Clarification of the role of affordable credit
From their previous funding experience, Trustees are of the view that there is no clear or shared view of what responsible lending policy and practice looks like in any practical and scaleable sense. There are still questions about the role of credit in our society and these should be explored and clarified, with consensus built with those working with and campaigning on behalf of low-income groups.
In 2005, the Personal Finance Research Centre at the University of Bristol estimated that more than three million people living in the poorest UK households are excluded from the mainstream credit market. A similar number of people use expensive sub-prime credit, such as doorstep loans and pawnbrokers. It is important to note that some people use both mainstream credit and sub-prime credit.
Given the lack of policy and practice clarity about the role of credit, the Foundation wishes to support work to explore in more depth a number of aspects in relation to credit, including:
- Practices: models of responsible lending by commercial, third sector and government sources
- The purposes of credit in the UK across the income spectrum
- Appropriateness: are some people too poor to borrow?
- Regulation – a framework for responsible lending, including disclosure of lending in particular areas or to particular client groups.
This is not an exhaustive list of the issues, however, and Trustees might also be interested in seeing proposals that address other areas under this outcome.
Examples of what the Foundation might fund in pursuit of this outcome include:- further thinking on these themes; practical pilots of lending models that meet the needs of low-income people; evaluations of lending practices and their impact on low-income borrowers.
