Northumberland County Council has agreed to provide £50,000 to the Northumberland Community Bank (NCB) as part of a loan to be repaid over the next decade.
The community bank, which provides lending services for local people and helps keep them away from unscrupulous loan sharks, needs to maintain a "capital to loan" ratio of 3% to satisfy the Financial Conduct Authority's rules.
A report presented to the council's cabinet on Tuesday explained that the bank provides a "vital alternative" to high-cost loans and illegal lenders for the county's residents, particularly individuals in Northumberland's "most vulnerable and disadvantaged communities".
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However, the Covid pandemic impacted the bank's growth plans, with lower spending reducing income. The council provided a £40,000 grant and a £50,000 loan to prevent NCB from falling below the ration in December 2020.
Speaking at the cabinet meeting, the council's deputy leader Coun Richard Wearmouth explained why there was a need to provide additional funding. He also detailed the checks that had been carried out to ensure the level of financial risk to the council was minimal.
Coun Wearmouth said: "The Northumberland Community Bank does really important work across the county, making sure people have access to loans at a fair rate, that removes the risk that they are driven into the arms of loan sharks.
"The bank does absolutely fantastic work, it's really important in the scheme of the council's own approach to inequalities and making sure we have that prospect in our community to provide these lending facilities.
"This proposal has gone through a risk appraisal panel. Questions were posed to the finance term and satisfactorily answered, and they have recommended this for approval."
Council leader Glen Sanderson added his support to the plan.
He said: "We all remember the really bad days of loan sharks and there's still lending today that takes advantage of people at their most vulnerable. We will be here for all our residents.
"We want to channel some support to the community bank to try and avoid people becoming caught up in an endless spiral of debt. It's about trying to help the most vulnerable in our society."
The plans were unanimously approved by the cabinet.
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