A London credit union aiming to compete with payday loan companies says it has now lent money to more than 6,000 customers.
London Mutual offers its services to people living or working in Westminster, Camden, Southwark or Lambeth, allowing them to borrow up to £1,000. Like all credit unions, it's a non-profit cooperative, offering financial services such as current accounts and savings as well as loans.
All calculate interest at just two percent per month, meaning that a £150 loan for one month would attract an interest charge of just £3, although London Mutual charges an £11 fee if the money's needed the same day. Wonga, by contrast, charges over £33 for a similar loan.
"People can clearly see the difference in APR," says London Mutual chief executive Lakshman Chandrasekera.
The application process is comparatively simple, says Chandrasekera, although it does involve a short questionnaire designed to establish the applicant's ability and willingness to repay the loan on time. This takes just ten minutes, although most people will also have to provide additional information over the phone.
But credit unions are on the rise. According to the Association of British Credit Unions Limited (ABCUL), there are around 400 now up and running in the UK, managing over £1 billion in assets for more than a million clients. They received a welcome boost in publicity recently with the endorsement of the Archbishop of Canterbury, Justin Welby.
Last week, a number of bishops followed his lead by publicly supporting their local credit unions, and the Department for Work and Pensions (DWP) has pledged to invest up to £38 million to support them. "Credit unions can offer exceptionally high-quality, good value financial products and provide an important service to many people," says DWP minister Lord Freud.
Credit unions enjoy much greater popularity in some countries - over a third of people in the US and Canada are claimed to use one. But they've failed to take off on the same scale in the UK, where payday lenders dominate.
Last week, prime minister David Cameron said he was considering imposing a cap on the interest rates payday lenders are allowed to charge, and Labour has said it's considering doing the same if it wins the next election, as well as imposing a levy on them that would go to fund credit unions.