LONDON, U.K. – Credit unions and other community development groups will benefit from 36 (US$63.19) million package announced by David Blunkett, Secretary of State for Work and Pensions. The money is to be used to tackle financial exclusion. Credit unions will use the funds to help provide low cost credit to people with few financial options. The package is one of a series of steps taken by the government to help poorer citizens receive banking services without being gouged. "We are particularly pleased that David Blunkett has made the link between people having access to affordable credit and easy ways to build savings. Credit unions have shown over the years what a difference it makes to people's lives if they can build up a small amount of savings and take control of their finances," Mark Lyonette, CEO of the Association of British Credit Unions Ltd. (ABCUL), said. "This is very welcome news. Over the last five years credit unions have doubled in size and now serve over half a million people. In making this commitment the government has recognized the good work that credit unions are doing, often in very low-income communities." However there is competition for the money. Other organizations that can tap into the funds are Community Development Finance Institutions (CDFIs). "Many of these started off using third-party capital (from banks, etc.) to lend to people for enterprise who would not be able to borrow from banks. Some have now also branched into personal lending," Abbie Shelton, ABCUL's spokesperson said. CDFIs have lent just over 1 (US$1.75) million for the last couple of years while credit unions lent 99.6% of loans in the community finance sector, Shelton said. CDFIs lend at higher interest rates than credit unions and "some say it costs upwards of 600 to provide a loan to a financially excluded person. They say that credit unions can't lend to people who can't afford to save, but a number of British credit unions have woken up to that and are lending to people without requiring them to first save," Shelton said. British credit unions usually expect a person to save for a number of weeks before they can take a loan. Shelton spoke of an ideal where credit unions, banks and CDFIs could work together. "The idea is to have a credit union, CDFI, and bank working together. The CDFI would lend to people, the credit union would allow people to save and borrow and the bank would help them open basic bank accounts. There would also be a money advice element built in," he said. [email protected]