Responsible finance providers are key to tackling problem debt and financial exclusion

Posted On: 
22nd June 2018

Responsible Finance’s latest and final report in a series designed to advance the supply of affordable credit to UK consumers looks at how existing affordable lenders have scaled, offering insight into the potential for the sector’s growth.

According to the debt charity StepChange, problem debt is costing the UK economy £8.3 billion as borrowing from high-cost, predatory lenders persists. As it’s impact on productivity, physical and mental health, and employment potential intensifies, the vision of affordable lenders is gaining traction.

The policy response to problem debt has identified the key role of affordable alternatives to high cost credit in tackling financial exclusion. There are a wealth of new initiatives considering how to sustainably scale solutions; the Department for Culture, Media and Sport (DCMS) has allocated £55 million of dormant account funds to financial inclusion. In addition, actor and activist Michael Sheen’s End High Cost Credit Alliance brings together industry bodies to improve the market for fair alternatives to high cost credit.

Responsible Finance’s latest report presents five case studies of responsible finance providers’ pathways to scale (Five Lamps, Scotcash, Fair for You, Just Finance Foundation and Affordable Lending Portal). The commonalities in their journeys offer the keys to unlocking scale for the affordable credit sector.

Responsible Finance is calling on policymakers, the regulator and the social sector to leverage the expertise of the sector to tackle problem debt and financial exclusion.

Jennifer Tankard, Chief Executive of Responsible Finance, commented:

“The lessons in our latest research provide evidence on how the responsible finance sector could reach what sustainable scale to have a greater impact in tackling problem debt and financial exclusion. Whilst the five organisations highlighted are distinct from one another, the commonalities in their journeys demonstrate what is required to achieve scale for the affordable credit sector.

“Ultimately, the expertise of what works lies within the sector itself. It now needs to be leveraged to tackle problem debt and financial exclusion head on.”

Amanda Beswick, Director of the Housing and Homelessness Programme, Oak Foundation, said:

This report provides a really useful analysis of what has worked in scaling affordable lending. So often models in the social sector are based on theory and projections of what might happen in the future not a careful identification of key factors underpinning the success of actual projects.  We know there is significant demand for access to affordable lending in the UK.  Projects that can help the sector to scale and serve these markets will play an important role in tackling financial exclusion.”

Scaling Up Affordable Lending: Case Studies was produced by Responsible Finance and Centre for Business in Society, Coventry University, with support from Oak Foundation. It is part of a broader research programme to advance the supply of sustainable and affordable finance to consumers excluded from mainstream credit. Its particular focus is on how to overcome barriers to affordable lenders meeting consumer demand both at a national scale and sustainably.

The report is available here: http://responsiblefinance.org.uk/download/affordable-lending-case-studies-report-2018/