Fears over financial pressure on Norwich Credit Union from coronavirus lockdown
PUBLISHED: 10:16 17 May 2020 | UPDATED: 10:16 17 May 2020
A social enterprise which gives out affordable loans has warned it may struggle financially next year following knock-on effects from the coronavirus lockdown.
But despite the concern, president of volunteer-led Norwich Credit Union, Jon Warne, said: “We have come through thick and thin. There is a crisis every five years so we will get through this.”
Norwich Credit Union currently gives out loans to 1,500 people and is offering a two-month payment holiday to people who cannot afford repayments.
Changes have also been made by the Financial Conduct Authority so credit unions can provision for 20pc of a loan - money put aside - if a payment is more than three months in arrears.
The previous amount of provision a credit union could hold onto was 35pc and the new arrangement is in place until January next year.
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Mr Warne fears this would put an additional financial pressure on the social enterprise at a time when more people will be out of work.
He said: “This is going to run and run. I fear for the Norwich Credit Union. We started the year on the back foot. We had a number of bad debts and good members lost their jobs. People were struggling before Covid-19. This obviously wont help one jot.
“We are going to see increased redundancies. If we do not see a recession, the country will experience a depression. It is very difficult to plan for what is around the corner. We can do our best but unfortunately we do not have access to hedge funds.”
Currently the union has £350,000 on loan to its members who pay a low amount of interest.
Mr Warne added: “Some people have still got jobs but we have people in uncertain waters. These are unprecedented times. If people struggle to pay back loans after three months they will struggle at six months. It would be nice to have some money for the credit union through donations so we can help people in need.”
Norwich Credit Union received a donation of £1,000 from the Norfolk Community Foundation so the social enterprise could support unpaid carers in the county.
“It would matter to a lot of people if the Norwich Credit Union was not here,” said Mr Warne. “It is about people helping people. We are about ethical finance.”
He urged anyone struggling to repay loans to contact the union.
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