Street UK, a community development finance institution (CDFI) makes loans to people on low incomes when they need credit, charging far less than firms like Provident, Morses Club and many other doorstep lenders or loan at home companies.
Kashaf Ali, Street UK’s chief executive, says this ethical and not-for-profit company only charges interest and fees to cover the cost of its services. A typical short-term loan of £300 over 3 months from Street UK will save the borrower £90 compared with a payday lender, and a typical £500 loan will save a Street UK customer £142 in interest and fees repayable, compared with borrowing from Provident or Loans at Home. It only lends to individuals who can afford a loan and always ensures that by providing credit, it is not over-indebting an individual.
Like other businesses, West Midlands-based Street UK needed to close its branches when lockdown happened. This had an immediate impact: it experienced a 95% drop in loans agreed compared with usual levels in the first month of Covid-19 lockdown. But this reduction is not necessarily because of a lack of demand.
While customers can start a loan application online, if they wish to, they must complete it either by telephoning one of its trained advisors or coming into a branch. “Clearly customers prefer to apply for a loan face-to-face,” says Kashaf. “When they come to see us we offer a safe environment, and when they apply for a loan it’s more than just a transaction.”
Wraparound support
This ability to offer “wraparound” services means Street UK, like other personal-lending CDFIs, frequently helps potential customers save money, often preventing them needing a loan in the first place. During lockdown Street UK signposted its own money-saving tips through social and digital media, along with tips from trusted sources such as moneysavingexpert. It also highlighted emergency financial support available from councils, plus high quality, free online education and skills development resources.
Kashaf adds: “We offered forbearance to existing customers and increased the frequency we communicate with them, changing our newsletters from every three months to every three weeks. We increased our use of text messages and other forms of communication too, to give customers a wider level of support and signpost other places they could access help.”
Product innovation
Street UK had a new “self-service” solution already in development pre-Covid which will launch this month. Customers will be able to check outstanding loan balances, download lists of transactions and make repayments online. “Our focus is always doing the right thing,” adds Kashaf, “and alongside making fair and responsible loans, budgeting advice and support, we strive to give a comfortable and positive experience to customers – and we’re always looking for ways to improve.”
High customer satisfaction and impact
Clearly customers do feel they get a positive experience. Reviews for Street UK on Feefo, an independent consumer platform, are overwhelmingly good. With an average customer rating of 4.9 out of 5, based on 1095 verified reviews, Street UK has a “Platinum” trusted service award.
The firm itself is a community interest company and has helped thousands of people avoid exploitative, high-interest doorstep lenders. But Kashaf is determined to increase this impact:
“So many people have been made redundant this year or their already low income has plummeted when they were furloughed,” he says, “and I’m worried that this is only the start of the economic impact for low-income households. Yet with the low support from the state, they struggle to survive and pay everyday expenses. That makes it easy to become trapped in a spiral of debt from unscrupulous high interest lenders.
“I’d like to have more capacity to support financially vulnerable people, but lenders like Street UK will need more capital to meet demand. It’s also terrible to be approached by distressed people needing access to affordable credit when they don’t meet our lending criteria. If we can’t help them, there needs to be a better solution for them than an exploitative and sometimes even illegal lender.
“I hope one outcome of the horrors of 2020 will be an understanding that for low income people, salaries, earnings and benefits must increase, so people can live with a minimum standard of dignity. And I want to see an increase in financial education for everyone: so many people have challenges and aren’t aware of how decisions they make can have a damaging impact on their credit rating and financial wellbeing.
“Surely now is the time for central and local Government to take financial health and inclusion more seriously. They could start by using the expertise and experience of community development finance institutions like Street UK to roll out NILS (the no-interest loan scheme) and to deliver more and better money advice.”
What next?
- In 2019, personal lending CDFIs including Street UK lent £24 million in 35,000 loans to individuals, helping them save over £7.5 million in interest payments compared to if they had gone to a high-cost lender. They engage with their customers meaningfully to give them access to products and services designed around what they need; to meet both their short-term needs and build their long-term wellbeing.
- We can supply journalists and media with a wide variety of case studies about how people, businesses and social enterprises have been supported thanks to Responsible Finance providers (community development finance institutions). We are also able to comment about access to finance, for businesses, social enterprises and households.