My Home Finance is a National Housing Federation initiative that offers services and products to people unable to access mainstream credit.
By Tess Pendle *
Around ten million people in the UK are excluded from obtaining credit at reasonable rates because they are, or have been, in adverse financial situations; usually not of their own making. This results in many individuals having to turn to loan sharks, very expensive pay day loan companies or door step lenders to access credit.
Over the past five years, the amount of money people have borrowed through payday lenders in the UK has boomed from £900m to £1.8bn. It is now estimated that 2million people use payday loans. The dangers and pitfalls of payday lending have been widely discussed in the media and in Parliament, but very little has been done to address the provision of responsible credit for those who are on low incomes, and already in difficult financial circumstances
In 2010 the National Housing Federation (the Federation) set up My Home Finance to offer services and products to people unable to access mainstream credit. The majority of My Home Finance’s customers are social housing tenants, many of whom live in homes provided by various housing associations which are themselves members of the Federation.
Since My Home Finance was conceived its aim has been to help create a widespread financially inclusive culture, instead of one where the poor pay more for services we all need. Until underprivileged individuals come within in the ambit of mainstream finance there can be no real prospect of societal equality. My Home Finance helps people who struggle to get loans and who may have a poor credit history. As a social enterprise My Home Finance is able to work with the most marginalised and those in greatest financial need by lending to them responsibly and at affordable rates. Responsible lending can have a profoundly positive impact on a person’s life; showing them that there is a way to borrow whilst still being in control of their finances.Read More
Any social business faces the perennial dilemma of balancing the pursuit of income against the provision of services which can fully respond to the socio-economic needs of its client base. For a social lender this is particularly tricky: assessing the creditworthiness of high-risk individuals, signposting them to other support agencies when we cannot lend, and helping them with their repayment schedules when they have problems, not to mention the recovery of bad debts from those who have fallen into difficulties, is an intensive and expensive matter. It was thus a significant achievement for My Home Finance to be recognised as Credit Today’s Responsible Lender of the Year in 2013. This indicates a widespread industry acknowledgement of the importance of treating customers fairly, whatever their background and circumstances.
The cycle of debt and dependency on borrowing can easily escalate – with the effects infiltrating all aspects of peoples’ lives. If lenders were more diligent and thorough in ensuring that their customers could afford to take out a loan, a huge proportion of tomorrow’s bad debt problems could be avoided.
Access to fast loans is not going to disappear, but if there were a greater understanding of why the need is there and what the benefits of responsible lending are, then there could be a vast improvement in economic and social wellbeing for millions across the UK.
* Tess Pendle is the Head of "My Home Finance"