Loans to help poorest families avoid poverty premium

Michael sheen crop

Cash will allow social enterprises to increase the availability of affordable loans to Scotland’s poorest families on a not-for-profit basis

Graham Martin's photo

23rd January 2018 by Graham Martin 1 Comment

Hollywood actor and social activist Michael Sheen has backed a new push to help Scotland’s poorest people to avoid a poverty premium when borrowing money.

He has supported the launch of a new £1 million fund set up by the Carnegie UK Trust and features in a new short film called Speaking out for Fair Credit.

The cash will allow Scottish social enterprises to increase the availability of affordable loans to Scotland’s poorest families on a not-for-profit basis.

It is estimated that around 150,000 people in Scotland borrow £250m from high cost lenders like pay day loan firms, door step lenders and rent-to-own shops annually.

A £600 loan repaid over six months would typically cost an extra £330 to repay to a door step lender and over £500 to repay via a payday lender. Repaying via a social lender could easily halve this cost.

Sheen said: “High cost credit has for too long been targeted at those who can least afford it and those who are most vulnerable in our society.

“The need for ethical alternative providers is clear, whether they be on our local high streets or available online. But it’s not just about creating more providers – we need to do more to enable them to compete with the high cost providers and to provide vital financial support to communities across the UK, putting people before profit.”

With 530,000 people in Scotland living in severe poverty, getting by on less than £240 per week, the poverty premium means that people who can least afford to borrow money usually pay the most to do so.

The Affordable Credit Loan Fund has been set up by the Carnegie UK Trust in partnership with Social Investment Scotland to help more people access affordable credit.

In addition to loans, not-for-profit finance providers also offer their customers debt advice, savings opportunities and budgeting services and the investment will also allow more people in Scotland to access these services.

Sheen added: “I welcome the work and commitment of Carnegie Trust UK and the collaboration with Social Investment Scotland to deliver more investment into these alternatives and I urge others to follow their lead.

“I hope the new fund will enable ethical alternatives to increase their reach and impact with their lending and to be part of an increasing trend towards ethical lending in the UK. I fully support this campaign and will continue to collaborate on this mission in 2018.”

23rd January 2018 by Miriam

I fully support this campaign, I was trapped in a cycle of pay day loan, not because of luxury but out of necessity. I was a student, had not credit rating and no income. When I start work even my own bank could not lend me any money despite having banked with them for over 10 years. You get penalised for being poor and not credit worth. The government have no strong legislation - they might have reduced pay day loans on high street, but not online. They are easily accessible and when you are in need you forget the high interest because what comes to your mind is we have nothing to eat tonight, this will solve the problem. However, the problem does not end there- it get worse when you wages come in and you have nothing left and the cycle start again because they take a big chunk from your wages that you were looking forward to to pay bills.