The government is to unveil an initiative to help people, especially those on low wages, beat the credit crunch, the BBC has learned.

The Treasury will announce later that it is to relax the rules governing credit unions - community-based savings and loans organisations.

It is designed to help people who are having trouble either repaying debts or obtaining loans from other lenders.

Ministers fear such people could become easy prey for loan sharks.

Credit unions work as low-risk savings and loans providers, frequently for less well-off customers.

Common bond

The move comes amid concerns such customers may be particularly badly hit by the credit crunch, such as by finding it increasingly difficult to borrow money from traditional High Street lenders.

Although any area or organisation can form a credit union, they have to operate within their own communities - known as the Common Bond.

The Treasury plans measures to broaden the Common Bond, allowing the sector to expand.

By this time next year, ministers hope to get rid of many restrictions on who credit unions can lend to, allowing them to branch out by forming alliances with other unions, employers and housing associations.

They hope that by doing this, people will be able to access cheap, secure loans which they will be able to repay.

source: BBC news

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