We welcome this call for evidence on reforming the common bond, which provides an important opportunity to support the growth of credit unions

We believe the cap on potential members for locality common bonds is a significant impediment to the growth of the sector. In particular, it can stop credit unions successfully conducting mergers, which can lead to financial exclusion when credit unions fail. Where mergers do go ahead, the cap can reduce their growth potential and can require credit unions to section off parts of their existing common bonds to meet the arbitrary cap.

To enable the continued growth of the credit union sector, we would support removing the potential membership population cap for locality common bonds. This would align with the other types of common bond, which do not have associated population caps.

Credit unions fulfil a hugely important role in providing access to savings and small sums of credit to lower income and financially excluded households.

Removing this barrier to credit union growth would support the goals of the government’s upcoming Financial Inclusion Strategy, as well as supporting the government’s objectives to double the size of the mutuals and cooperative sector.

One of our strategic priorities is increasing access to affordable credit through a scaled community finance sector. Since we were set up in 2019 we have provided around £60m of funding to more than 60 community finance providers, the majority of which are credit unions.

Alongside grants and investment, our work to support the growth of the credit union movement includes technology transformation projects, leadership programmes and the development of research and resources.

Our response to this call for evidence is informed by consultation with credit union partners and their representatives, and by our work with the sector.