Welfare Reform Minister Lord Freud has announced that credit unions will receive up to £38 million to modernise and expand.
This investment follows a £13 million cash injection in 2011, and will help credit unions to buy in new IT systems and infrastructure needed to increase the numbers of people they help to save and borrow.
A survey involving 350,000 people carried out by Unite found that 82% of working people cannot make their wages last the month with 12% of that group having used payday lenders to help them through until their next payday.
In their report, Unite estimate that if a worker was to borrow £200 a month from a payday loan company who charge an interest rate of 4,200% APR they will use three working days a year paying it back.
Credit unions offer the most competitive interest rates on personal loans in the UK market and can save borrowers an average of £401 a year. Despite this, just 2% of people in the UK are members of a credit union compared to 24& in Australia, 44% in America and up to 75% in Ireland.
Lord Freud said: “Our investment will help credit unions reach up to one million new customers providing a real alternative to rip-off interest rates from payday loans, doorstep lenders and illegal loan sharks.”