rate and they
believe that interest rates offered by London Community Credit Union are the best of all
the market. The most important thing which the respondents brought to the researcher
attention was negotiable payback terms and conditions and interest rates on reducing
balance of loan, also their credit union doesnt offer any loan without a flexi card
account, which means that individuals need to put some savings into that account to
borrow some money, however even if someone doesnt have any saving, their credit union
still caters his needs in every possible way.

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One thing important to note is all the respondents implied the same upper limit amount
for loan i.e. 15,000. However lower limit amount of the loan differs, respondents of
Credit Unions implied it to be 1-600, respondents from London Mutual Credit Unions
implied it to be 500, and respondents from London Community Credit Union implied it
to be 1000, and other respondents implies it to be somewhere between 500-600.
Some respondents (also members of Credit Union) implied that on average their credit
union charge them 12.7% on saver loan, approx. 5% on security loan, approx. 27-20% on
instant saver loan (reduces as the loan balance gets lower), and at home loan on average
they charge 3-10%. However on unsecured loan e.g. flexi loan credit union charges
26.8%, respondents implied that all interest rates gets lower as the borrower paybacks
his loan and loan balance falls. The minimum payback period of any loan is 12
months and maximum repay period is 5 years.
Some other respondents which constituted most members of London Mutual Credit
Union, implied that on premier loans their credit union charges 13.68% interest, on
Saver loan they charge 4.5% approx., on gold and platinum loan they charge 5.9%, for
payday loans they charge 43% interest rate, and on plus loans they charge 35% interest
amount. Respondents also included staff of the credit union and they showed greater
satisfaction regarding the interest amounts. The minimum repay period is 30 days for
5

unsecured loans and for saver loans i.e. most secured loan it is 120 months.
Most respondents replied that regarding any type of business, no such loan is available,
however credit union staff still helps regarding making a decision about a particular loan,
if someone conveys them the purpose of loan. A few respondents, who were also members
of Credit Union, implied that their credit union offers complete help, if someone visits
them regarding the business loan. London Community Credit Union members also
responded that their credit unions offer loans ranging from standard to flexi, including
loans catering different needs of the people, and the credit union also offers low interest
loans with large time span to return and have great services regarding financial
assistance. Respondents who were member of London Mutual Credit Union implied
that though their credit union is among the large credit unions of London, still it does not
62

offer any small business based specific loans, however other types of loans are available
which can be used to establish the business, but they might not be enough to establish a
good business. Besides that the respondents also implied that interest rates through this
credit union are slightly higher as compared to the other credit unions in market. All
respondents told similar criteria to apply for a secured loan criteria of the secured loan
is usually evaluated based on the credit history, level of saving in account, annual
income/monthly income, capability to repay the borrowed amount, any beneficiary
guarantee if available, or traditional credit scoring. If someone doesnt meet the criteria
then he/she might need to apply for unsecured loan, and interest charges on unsecured
loans are quite high. Regarding hidden charges all of the respondents replied that their
credit unions show all the charges clearly, there are no hidden charges as such. Some
respondents implied that sometimes credit unions requires them to put something
collateral as a security e.g. property, jewellery etc., when they go for premium or large
6

amount of loans.
Regarding question about provision of help in establishment or growth or expanding of
small business, only 3 respondents replied that their credit union offers business
expanding loan or growth loan on easy terms with quite lower interest rate, they
implied that there is special teams if you visit credit union to help you over how to expand
your business using a particular loan, and they also provides free advices related to the
market environment. Other most answered that there are loans available, however
particularly for expanding business or growing it, there are no such loans available;
however someone can use other loans to expand or grow the business. Besides that
they also implied that in case someone needs advice regarding which loan to choose based
on the payback period and interest rate, they can get helped from the staff, they are quite

open to explain all the loan products transparently.

Almost all respondents given similar views regarding the guidelines; all the type of
financial help regarding the services, accounts, loans or savings or advices are
available to the members and non-members for free of cost. Moreover if anyone
needs help; they can use the web portal of the credit unions to understand about the
products and services, email them or make a direct call on the helpline , besides that;
the staffs of credit unions usually are very helpful. Regarding business establishment
advices very few respondent said that their credit union provides such advices and help
63

you with start-up capital and market analysis. Most of the respondents implied that
there is no business establishment help available and potential businessmen have to
find ways themselves or take help from financial or business consultancies to establish
their businesses. Regarding financial literacy respondents implied that they are offered
pamphlets, broachers, newsletters through email and upon visits they give you show
cards to read thoroughly about particular loan or saving products and understand
them, still if someone needs help, then one can ask from the staff about a particular
product/service. In response to the ATM and credit cards, all respondents replied that
their credit unions offer the ATM, credit cards and as well as account checking facility,
however only two respondents said that it is offered free of cost to them, all other
respondents implied that a nominal fee is charged to check account and make
transactions, however if someone uses the specific ATM of the credit union then it
doesnt charge them any penny.

Regarding other facilities a few respondents

informed that their credit unions offer loans based on summer vacation packages,
funeral planning, flexi loans, marriage planning loans, educational planning loans and
maternity or child delivery savings/loans etc., other few respondents said that their
credit unions also provide retirement funds through personal savings in form of insurance,
fixed deposits for a certain time period, voluntary withdrawal savings, rural production
loans, and certified checks and instant text message service over all types of transactions
8

etc.
Most respondents responded that there are no such challenges; provided that credit union
is near to one and he/she does not have to travel out of ones place. A few respondents
implied that they faced certain challenges such as no credit history due to which they
were offered unsecured loans on which they charge higher than the secured loans. A
few implied that it is hard for the people of the other communities to join credit union of a
particular area, they have to provide guarantees and fulfil certain requirements so credit

unions should expand their view of common bond to the whole city if not the country.
Almost all of the respondents said low cost affordable finance available on easy terms
and trustworthiness of the community based unions and not-for-profit institutional view
of the credit unions attracted them to join the credit unions. Some of them implied that
they joined credit unions because they offer detailed saving and loan products. For
each purpose there is different category which caters your need regarding both saving
64

and loan. When go for other options, banks dont have customised products to cater
the individual based needs. Regarding motivation to self-help, most respondents said
that their credit unions encourage them to save, and if they borrow for fewer payback
10

periods, they pay lower interest, thus leading to self-financial establishment.

All of the respondents showed positive views regarding the social aspect of provision of
finance through credit unions. They agreed that credit unions offer affordable banking
products to the community people, which otherwise can get exploited by the big banks
through paying higher prices for the same products. Most respondent implied that easy
access to low cost finance to individuals who cannot afford; is the actual social gain to
remove the poverty and unemployment. Most respondents said that credit unions offer
unsecured loans as well for the beginners or people with poor credit history.
Furthermore many of them also implied that Credit unions encourage the individuals to
save through keeping their savings reserved for a rainy day as in security loan or flexiaccounts/cards/loans. Credit Union also offers saving and instant saving loan, the
members of the Credit Union responded that their credit union do not lend unless
individuals show some basic 20 in their accounts, and London Community Credit
Union and Credit Union members also implied that if the borrower starts saving more,
their interest rate on lending gets lower so that to encourage them to save and finally
get over with borrowing thing and help themselves to achieve financial inclusion. This
way credit unions help people in tackling their financial needs, and hence reducing the
poverty and unemployment, and achieving financial inclusion. Moreover respondents of
London Community Credit Unions implied that their credit union encourages the
expanding and starting of small businesses, which in turn can be beneficial to produce
more employment in the country and also help the individuals with ideas of business
with no finance in hand, to achieve financial inclusion for themselves through multiple

11

loan products especially small business start-up capital loan.

5 of the respondents said that small business provide employment to 4-10 people, pay
tax, and besides when they get loan they pay interest amount which can further be
borrowed by someone else thus it keeps the money active and contribute towards the
economy. Other members responded that small businesses can impact the economic
development significantly. Credit unions provide finance to individuals who can start
their own businesses with this finance thus there will be less unemployed people, some of
65

them said that more people will own the houses to save the rent amount and invest that
into their future businesses which in turn can contribute towards the economy. Staff
respondents responded that they have serious concerns related to the Brexit effects as
economic activity is about to fall, inflation rates are expected to get high, credits from
foreign are expected to be available at high interest costs, and Bank of England is striving
hard to keep the interest rate intact. Besides that credit unions are receiving much
pressure from the government and non-governmental organisations to target the
individuals who wish to establish or start their own businesses, encourage the
individuals to produce small businessmen through making effective loan packages on
easy terms to control the unemployment and poverty during the recent hard time.

66