Deduction Lending – Does it all add up for low income earners?
Working with The Financial Inclusion Centre and the Swoboda Research Centre we heard from over 7,500 borrowers who told us about their experiences with payroll and benefit deduction lending. We also worked with seven credit unions, debt advisors, employers and consumer experts.
We wanted to find out how well deduction lending works for borrowers on low incomes, lenders and employers; where there might be opportunities to improve and grow the offer; and how the model can impact savings behaviour.
What we found was overwhelmingly positive:
- With over 95% satisfaction rates, this form of lending is hugely popular with borrowers
- 7 out of 10 borrowers agreed that this type of lending – when packaged up with a savings element – helped them to save more regularly, even when they had never done so before
- Borrowers felt more confident about managing their money and reported feeling less stressed, anxious, or depressed
- For lenders, fewer loan applications were rejected
- And automatic payments meant lower arrears and default levels
- It works for employers too, improving the satisfaction and wellbeing of their workforce