‘Put people before profit’: new fund launches in Scotland

A £1m fund has been launched today to help Scotland’s financially excluded to break free from high cost credit and access affordable loans.

The Carnegie UK Trust’s £1m Affordable Credit Loan Fund will allow Scottish social enterprises to increase the availability of affordable loans to Scotland’s poorest families on a not-for-profit basis. The fund will be delivered in partnership with Social Investment Scotland, and made available to social lenders to help them expand their loan book and reach many more vulnerable people.

Latest figures from the Scottish Government severe poverty report show that half a million Scots are living on less than £240 a week.

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.

The launch of the fund is backed by actor and activist Michael Sheen who also features in a new short film, Speaking out for Fair Credit, to mark the arrival of the fund.

‘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.’

The intervention from the Carnegie UK Trust comes after it previously published Scotland’s most comprehensive review on affordable credit, having brought together more than 20 leading organisations from the public, private, charity and funding sectors.

A £600 loan repaid over six months would typically cost an extra £330 to repay to a door step lender and more than £500 to repay via a payday lender, according to the Carnegie UK Trust. Repaying via a social lender could easily halve this cost.

Scottish Equalities Secretary Angela Constance said: ‘I welcome this pledge to increase access to affordable credit and provide a clear alternative to institutions and organisations, such as payday lenders, that can often charge extortionate interest rates and can leave people trapped in a cycle of debt. That is why it is so important that social lenders, such as Community Development Finance Institutions (CDFIs) and credit unions – are providing more affordable loans, where it is appropriate, at significantly cheaper interest rates than commercial alternatives.

‘Scotland has the potential to lead the way on tackling the problem of access to affordable credit and financial exclusion.’

Sir John Elvidge, Chair of the Carnegie UK Trust, said: “We want to support better alternatives for some of our most financially excluded citizens, allowing them to borrow money in a fair, affordable and responsible way that can improve their quality of life.

‘This fund will help social investors demonstrate that they can provide a responsible and sustainable solution to the complex problem of access to affordable loans.’

The fund will be administered by Social Investment Scotland, which provides affordable, flexible, repayable investment for social enterprises.

Nick Kuenssberg, chair of Social Investment Scotland, said: ‘The need for appropriate investment and support is clear and the investment from the Carnegie UK Trust will be crucial in supporting the growth of this sector. This is not only to improve the operational sustainability and efficiency of providers but more importantly creating a real, measurable and sustainable impact upon people’s lives. We hope to work with other partners to increase the size of the fund over time and welcome the initiative of the Carnegie UK Trust to provide the thinking and impetus for this important development.’

• If you are a social enterprise interested in accessing or finding out more about the fund, please visit socialinvestmentscotland.com.