Banking on Affordable Credit
Fair finance means affordable credit for everyone, whatever your gender, race or postcode.
Being “unbanked” refers to an inability to open a bank account. It also describes a world where you have no status and little history. Being unbanked means being financially excluded and is among the most common ways that anyone, but especially migrants and newcomers, can become marginalized and cut off from the economic and social commerce of society.
The lack of a bank account impacts one’s ability to secure regular and stable employment as well as to access basic services such as heat and water or signing up for cable. The “unbanked” are also unable to build a credit history or create proper savings accounts. The inability to cash a cheque or cover your rent “until next week” suddenly puts you at a higher risk of financial exploitation.
How big is this problem? According to the Financial Services Authority and the Government and Financial Inclusion Taskforce, 10-15% of the adult population in the UK do not have access to a bank account.
Isn’t It Time You Got a Fair Deal?
Located in the multicultural streets of London, Fair Finance is a social enterprise that is offering a range of loan products to the ‘unbanked’ in the city’s East End. Fair Finance serves all those who are financially excluded; although their outreach is not limited to migrants, over 60% of the personal loans and 83% of the business loans that Fair Finance provides are to people from black and minority backgrounds (BME).
Why? UK research has shown that low income, poor education and insecure employment contribute to financial exclusion and that these factors are disproportionally found among those from black and minority ethnic backgrounds. For instance, 59% of Bangladeshi and Pakistani groups in the UK and 37% of the black population live in low-income households, compared to 19% of the white population.
Fair Finance exists to bring affordable loans and money advice within reach of poor Londoners, especially the low-income families and minority communities preyed upon by doorstep lenders and loan sharks, as well as legal money-lending services with interest rates soaring up to 1069%.
“We’ve made a big impact on the lives of East Londoners,” says Fair Finance Managing Director Faisel Rahman, “People come to us because we provide honest loans at fair rates.”
Since 2005, Fair Finance has provided money and debt advice as well as access to bank accounts and microcredit business and personal loans – all in a transparent and sustainable manner. In its first three years, Fair Finance has helped over 3000 ‘unbanked’ Londoners access bank accounts and saved clients nearly £1m in interest.
Preventing Financial Exploitation
As the larger commercial banks abandon inner city areas, pay-lenders with average interest rates that start at 600% per annum step in.
The result? A small loan soon escalates to a serious debt in the thousands.
By providing emergency credit at a fair rate and offering it to individuals in “high risk” (and migrant heavy) industries such as catering and taxis, Fair Finance is helping prevent the financially vulnerable from being further exploited.
More importantly, it brings a vital service to those who were previously financially excluded and the opportunity to assume greater control over their lives, their finances and their future.
Fair Finance loans, as opposed to payday or doorstep lenders, save the individual anywhere from £20 to £100 a month in reduced interest payments. To date, Fair Finance has given over 1,500 people debt advice representing £12m in managed debt. Noteworthy, is a modest ‘bad debt’ rate of only 6% on £1.1m in personal loans –substantially lower than credit card companies.
A Travelling Good Idea…
Ironically, Fair Finance replicates in London’s East End the landmark social experiment that transformed millions of lives in Bangladesh and earned Muhammad Yunus, architect of microfinance and founder of the Grameen Bank, a Nobel Prize. Managing Director Faisel Rahman first came up with the idea for Fair Finance while he was working in Bangladesh on a World Bank £120m microfinance programme.
In a conference held by the Runnymede Trust, Rahman explained how he found similarities in rural Bangladesh and East London, “It was one of the main drivers that brought me back to the United Kingdom. How was it that we were finding new ways of providing services in a village and the same people seemed forgotten about in the United Kingdom. What was happening in Bangladesh is now happening here. We are returning to old style banking – relationship lending – and putting humanity back in the lending process.”
Bringing socially responsible financial services has not gone unnoticed.
Fair Finance has been cited by the Bank of England’s 9th Annual Report on Small Businesses (2001) as a model of community-led innovation through partnership working; recognized for excellence in community enterprises by the Development Trusts Association in 2001; cited as an example of best practice by the National Strategy for Neighbourhood Renewal in 1999; cited as an example of innovation and good practice by the Royal Town Planning Institute in 2001; and was also cited as an example of good practice by Microfinance Gateway, the website of the International Consultative Group to Assist the Poor in 2001.
More importantly, Fair Finance brings a vital service and future opportunities to those who were previously excluded –regardless of race, gender or postal code.
Making it Work for You:
- Band-aid solutions don't solve problems. Long-term, effective solutions mean looking for the underlying cause of social problems.
- Due diligence means doing your homework. When designing programming make sure you understand both your client's needs and what services they want or will use.
- Avoid service silos and duplication of resources by making programming flexible and inclusive that can respond to the needs of newcomers and well as other social groups.
- Keep your messages simple for greater impact, as in the concept of "fair finance."
For this Good Idea contact:
Stephanie Mestrallet, Head of Business
8 Ashwin Street, London E8 3D, UK,
T: 0207 254 1976
F: 0207 254 3810
Stephanie @ fairfinance.org.uk