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Former Chancellor Philip Hammond first proposed the idea in 2018
Charities and community lenders have cautiously welcomed Treasury plans to provide £3.8million to pilot an Australian-style system of no-interest loans for hundreds of thousands of people who cannot afford high-cost credit.
The funding for the scheme finally makes good on a proposal first unveiled by former Chancellor Philip Hammond in the 2018 Budget to help those below the poverty line access credit.
The Treasury said on Wednesday the scheme will help vulnerable consumers who would benefit from affordable short-term credit to meet unexpected costs as an alternative to high-cost credit.
The announcement of the £3.8million to fund the pilot comes 12 months after publication of a report by London Economics into the feasibility of the loans, which had been carried out between April and August 2019.
Yet that is exactly what happened to Police Credit Union last March.
The member owned co-operative, which has grown to 34,000 members since its founding in 2002, was handed the cash from a Treasury-backed fund so it could help those in the police, armed forces and other public services cut the cost of their borrowing as their financial habits improved.
Officially dating back to the 1960s and with roots which go back to the 18th century, credit unions have long been applauded for their membership model. High profile supporters of the co-operatives include Michael Sheen and Camilla, Duchess of Cornwall
And it was not the only one. Despite their age, credit unions have been around since 1960 and can trace their roots back to the 18th century, two of the three winners, and four of the six finalists, of the £200,000 prizes were credit unions.
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