Welcome to the latest edition of our Community Finance Bulletin, and the last one of 2024. It’s been an eventful year and among other things we’ve seen a change of government and a renewed focus on financial inclusion with the commitment to a National Strategy and launch of the Financial Inclusion Committee.
In this edition, much like the Ghost of Christmas Past, we’re taking a moment to reflect on some of the achievements of the past year, many of which would not have been possible without your time and support.
Whilst we are very pleased to have worked so closely with many community finance organisations this year, we are well aware of the size of the challenge before all of us in transforming financial inclusion, and the reality facing over 20m people in the UK who currently live in financially vulnerable circumstances.
Holly Piper, Investment Director
‘A huge thanks to everyone in the community finance sector we have worked with this year. We know just how busy you are, and whether you’re making the time to get involved on a particular project, providing us with essential feedback or meeting the team at a conference or event, it is really important to the work we do and it’s really appreciated by the whole team.
Wishing you all a merry Christmas however you celebrate, and a happy New Year’
Our Community Finance Resilience Fund
One constant throughout 2024 has been the Community Finance Resilience fund. As a reminder, this is a £5m+ grants and investment fund with two objectives:
- Improve the resilience of the community finance sector through the cost of living crisis, and
- Preserve and scale affordable credit provision
We were able to offer this Fund thanks to additional dormant assets funding received to alleviate the negative effects of the cost of living crisis on the community finance sector and their customers. We closed the Fund to applications at the end of January 2024 and had an overwhelming response with over 70 separate community finance organisations applying for funding.
We went through all the applications in a methodical way, prioritising the small grants, then the larger grants and then moving into the investment requests and our Expression of Interest (EOI) category which enables single or multiple organisations to propose specific projects which they felt met the Fund’s objectives but sat outside the core grants.
So far we have approved £5.5m of funding through the Community Finance Resilience Fund to 48 organisations. This covers grants, capital adequacy and some of the early EOI projects. We are still considering some applications and we hope to finalise all funding decisions in spring 2025.
Whilst a lot of the grant funding has been on things within businesses sharply hit by the cost of living challenges, notably unplanned costs around people and technology improvements, the EOI proposals have been really interesting. The variety of ideas has seen everything from working on projects with Housing Associations, simple loan guarantee schemes and propositions targeting younger member savings and acquisition. When some of the impact data is more mature we’ll be sharing lots of case studies throughout 2025 as many of these may be scaleable in other organisations.
ABCUL Inclusivity Group
We’re pleased that Ayesha Begum, our Senior Manager, Strategy and Impact has been appointed to the ABCUL Inclusivity Group (AIG) which serves to make recommendations to the ABCUL board in practical ways to ensure diversity, equity and inclusion are at the heart of how it operates within itself and with its members.
Ayesha Begum, Senior Manager, Strategy and Impact
Milestones
Insights to help serve the growing number of people in financially vulnerable circumstances
The financial situation facing households across the country showed little signs of improving this year. This was clear to see in our updated segmentation research which identified that over 20m people in the UK are now living in financially vulnerable circumstances – that’s almost half of the adult population, and increase of 16% on 2022.
You can learn more about the different groups of people in financially vulnerable circumstances on our website here, including how you can use our segmentation resources to better understand these customers and design solutions to meet their needs.
Investing in affordable credit
This year, we have continued to closely support lenders to successfully scale their provision of affordable credit. We are very proud of the recognition that several of our investees have achieved – shortlisted for the UK Social Enterprise Awards 2024 (Great Western Credit Union and Moneyline), winners at the Credit Strategy Lending Awards (Moneyline), and increasing press coverage of community finance across the country.
As part of this, we’ve worked with partners to leverage new investment into the community finance sector. Our recent co-investment alongside commercial funder Shawbrook into Fair for You is the first large senior debt facility from a commercial funder to a not-for-profit personal lending CDFI. Fair4All Finance has been working with Fair for You over many years to facilitate an appropriate structure that has been the catalyst for Shawbrook’s investment.
Together this funding allows Fair for You to further grow its offering and doubles its ability to support people in financially vulnerable circumstances with affordable credit. This means tens of thousands more customers will be able to access essential household items and build financial resilience.
We have continued to work alongside non-profit social impact minded crowdfunder Ethex who, in the last year have helped three community finance providers run investment raising campaigns totalling around £4m.
We work with a wider range of investors and funders to secure the most appropriate and scaleable funding and investment for affordable credit providers – read more about our thinking here. With over 20 million people in the UK in financially vulnerable circumstances, access to credit when needed is critical for households to effectively manage life events and improve their financial wellbeing.
Consolidation lending pilot
We’ve also worked with partners to explore consolidation lending and earlier this year we provided a £1.3m financial package to Great Western Credit Union, including a £100,000 partial bad debt guarantee. This will support the credit union to extend their existing consolidation loan products to customers they’re currently unable to serve, increasing access to affordable credit and boosting financial resilience across the South East.
Our Leadership Programme
This year our Leadership Programme has seen 38 graduates from across the community finance sector, building capacity and sharing knowledge with the leaders of today and tomorrow. We held two courses focussing on the key areas of Marketing and Consumer Insights, and Strategic Planning and Change.
NILS pilot delivering results
We believe that there are innovative solutions out there that have the potential to improve the financial resilience and wellbeing of people in financially vulnerable circumstances. We’re working to develop the market to consistently provide products that meet the needs of all customers and one example of this is the No Interest Loan Scheme (NILS) pilot.
Back in August we hit a huge £10m milestone in the provision of affordable credit through the NILS pilot. This means over the course of the pilot £10m of new credit has been made available and lent to people in financially vulnerable circumstances who otherwise would have been declined.
This announcement follows an independent interim report which provides evidence that the scheme is helping people in financially vulnerable circumstances, and has the potential to help many more. The report shows that 80% of loans appear to be reaching those in financially vulnerable circumstances, and just over half of the loans (51%) are provided to individuals in the two most financially vulnerable groups.
Recently we brought together some of the lenders taking part in this pilot to share their experiences as lenders, and to hear more about what they’ve learned through the scheme. You can listen to the podcast here, or listen below.
A year of change
In June we started the process of looking for a new CEO, after five successful years with Sacha Romanovitch at the helm. Later in the year we were pleased to announce that Kate Pender had been appointed to the role.
We were pleased to welcome former Mayor of Liverpool, Joanne Anderson to the Fair4All Finance board – Joanne was the first Black woman elected mayor, and has a 30-year career establishing her as an expert in equity, diversity, inclusion, inclusive prosperity, social impact and net zero. David Wishart, Chief Risk Officer at Sainsbury’s Bank was also appointed as an independent member of the Investment Committee.
Finally, it would be remiss of us to not mention some changes in and around the sector with ABCUL CEO Robert Kelly announcing his upcoming departure from the organisation, and Martin Coppack moving on from his time as Director at Fair by Design. We wish them all the best for the future and we look forward to continuing to work together.
Events and engagement
It’s been a busy year and we are so grateful to have received so many invites to attend and speak at events up and down the country, whether it’s a conference, facilitating a board visit, setting up a stall to support an event, or simply attending to hear about the fantastic work going on.
Earlier this month we were pleased to share the news that our CEO, Kate Pender, had been appointed to the Government’s new Financial Inclusion Committee. This committee will explore measures to help people in financially vulnerable circumstances access banking, affordable credit and other financial services.
In March we were really pleased to be able to support the ABCUL conference. As well as attending it was great to host a breakout session about raising awareness of the sector and getting input from the ABCUL members. More recently we attended the Responsible Finance members day. Thanks to everyone who came and spoke to us on our stand and Holly Piper, Investment Director, enjoyed being on a panel on the topic of expanding investment into CDFIs and sharing learning and thoughts from innovative approaches.
In July we held our first ever financial inclusion conference where we welcomed over 200 leaders from across the financial services sector. There was a lot of discussion and you can read our six key takeaways here. It was clear that there is an appetite for the financial services sector to improve the way it works with community finance, and more importantly the case was made for investing in community finance, and that this shouldn’t be seen as something radical.
We also brought together 150 guests from across the financial services, community finance, public sector and civil society for a reception in Parliament on how we can all tackle financial exclusion together. We were honoured that Tulip Siddiq MP, Economic Secretary, and several other leading politicians from the major parties spoke at the event – it was great to see some of you there. We used the session to underline our 5 key priorities to tackle financial exclusion, which you can read on our website.
Tools and resources for you
Our Good Practice Lending Guide launched earlier this year and includes industry best practice alongside relevant examples to the operations of the different community finance providers. The guide covers credit risk activities that impact your customer journey, governance and regulatory compliance, and management information to support informed decision making.
In February we launched our guide to Building Strategic Sustainability within the Credit Union Sector which draws on expert advice and experiences from the credit union sector to help providers develop robust strategic plans for sustainable growth.
Here’s now CEO Kate Pender talking about why this guide has been created and why sustainability matters in business:
In March we shared our Customer Engagement Support Guide (in conjunction with the Behavioural Insights Team) which builds on the work with three lenders to provide practical examples of interventions that you can make to increase your conversion rates of eligible customers, and to strengthen your customer and member communications.
We also released a Technology Provider Due Diligence guide to support you with ICT procurement, and to provide indicative factors against which to measure possible investments.
Over the year our partnership with Instinctif on the raising awareness of community finance campaign has led to significant coverage in the media. This includes placing quotes from credit unions in a variety of publications ranging from regional titles to The Big Issue and Metro. With your support we’ve been able to highlight the real difference that you make in your communities, providing access to responsible and affordable credit, and also by encouraging savings and increasing financial wellbeing and resilience.
All of these initiatives have been able to happen because of your input, so thank you to everyone who got involved and supported on these projects.
Join us in the new year as we ask the question ‘does APR help consumers understand the costs of short term, small sum loans?’
When? 1pm, Thursday 23 January 2025
Where? Online webinar
This webinar will feature representatives from ClearScore, Plain Numbers, and Thinks Behavioural Team who will present the findings. We will also be joined by the FCA and consumer representatives who’ll share their perspectives and respond to the research. There will be the opportunity for attendees to pose questions to the panel and the webinar will conclude with a summary of next steps.
Our new address
Lastly, the lease on our office has come to an end and we have moved to a new home (very nearby!). Please update your records to reflect our new address:
Fair4All Finance
3rd Floor
16-18 Middlesex Street London
E1 7EX
