Provident Financial, which has closed its doorstep lending arm, has written to former customers to direct them to our members (community development finance institutions) and to credit unions.
Our members exist so people can get affordable credit in a way that helps them, rather than exploits them. As social enterprises, the only people we want to make richer are our customers.
We have been critical of many high-cost lenders, including Provident. But we must ensure illegal and exploitative lenders don’t prey on their former customers. So we welcome them signposting community finance. We want to make life better for everyone locked out of mainstream credit.
Theodora Hadjimichael, Chief Executive of Responsible Finance, said:
“Millions of people use subprime or non standard credit to get by. When lending isn’t done well it can push someone to a financial cliff-edge, stuck with unaffordable debt. Community finance exists to make customers better off. Thousands of people with low and unpredictable incomes save millions of pounds in interest, build their credit ratings and put money back in their pocket because of our members.
“We are pleased that more consumers will now have affordable and ethical options after their relationship with Provident. We have been critical of Provident and other high-cost lenders when good customer outcomes aren’t achieved. But we welcome them signposting community finance like CDFIs to their customers, as there is a real risk that illegal and exploitative lenders could fill the gap instead to the detriment of more consumers. As social enterprises, we want to make life better for everyone locked out of mainstream credit.
“We know we won’t be able to help all their customers. We don’t give loans if customers can’t afford to repay them. The reality is a sudden jump in applications from viable customers could be challenging for the sector, because we are currently lending around £25 million per year to individuals. But the role of CDFIs as a viable alternative is clear, and to scale up to the £100 million or more level needed to fill the gap left by Provident we need more capital.
“In the US, banks and many corporates like Twitter and Netflix now invest in CDFIs to create opportunities in underserved communities. Scaling up CDFIs in the UK makes sense: although we go where banks can’t, many of our customers will become their customers in the future. And investors searching for positive impact investments can get a financial return, while stimulating inclusive, sustainable economic growth.
“Banks, businesses, charities and public sector organisations: work more closely with us so more people can take control of their finances and access appropriate and affordable financial services through CDFIs.”