Our first focus area
Improving access to affordable credit
Our work aims to improve the financial resilience of individuals and communities. Our initial focus is on addressing the problem of access to affordable credit by providing support and funding for the affordable credit market.
The demand for high cost credit is currently c.£3bn a year and affordable credit just c.£250m a year.
For the millions of people in the UK excluded from access to mainstream credit, fair and affordable lenders like credit unions and CDFIs provide a lifeline. Scaling the affordable credit sector so it can become truly competitive with high cost credit requires transformational change – we call this a 10x challenge.
We are currently running a pilot ‘Scale Up Programme’ of capability development for five organisations in the affordable credit sector; Enterprise Credit Union, Fair for You, Five Lamps / Conduit, Leeds City Credit Union and Moneyline.
The aim of this pilot programme is to improve the access, availability and affordability of credit with an emphasis on enabling smaller lenders to scale up or to disrupt the sector more broadly.
As part of this work, we are also:
- Understanding our target market and the economics of intervention
- Exploring the possibility of employers providing low costs employee loans
- Developing a fair and affordable credit standard
- Convening investors in financial inclusion
- Improving the fairness of credit scoring
In the longer term, we plan to expand our portfolio of projects to potentially include:
Supporting alternatives to credit such as the provision of furniture rental through Housing Associations.
Supporting insurance initiatives, that protect against income shocks or increase the scale of home contents cover.
Developing programmes and interventions that encourage savings behaviour.
We are keen that our work adds to other great work that is already happening in this space and are committed to working collaboratively. We are currently in the process of meeting with a wide range of stakeholders across the public, private and third sectors as outlined below:
- Government and financial inclusion regulatorsGovernment and financial inclusion regulators
Government and financial inclusion regulatorsOver three million people use high-cost credit in the UK. However, there are affordable options available from credit unions and CDFIs who are committed to helping their communities. We will help these organisations serve more customers in a fair and affordable way, by developing their capacity and raising awareness of their services with groups who may need them.
- Financial inclusion advocates & researchersFinancial inclusion advocates & researchers
Financial inclusion advocates & researchersWe will collaborate to support the changes needed in society to deliver healthy credit for all and an effective safety net for those individuals who need it
- Financial guidance and debt advice providersFinancial guidance and debt advice providers
Financial guidance and debt advice providersWe want to work with organisations who are supporting vulnerable people and support them to deliver services which improve financial management skills and encourage savings behaviour. We also plan to work with this sector to help build local eco-systems that help customers navigate debt advice and access affordable loans
- Affordable credit providersAffordable credit providers
Affordable credit providersWe believe customers in vulnerable circumstances and financial difficulty should have access to a fair and affordable credit option when appropriate to their circumstances. This option should be available from providers who charge a reasonable price based on risk and who treat customers with fairness and support to improve their situation throughout their journey with a lender.Responsible lending makes up only a fraction of short-term lending in the UK. Each year, affordable credit providers make just £250m of loans, while over the same period, high-cost short-term credit providers lend £3bn, more than ten times as much. Our challenge is to grow the sector to meet this demand – we call this a “10x challenge”. Our scale-up programme is part of our approach to work with affordable credit providers to help them meet this scale.
- Credit reference agenciesCredit reference agencies
Credit reference agenciesWe intend to work with credit reference agencies to help make credit scoring fairer and ensure it gives a more realistic profile of individuals
- Commercial lendersCommercial lenders
Commercial lendersWe will work with commercial lenders to explore how they, along with Fair4All Finance, can support vulnerable customers
- Housing associationsHousing associations
Housing associationsOne of the ways we hope to address the problem of access to affordable credit is by helping to provide alternatives to credit, such as provision of white-goods and furniture rental, which we invision delivering through partnerships with Housing Associations and social enterprises. We also recognise housing associations as excellent routes to market for affordable credit providers
EmployersWe plan to explore the possibility of providing low-cost employee loans via employers
- Technology for good providersTechnology for good providers
Technology for good providersWe are interested in collaborating with providers of technology who could facilitate low-cost employee loan distribution. We are keen to explore how technology could transform credit scoring
- Insurance industryInsurance industry
Insurance industryWe plan to work with insurers to develop new affordable insurance initiatives, which protect against income shocks or increase the scale of home contents cover among low income groups
If you operate in the financial inclusion space and would like to help us in our mission to end financial exclusion, please get in touch.