At Fair4All Finance, we’re working to build a fairer financial system where everyone has access to the right products and services when they need them most. Funded through the Dormant Assets Scheme, we use our capital flexibly – investing, lending, and granting to organisations that support people in vulnerable financial situations. In this blog, Richard Collier-Keywood (Chair of the Fair4All Finance Board), and Holly Piper (Investment Director) share how our impact-first investment approach helps grow affordable credit, strengthen community finance, and deliver meaningful social change across the UK.

Fair4All Finance is a not for profit organisation working to boost financial inclusion. Our mission is to increase the financial resilience and wellbeing of people in vulnerable financial circumstances by ensuring that everyone has access to the right financial products and services, whenever they need them.

We were set up in 2019 through Government, and our core funding comes from The Dormant Assets Scheme which makes it possible for money from forgotten bank accounts and other financial products to be used for good causes.

At Fair4All Finance we have the advantage of being a dormant assets organisation with flexibility in how we deploy our capital towards our mission of ending financial exclusion. This means that we can make a range of impact investments including debt and equity. We can also make grants to support the organisations working alongside us on this mission.

For the most part the markets we are working in are broken, so it’s not possible to invest in these markets and make a risk-adjusted financial return that a commercial investor would expect. Our impact investments often have significant risks attached to them and usually are not fully asset backed. This exposes us to the risk of loss of our capital, and we carefully consider the risks of each investment against the prospect of social and financial returns.

We therefore work on the basis that our investments may have a negative financial return (ie we may not get back what we put in) providing we can reasonably establish the value of a social return. We do make genuinely risk-bearing investments where the financial returns by themselves are insufficient – but the social impact is transformative.

We put as much rigour into our analysis of the social returns as we do to financial returns. Lots of impact investors say this, but our experience is that few will do this at scale in many areas of the UK social landscape, including financial inclusion.

When we invest in social purpose organisations, we rarely expect our potential financial upside to compensate for the financial risk we’re taking. Instead, we expect the combined social and financial impact to compensate for the financial risk. For example, we might make a debt investment into a community finance lender and we charge a low (and what we hope is affordable) sub-market interest rate.

In some cases, the delta between our lower interest rate and a higher ‘market’ interest rate can be measured (and we can therefore assess the value of our ‘impact-adjustment’). In others, genuinely comparable market rates are unavailable (as no other investors are willing to invest), and it is therefore the fact of the investment itself – not just the lower interest rate – which is the impact adjustment. An impact-adjusted investment risk appetite, not just an impact-adjusted interest rate!

We do of course make some exceptions to this approach. In particular, we are thoughtful to ensure that we are not unnecessarily subsidising other investors, particularly commercial ones. We are mindful of

• taking a lower financial return when investing alongside others at a similar risk level (ie same part of the capital stack) and for a similar duration
• of excessive private gain, which is particularly important when either the organisation we are investing into is a commercial one or when the other investors are commercial investors

However, leverage is essential when you are trying to solve a £2bn affordable credit gap with finite funds.

We consider the trade-off between achieving leverage and achieving fairness amongst investors. And we recognise that sometimes (many times) it is necessary for us to take a comparatively lower financial return. This means we typically take the highest financial risk but not the highest financial return in any co-investment.

This is counterintuitive – indeed nonsensical – if you’re focused on only financial return but makes sense if you’re giving genuine weight to the anticipated social impact arising from the investment.

We make targeted grant funding, for example to community finance organisations dealing with the cost of living crisis, to preserve the capacity in the market at times of crisis. And we also support so called ‘blended finance’ which fellow dormant asset organisation Access, and some leading foundations, have championed.

Our blended finance comes with a twist – we offer some lenders partial bad debt guarantees combined with lending capital in an approach specifically designed to support the expansion of responsible lending to excluded customers.

This incentivises lending to these excluded customers (who are often perceived to be, or are, more risky) by sharing the increase in risk with the lender. The ‘partial’ aspect of the bad debt guarantee acts as a strong financial incentive to continue responsible lending and collections (eg the guarantee has a share or a cap, so if bad debts increase above this then the lender bears a financial hit).

We are very conscious that at Fair4All Finance we have a privileged position in being able to use our funds so flexibly to achieve our mission. We see this as a responsibility to use our funds as well as we can.

This often involves tricky trade-offs; we know that other investors don’t always agree with our approach; and we’re conscious that we haven’t yet explained the nuances of our social investment approach as we continue to develop it.

Moreover, we believe our approach is working. We have invested £40m in our Affordable Credit Scale Up portfolio since 2020, and this is now delivering significant social impact. Affordable and responsible lending to people in vulnerable financial circumstances (one of the key performance indicators for this portfolio) grew by 33% in 2024 versus 2023. This is significantly above the comparable growth by other community finance or non-standard commercial lenders.

This growth is primarily the result of hard work by these community finance lenders, but we believe that our genuinely impact focused investments have played an important role in this.

There are of course implications of this approach:

• In financial inclusion, it is likely that the benefits of responsible lending to people in financially vulnerable circumstances, allowing them to borrow where they can afford to, and consequent improvements in their mental health will have significant social benefit and economic returns as they will support a growth agenda, often reducing reliance on the state. This may require the allocation of an enduring subsidy
• This is an example of applying a business approach to solving a social issue. It is essential that this includes a consideration of treating customers with dignity and enabling them to participate in finding a way out of their current vulnerability
• Full capital preservation is unlikely, which means this approach will not suit pure commercial investors
• Accounting for this is non-trivial given the accounting guidance around using ‘fair value’ as a determiner on balance sheets

Finally, we recognise that Fair4All Finance is a limited life organisation. We spent broadly the first four years understanding and piloting different products in the market (albeit a changing market impacted heavily by the covid pandemic). We are now in the phase of scaling the products through leveraging increased funding from banks and other significant capital providers. The final phase will be about sharing our learning and the legacy of the investments that we have made.