A new report has highlighted the gap in responsible lending, highlighting that affordable credit providers make just £250 million of loans, while over the same period, high-cost short-term credit providers lend £3 billion – more than ten times as much.

The report titled ‘Transforming affordable credit in the UK’  identifies affordable lenders who operate with the care, forbearance and support that customers in vulnerable circumstances need, and can save families hundreds or thousands of pounds a year in repayments when compared to the rates charged by payday or doorstep lenders.

Fair4All Finance has launched its report setting out its initial findings on what it will take to build capacity and capability in the sector. This is based on the shared Theory of Change it has developed with the wider sector, as well as a pilot programme, which involved working closely with five affordable credit providers,  Enterprise Credit Union, Fair for You, Five Lamps, Leeds Credit Union and Moneyline.

To help meet this scale-up challenge, the report identifies five opportunity areas for capability development:

  • system change and impact
  • funding and finance
  • markets, customer insight and product design
  • operational excellence
  • governance, leadership and talent.

The report sets out some of its findings and areas of future enquiry in each of these areas. It is now developing the next phase of the programme on the back of these findings and expect its approach to be launched later in the spring when all five case studies will be published.

Chief Executive of Fair4All Finance, Sacha Romanovitch said “Responsible credit allows borrowers to meet unexpected costs, to smooth incomes or to make essential purchases that are otherwise unaffordable upfront.”

“Conversely, a lack of access can mean going without essential appliances like a boiler or a washing machine, or being unable to afford school uniforms or birthday presents for children. Affordable lenders operate with the care, forbearance and support that customers in vulnerable circumstances need, and can save families hundreds or thousands of pounds a year in repayments compared to the rates charged by payday or doorstep lenders.”

“The challenge we face is how we create a new normal – a ‘10x challenge’ to give more people than ever before the fair and affordable alternative they need. This will require transformational change. Work is needed on the supply side, to increase the availability and appropriateness of affordable credit.

“We’re looking forward to taking this exciting agenda forward to drive positive change for the people and communities that most need it.”

The report can be viewed here.