Salad Money Impact Report 22-23 WEB - Flipbook - Page 12
MARKET
CONDITIONS
“Financial exclusion has grown signi昀椀cantly in recent
years, with at least 17.5m people in the UK in
昀椀nancially vulnerable circumstances.”1
That’s more than the combined
populations of Scotland, Wales,
Northern Ireland, Birmingham,
Manchester and Bristol.
Poor, expensive, and illegal credit
options contribute to 昀椀nancial
exclusion. But the gap in availability
of a昀昀ordable credit is now
estimated to be £3bn. It’s a
damaging spiral which will plunge
more people into unsustainable debt
which harms their circumstances.
We see it already: Buy Now Pay
Later use is increasing with many
users of this glittering product
unaware of the consequences of
missed payments: escalating 昀椀nes,
damage to their credit 昀椀les. Others
have become hugely overindebted
since many of these unregulated
providers have granted BNPL
agreements with no or scant
a昀昀ordability checks. And this
summer, research suggested 3
million people may now be borrowing
from loan sharks.
Salad collaborates with other
community lenders, is proud to be a
two-time investee of Fair4All Finance
and to have backing from a variety
of visionary investors. But valued as
these partnerships and investments
are, they will never enable us (or
other ethical, social purpose lenders)
to meet the yawning gap unless we
address key market challenges:
• Mainstream banks and other retail
investors talk about addressing
昀椀nancial exclusion. Yet Salad had to
secure a £40m lending facility from
a USA-based organisation. The
UK’s banks must step up and back
CDFIs. Many of our customers have
accounts with the mainstream
banks but can’t borrow from them.
We can lend to them and help
them build their 昀椀nances, and we
can o昀昀er backers a fantastic social
return and an appropriate 昀椀nancial
return on their investment. We
think we could reduce our APR
by up to 10% if we could secure
the funding we need from UK
investors at commercial rates.
• Credit scoring and the Credit
Information Market. The FCA has
acknowledged this fails (and leads
to poor outcomes for) many. With
other CDFIs, we’ve proposed a
“social credit score” which would
actually remove some of our
competitive advantages as a
business – but is the right thing to
do for consumers and would level
the playing 昀椀eld for those CDFIs
which use credit agency data.2
• Regulate Buy Now Pay Later. It was
“urgent” two years ago so why has
it not happened yet?
• Enable better signposting. As page
3 shows, many Salad customers
are housing association or council
tenants. Some housing providers
do a brilliant job in signposting
community lenders but other
institutions can’t (or feel they can’t).
We back Responsible Finance’s
call for action so organisations can
champion CDFIs.
Fair4All Finance, 21 July 2023
Social Credit Score report, Salad Projects and Responsible Finance, https://responsible昀椀nance.org.uk/2023/04/uk-public-think-creditscores-unfair-as-organisations-call-for-reform-of-credit-information-market/
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Fair Lending for Key Workers
