Charities, social enterprises and community groups will be able to join a credit union from next week under changes made to the Credit Unions Act 1979.

Previously, only individuals were able to be members of credit unions and use the financial services they provide. However, last November, a Legislative Reform Order was passed by Parliament, under the Credit Unions Act 1979, meaning that from 8 January credit unions can:

• Reach out to more people by extending membership to new groups – as a credit union will no longer have to prove that everyone who can join the credit union has something in common
• Provide services to community groups, social enterprises and businesses, not just individuals
• Choose to pay interest on savings, instead of a dividend

Mark Lyonette, chief executive of the Association of British Credit Unions, said: “These changes are a major breakthrough in the delivery of credit union services to organisations around Britain.

“The new rules mean that, for the first time, credit unions will be able to offer services directly to charities, social enterprises and community groups, allowing credit unions to compete more effectively with banks and other lenders to provide fair and affordable financial services.

"The changes will also help credit unions build stronger relationships with the staff, members and service users of organisations, helping them to develop a savings habit – which can only be good for communities.”

As financial co-operatives, owned and controlled by their members, credit unions have no outside shareholders to pay and any profit they make stays in the community and is used to develop the credit union and provide a return to savers.