A new report, published today, by the Centre for Responsible Credit (‘CfRC’) calls on local authorities, housing associations and utility companies to join forces with Government and social investors to help scale up ethical lending. CfRC says that supporting proven providers such as charity-owned Fair for You will help tackle growing material deprivation in the UK.
For every pound spent on well managed, affordable credit operations, the UK could realise over £80 of social value the report says – creating an inescapable case for further investment and support. The independent CfRC report models the social impact of fast growth, responsible lender fairforyou.co.uk through a study of more than 3,500 customers and analysis of over 50,000 loan records. Fair for You, a Community Interest Company.
Social and financial return on investment
It finds that by providing fair, decent, and flexible loans to help low income families obtain essential household items including cookers, fridges, washing machines and children’s beds, Fair for You has not only eased their financial burdens but also had hugely positive impacts for their health and well-being, including that of their children. Headline findings are:
- Fair for You has generated at least £50.5 million of social value for 33,500 customers since starting its operations in 2015.
- Fair for You has helped an estimated 71% of its customers stop using high cost credit, realising just under £9 million of financial savings. CfRC estimates that FfY has prevented approximately 35,615 high cost loans from door-to-door and payday lenders, rent-to-own agreements and unlicensed moneylenders.
- 60% of Fair for You customers are now better able to pay their rent, Council Tax and other household bills as a result.
- Over £2 million has been saved from reduced use of NHS services, due to the positive health benefits of having essential home items.
- Most of the financial savings have been made because customers would otherwise have had to go without cookers, fridge-freezers, and washing machines for considerable periods, resulting in significant additional living costs. On average, providing affordable loans for essential items saves Fair for You customers just under £30 per week.
These impacts are the ‘tip of the iceberg’. CfRC’s research found more than twenty different types of immediate benefits and intermediate outcomes for customers. For example, customers had better diets, felt better about themselves and their homes, and were able to spend more on their children, including on educational activities. These benefits and outcomes contribute towards long-term improvements in health and wellbeing but could not be translated into monetary estimates.
‘More needed to address material deprivation’
The report welcomes the investments that have been made in Fair for You to date, with Fair4All Finance investing £5m and working with existing social investors on the recent recapitalisation of the business in July to provide it with firm foundations for future investment and growth.
However, CfRC Director, Damon Gibbons, warns that too many low-income families are currently living in material deprivation and calls for more to be done:
“Far too many homes lack the items most of us take for granted. In 2020 Britain it is truly shocking that many low-income families are living without cookers, fridges and washing machines, a table to eat their meals from, and decent beds.
This report shows how providing low income families with access to essential items not only improves their lives but also has positive impacts on the payment of rent and Council Tax and reduces the demand on health services.
We need a clear strategy, including investment, to end material deprivation as a matter of urgency. We are therefore calling for local authorities, housing associations and utility companies to join forces with Government and social investors to help scale up Fair for You as part of a wider strategy to end material deprivation in the UK.”
‘Lessons for credit regulation’
The report also highlights the importance of good lending practice. Fair for You’s customers praised the way in which they were encouraged to work out how much they could afford to borrow, as well as the fact that no late payment charges were levied if they experienced repayment problems. Unlike high cost lenders, Fair for You also never re-lends to people whilst they are in arrears with their payments.
CfRC has identified these best practices as ‘the bedrock’ on which future lending to low income borrowers should be conducted and called on the Financial Conduct Authority to ensure these become embedded throughout the consumer credit market moving forwards.
Chief Executive of Fair for You, Angela Clements said:
“The need for more affordable credit is greater than ever. The number of households falling into the gap between the social security and affordable credit ‘systems’ – people who are not poor enough for a grant, but who are also too poor for mainstream loans is growing. Since the Covid-19 lockdown, although Fair for You has doubled the number of affordable loans made compared to the same period last year, other credit options available to lower income households have been constrained.
“Although the CfRC report praises our social impact and financial sustainability, I am deeply anxious that without serious investment we won’t be able to continue serving eligible applicants. The high cost credit industry, with their expensive marketing budgets are preying on millions of households that are experiencing hardship and we want to stop that.”
Sacha Romanovitch, CEO of Fair4All Finance which funded the research said:
“We’re pleased to have been able to support Fair for You in further tracking their social impact. This report provides a compelling assessment of the impressive and far reaching benefits they have created. Benefits that are realised by the very customers who need them most.”