Universal Access to Affordable Credit

1. Universal Access to Affordable Credit Jenny Rossiter Urban Development Consultant

2. AFFORDABLE CREDIT • What is the need? • What is available? • What and where are the gaps? • Challenges, policy, institutional arrangements, products needed.

3. What is the need? • The demand for affordable credit is huge • 8 million people systematically denied access to mainstream credit (Datamonitor 2002) • Sub-prime market is worth £16 billion per year to non standard lenders in UK (Datamonitor 2003) • 1 million people without access to affordable credit (HMT) • Third of lending simply to pay household bills • Much of remainder on basic necessities, clothes, children etc.

4. WHAT IS AVAILABLE ? • FROM THE BANKS • FROM THE PUBLIC SECTOR, & • FROM THE COMMUNITY/VOLUNTARY SECTOR

5. Affordable credit from the Private Sector • SUB-PRIME SECTOR. Credit but not affordable. Legislation may tackle some ‘unfair’ practices, but won’t make it affordable. • MAINSTREAM BANKING SECTOR. Don’t directly provide affordable credit to people on low incomes. • BANK PARTNERSHIP ARGEEMENTS. Do provide savings and loans to some people via third party agreements: • Cambridge Housing Association & Cambridge Building Society • Prospect HA and Bank of Scotland in Wester Hailes Edinburgh • SUPPORT FOR CDFIs. Many banks now have Community Banking Teams and provide grants/loans to CDFIs and CUs. • PREFERENTIAL TERMS. Sometimes give reasonable and flexible terms to credit unions and CDFI.

6. Private sector: Comments • SOME VERY GOOD EXAMPLES OF PARTNERSHIP AGREEMENTS WITH BANKS AND VOLUNTARY SECTOR ORGANISATIONS TO DELIVER AFFORDABLE CREDIT. Examples are few, isolated and small scale, but they do provide a good model for scaling up. • HOUSING ASSOCIATIONS AND BANKS ARE PRESENT THROUGHOUT THE COUNTRY. The are therefore well placed to provide (in partnership) extensive affordable credit schemes.

7. Affordable credit in community/voluntary sector • CREDIT UNIONS: Growing, and offer more than financial services. Many under-capitalised, lack financial and human resources. Need to save before borrowing. Only 1% of population, but regional variations • CDFIs - some new and innovative schemes in Portsmouth, London, Salford, East Lancs • HOUSING ASSOCIATIONS - c70 involved in financial inclusion schemes, but few in loans schemes. HAs sitting on £3billion and 80% of financially excluded live in social housing. • LOCAL AUTHORITIES - could offer co-ordination, funding, leadership and strategy to voluntary sector.

8. WHAT ARE THE GAPS IN PROVISION? • Financial inclusion is more than opening a bank account: It includes access to affordable credit and other financial products. • Access to affordable credit has lagged behind the progress made to address other aspects of financial inclusion – basic bank accounts, budgeting and literacy.

9. Geographical Challenges • Target most deprived LA areas? • Delivery agents: • Be able to reach people • Have links and knowledge of community • Be trusted and friendly • Have a physical presence • Have easy to use products

10. Financial inclusion partnerships? (FIPS) • FINANCIAL INCLUSION PARTNERSHIPS (FiPS) IN DEPRIVED AREAS: To provide range of financial services including credit, savings, money advice and budgeting services. • PARTNERSHIP WITH LEAD AGENCY – Could be CU, CDFI, Bank, Building Society or Housing Association. • SIMILAR MODEL TO SURE START? • AREAS OUTSIDE THE MOST DEPRIVED - DIFFERENT APPROACH NEEDED, eg countywide (netCUDA pilot in Essex) or rural

11. Joined up solutions? • Joined up approach at policy and delivery level of all aspects of financial inclusion. • WE NEED TO CHANGE EXTORTIONATE CREDIT INTO AFFORDABLE CREDIT