Universal Access to Affordable Credit Jenny Rossiter Urban Development Consultant

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

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.

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

Affordable credit from the Private Sector SUB-PRIME SECTOR. Credit but not affordable. Legislation may tackle some unfair practices, but wont make it affordable. MAINSTREAM BANKING SECTOR. Dont 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.

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.

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.

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.

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

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

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