Living in poverty has insidious effects, not least a spiral which makes it ever-harder to access credit. But a new idea is offering donors the chance to finance a scheme which allows those on low incomes to afford essentials and rebuild their credit score at the same time. And there’s a twist: Pay back on time, and some of the debt might be written off.
Building on the Iceland Food Club, the Giving4Living pilot uses money donated through Crowdfunder to incentivise on-time repayment of interest-free micro-loans of up to £100.
When the Iceland Food Club scheme launched in 2022, it gave customers the ability to pay for essentials without going to loan sharks – in the form of pre-payment cards financed by ethical lender Fair for You. Now, after a pair of pilots, the brains behind the scheme want to take it further.
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With their new idea, a certain number of those who take out loans will be told the last bit of the loan will be written off if they stick to repayments
“It’s giving people a helping hand, not a handout,” said Simon Dukes, CEO of Fair for You. “What a great incentive for somebody to then find the last £20 has been paid off and they can use that for something for the family, or perhaps something they haven’t budgeted for that happens.
“These necessities are not available to millions of people simply because they have poor credit scores,” Dukes added. “The way our financial system works, it prejudices against these people.”