Our first focus area: Access to affordable credit
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.
The demand for high cost credit is currently ~£3bn a year and affordable credit just ~£250m a year
Scaling the affordable credit sector so it can become truly competitive with high cost credit requires transformational change – we call this a 10x challenge.
Programmes and funding
Pilot Affordable Credit Scale-up Programme
In August 2019 we launched 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 to people in vulnerable circumstances with an emphasis on enabling alternative lenders to scale to prove models for sustainable serving this customer group.
We have worked with five organisations to conduct a detailed business diagnostic into each of them and understand how we can best support sustainable growth of the organisations and the wider sector.
- We have summarised our overall learning and developed some early recommendations for the sector in our report Transforming Affordable Credit in the UK
- We have committed to a tailored package of support and investment for each of the organisations to help them scale sustainably
Affordable Credit Scale-up Programme – opens in mid-late May
We are expanding our scale-up programme to support more affordable credit providers.
The Affordable Credit Scale-up Programme is designed to provide a package of tailored support to sustainably scale affordable credit as part of the wider transformation of financial services.
- An expanded Affordable Credit Scale-up Programme will help the sector to play its part in the 10x growth challenge in the delivery of affordable credit to people in vulnerable circumstances
Covid-19 Resilience Fund – open
Covid-19 presents significant financial challenges to millions of people across the country. At this time, it is more important than ever that the financial system is supportive of their needs and helps them to maintain their wellbeing through some financial security.
We know that the effects of this crisis on the affordable credit sector are already challenging and may become even more so, and we have launched a new fund to help the sector emerge in a resilient state.
- The Covid-19 fund will provide up to £5m in grant funding to CDFIs and credit unions in England in the coming months in response to the pandemic
Apply for support
For more information about our Scale-up programme and Covid-19 Resilience Fund please view the information pack: Covid-19 Resilience Fund and Scale-up Programme
Organisations that are eligible may apply for an individual programme or both based on their needs.
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.
- 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