South Ribble residents who struggle to access financial services such as loans and bank accounts will soon have access to a credit union.

It comes after South Ribble Borough Council approved a £150,000 grant to the Unify Credit Union to roll out its services to the entire district.

It has served the Leyland area since 2013, when it also expanded into Chorley after originally being formed in Wigan almost 40 years ago by a group of mothers concerned about the dearth of borrowing saving options for people in deprived communities.

However, it was only last week that a brick branch was opened in Leyland – as part of the funding agreement with the local authority – and the whole of South Ribble will shortly be able to benefit from the facility once its extended coverage area has been approved by the regulator.

Unify chief executive Angela Fishwick said that one of the key aims of the credit union movement is to make people more “financially resilient” – and provide an alternative to doorstep lenders.

“Many of us are in the privileged position of never having to worry about being able to afford a new washing machine or some other essential item if it breaks down – we just go out and buy another one and if you’ve not got the money, you put it on your credit card.

“But if you’ve not got a credit card and haven’t got the cash either, then who do you turn to?

People on universal credit have got just enough money to live on – it doesn’t give them a pot for [emergencies] to fall back on.

“The banks aren’t interested in giving people small loans, so [they are left with] the doorstep lenders – but the APR [annual percentage rate of interest] is around 480 percent.

“These companies frontload the interest, then they’ll give a person another loan to pay back [the first] and frontload the interest again – and it just goes on for years.   And that is just the legal operators – there are big issues with illegal loan sharks as well.

“It’s a poverty premium – the people with less money have to pay more for everything that they want.  We are trying to balance that up,” Angela explained.

Anybody taking out a loan with a credit union is also required to save as part of the repayment plan, sometimes leading to them having savings for the first time in their lives.

While stressed that the credit union will not be able to help everybody and would never give loans to people who could not afford to repay, Angela said that people who are struggling will be referred to other organisations who may be able to help them with things like debt advice and claiming all of the benefits to which they are entitled.

She also wants to shake off the image of credit unions being a “poor man’s bank” – insisting that they are open to everybody and need regular savers in order to be sustainable.

“We use members’ savings to give loans – so people help their local community by saving with us.    The money you put in your bank goes down to Canary Wharf.”

Savers in credit unions receive a dividend based on the profits generated – and they are also given free life insurance, which can benefit loved ones after their death with payouts and payoffs of outstanding loans. As with high street banks, their deposits are protected by the Financial Services Compensation Scheme.

South Ribble Borough Council has agreed a three-year business plan with Unify in return for the authority’s financial support, which will largely be used to cover staffing and running costs. It includes a commitment to extend the reach of the branch in Leyland by creating either physical or virtual community hubs in areas including Penwortham, Bamber Bridge, Lostock Hall and Longton.

The council’s cash will be handed over in the three installments, starting with £66,000 in the current financial year.

Cllr Aniela Bylinski Gelder, cabinet member for communities, social justice and wealth building, said that the pandemic had “only served to underline the need to make financial support more accessible for our residents”.

“Many local people are facing challenging circumstances right now, experiencing financial stresses which in turn can have a major effect on their mental health and wellbeing.

“This grant enables Unify Credit Union to expand their reach across the whole of our borough in order to provide a sustainable community-focused alternative to high street lending as part of our vision for a fair local economy that works for everyone.

“We’re also pleased that this funding will create three new jobs at Unify’s new Leyland branch, including an employment and development opportunity for at least one young person aged 16-24 through the Kickstart programme.”

Angela Fishwick said that the council itself could also benefit from residents being more financially secure – and not having to make the choice between paying “the person at the front door” and things like council tax and rent.