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 ~£3bn a year and affordable credit just ~£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. A Detailed update on this programme, along with recommendations for the wider affordable credit sector, can be found in our report Transforming Affordable Credit in the UK.
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
- Looking to expand the programme beyond a pilot
Future projects
We are committed to pursuing other innovations that meet the needs of people in vulnerable circumstances. Solutions could 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
If you’ve got a bold idea that you think we should be exploring, please connect with our team.
Partners
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 regulators Government and financial inclusion regulators Government and financial inclusion regulators
Over 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 & researchers Financial inclusion advocates & researchers
Financial inclusion advocates & researchers
We 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 providers Financial guidance and debt advice providers
Financial guidance and debt advice providers
We 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 providers Affordable credit providers
Affordable credit providers
We 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 agencies Credit reference agencies
Credit reference agencies
We intend to work with credit reference agencies to help make credit scoring fairer and ensure it gives a more realistic profile of individuals - Commercial lenders Commercial lenders
Commercial lenders
We will work with commercial lenders to explore how they, along with Fair4All Finance, can support vulnerable customers - Housing associations Housing associations
Housing associations
One 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 - Employers Employers
Employers
We plan to explore the possibility of providing low-cost employee loans via employers - Technology for good providers Technology for good providers
Technology for good providers
We 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 industry Insurance industry
Insurance industry
We 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
Get involved
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.