City Bridge Foundation and Responsible Finance are splitting £600,000 between three ethical lenders to bolster the amount of money they can lend to financially excluded customers
Three community lenders have just received £200,000 each to help Londoners avoid turning to high-cost credit and illegal lenders.
City Bridge Foundation, London’s largest independent charitable funder, is working alongside Responsible Finance to provide £600,000 to Salad Money, Fair Finance and Fair For You.
The money, split between the ‘community development finance institutions’ (CDFIs), will lever in more than £4.2m in other investment, enabling the companies to lend up to £10m to between 10,000 and 13,000 Londoners.
“Often low-income households don’t have access to an arranged overdraft or a credit card; in the absence of savings this leaves them highly vulnerable to a financial shock,” Responsible Finance CEO Theodora Hadjimichael said.
“A small loan which they can repay over a few months can be their only way to buy a large item like a fridge or pay a one-off cost like a car repair.”
Last year there was a one-third year-on-year increase in the sector’s lending, and the three companies made loans of £4.1m to more than 8,000 people in London, saving customers an average of £308 in interest.
The companies help people who are typically excluded from accessing mainstream credit, which results in them having to turn to high-cost and payday loans.
Salad Money is an open banking-powered fintech for good providing affordable lending to key workers across the UK.
Fair Finance provides personal loans of up to £3,000 and debt advice to over-indebted people in London, and Fair For You is an ethical lender, helping financially excluded families and more than 80,000 customers since 2015.
According to Hadjimichael, the funding will enable the CDFIs to reach almost twice as many Londoners as they can currently.
“It’s tremendous news for Londoners who need and can afford to repay credit but don't have enough fair options available,” Hadjimichael said.
“Without CDFIs they are locked out of access to finance and risk turning to providers who don’t prioritise their wellbeing.”
Nearly 40 per cent of Londoners are currently in ‘financially vulnerable circumstances’, as defined by financial inclusion organisation Fair4AllFinance, which also says that more than three million people in the UK have borrowed from an illegal money lender in the last three years.
“In the current difficult economic climate, many people face a real struggle just to cover day-to-day costs, and one-off purchases like replacing a broken fridge can push them into the trap of high-interest loans, or worse still, illegal lenders,” City Bridge Foundation grants committee chairman Paul Martinelli said.
“We’re delighted to be able to support a programme which will enable three responsible lenders to open up access to affordable credit to thousands more Londoners, making a real difference to their lives.”
Martinelli added that he hopes the initiative will “provide a blueprint” which can replicated both across London and the country.