13.09.2013
A new report has found that a credit union payday loan product could break even in the long-term and has proved very popular. London Mutual Credit Union has piloted the use of a payday loan product, funded through the Barclays Community Finance Fund and Friends Provident Foundation. The pilot aimed to determine whether, given the current restraints of the capped APR, offering such a product is viable and sustainable.
There were over 6000 applications for the loans. The first loan cost approximately £6 more to administer and manage than the money made from the product, however when repeat loans and subsequent savings deposited in the credit union are included the product begins to break even.
The full report is available here and a summary here.
There is still some way to go if credit unions can take on the payday lenders. Wonga recently announced that last year it made more than £1million in profits every week. Nine of the top ten payday lenders have seen their turnover double in the last three years. It’s a booming industry, and the ethical alternatives – like credit unions and community development finance institutions (CDFIs) need more investment if they can take on payday lenders. This new report shows there is demand for ethical payday loans – and of course there would be. Making such products more widely known and widely available would bring massive benefits to families and communities.
Read more about how CDFIs are helping families in need of credit