Welcome To The Poverty Bus ines s

• Credit Crunched

• Sub Prime Victims

—12-15% of the UK without access to bank accounts (2.5m people)

—7-10 million with limited access to financial services—One in five adults denied access to mainstream credit from

banks

—6-10 million people sub prime credit in the UK regularly—Sub prime market estimated value of £16 billion a year (2002)

—3-5 million use door step lenders

—APRs of over 2,000% are not unheard of

Sources HMT, FSA, ODPM, Competition Commission

Financial Services For All?

• Mainstream finances uses boxes – people who don’t fit the boxes don’t have access to mainstream services

• Risk is based on income and assets

• Products designed with the average in mind and not the unique or individual

• Innovation occurs where value is high

• Flexibility is sacrificed for regularity

• Information Exclusion?

• Market Failure?

Exclusion & Marginalisation?

Lender Average APR

London & Scottish

Provident 158%

Provident 164%

Morses Ltd 365%

CLC 1564%

‘ New Economic Foundation Profiting from 2002’Poverty

The market rates

Public Policy

• Policy Action Team reports (PAT 3 & PAT 14)

• Cruickshank report

• Social Investment Taskforce

• Financial Inclusion Taskforce

• Financial Capability – generic financial advice

• Deindustrialisation and a move away from large companies with jobs for life

Community Finance in the UK

Characteris tics

• Credit Unions: financial cooperatives 2-300 credit unions nationally

Savings and loans institutions

• Community Development Finance Initiatives – 70-80 organisations

Established to serve the financial needs of the financially excluded

Work in 4 Areas:

1. Lending to microenterprise (less than £10k)

2. Lending to small and medium enterprises (10-50k)

3. Lending to Social Business (around £50k)

4. Personal Finance (less than £2k)

Community Finance in the UK

Welcome to Fair Finance

2008DECEMBER

Ethical and s oc ially res pons ible lender developing financial s ervices for the exc luded

and explo ited in London

Service Cos t to c lient

Money and Debt Advice Free

Access to bank accounts Free

Microcredit Business Loans 12-19% APR

Personal Loans 28-25%APR

Our Business

2007/08

Total people since April 05 4000

• Loaned

Business loans: (120) £450,000

Personal Loans: (1200) £955,000

• Interest saved £750,000

• Bad debt 7%

• Debt advice provided to 700 clients

• Money Matters Credit Managed £8m

• Bank accounts opened: 100

SOME RESULTS

Some Conclusion

On making microfinance successful in the UK:

• Small is not always beautiful – sustainability is possible but at scale

• Creation of an asset class is complex as investors need to understand the business itself

• Social investment opportunity

• Innovation is constant and challenging

• Success is only possible with inclusion

• Clarity on the service and identity of the organisations are key to meeting needs unity interests (Hard headed but soft hearted) with partners and staff

Some Conclusion

• (micro)Finance is only part of the solution

• Financial Exclusion in the UK and Western Europe is about information and adaptation

• It as much about cultural shifts as it is about financial services - education

• Important in migration and people flows where inequality is higher - integration

• Success is to be determined by service appropriateness of service and overcoming inequality – gender/race/cultural and geography

• Public policy is an important partner to meeting non financial objectives, but suffers from its own lack of clarity

• Alternative to mainstream finance?

www fairfinance.org.uk.