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Responsible Finance

Responsible Finance

Member: Society Free
Since: 12.10.2016
We are the voice of the Responsible Finance industry

Unit 5 Angel Gate, 320 – 326 City Road, EC1V 2PT London, United Kingdom

Responsible finance providers are a vital source of unsecured credit for low-income households

14.02.2020 Share

There is widespread recognition that the provision of unsecured credit is an essential service for many households to allow them to smooth the effects of fluctuating income and expenditure; responsible finance providers work to create a society where regardless of income, all households have access to appropriate financial services.

In the UK 18.7 million individuals live in households below the Minimum Income Standard; the minimum amount the public think is needed for a socially acceptable standard of living. Real earnings have stalled, and working-age households in receipt of benefits have seen significant falls in income over the past year[1]. At the same time, 11.5 million people have less than £100 in savings[2]. This leaves many UK households highly vulnerable to financial shock – such as the break down of a washing machine – and taking out small loans to cover periods of increased spending with high-cost lenders can leave households heavily indebted.

Responsible finance providers are an alternative to high-cost lenders. They offer their customers affordable loans, money management and budgeting advice. In 2019, personal lending responsible finance providers lent £24 million in 35,000 loans to individuals, helping them to save over £7.5 million in interest payments compared to if they had gone to a high-cost lender. They engage with their customers meaningfully to give them access to products and services designed around what they need; to meet both their short-term needs and build their long-term wellbeing.

For example, 55 year old Eileen, a recovering alcoholic, approached Scotcash for a small loan to allow her to make improvements to her old house before she could move to a new home. She had faced challenges in the past but had stabilised her life thanks to ongoing support from Drink Wise, who recommended moving to a new home to help her recovery.

Eileen made an appointment and applied at Scotcash’s Glasgow office. Her loan officer approved a small loan of £250 and introduced her to Kevin, Scotcash’s Financial Inclusion Officer. Kevin was able to meet with Eileen immediately after her loan application appointment and identified a number of key benefits which Eileen was eligible for. He also explained how – as a result of her vulnerabilities – she could access assistance through the Scottish Welfare Fund and from Glasgow City Council for a Discretionary Housing Payment (DHP) to help with one months’ rental advance. In the meantime due to her ongoing health issues, a claim for Personal Independence Payment was submitted by Kevin. Eileen was unaware that she should have been claiming these benefits or of the other support Kevin had identified. Reducing her financial stress will positively impact on her ability to deal with her medical condition. Scotcash will continue to support Eileen in her transition to her new home by providing on-going advice on her financial situation.

Responsible finance providers make a real difference to the lives of individuals across the UK. They also promote wellbeing in communities by alleviating financial stress and its knock on effects such as issues with mental health and relationship breakdown. However, the industry still faces barriers including a lack of awareness and access to capital to on-lend.

We welcomed the creation of Fair4All Finance in 2019 in response to the Government’s commitment to allocate dormant assets money to financial inclusion initiatives, and trust that their support will extend across the sector. In addition, last year the Government removed the requirement for housing associations to have FCA authorisation for credit broking when referring clients to sources of affordable credit. We would like to see further collaboration between housing associations and responsible finance providers to ensure that tenants without savings who need to purchase white goods and furniture are aware of the responsible finance industry as an alternative to high-cost lenders.

The new government has committed to increasing prosperity in underserved areas of the country; what better way to do it than through the responsible finance sector.

[1] Padley and Stone (2020) Joseph Rowntree Foundation, Households below a Minimum Income Standard: 2008/09 – 2017/18.  Available: