Iceland loan scheme to support shoppers receives 50,000 applications in first week

Around 50,000 people applied for micro-loans from supermarket Iceland in its first week after the scheme launched, the Big Issue can reveal.

The Iceland Food Club has been made available across the UK with people able to apply for loans between £25 and £100 to pay for groceries in the supermarkets’ stores. The loans, given out on pre-payment cards, are a response to the cost of living crisis.

Customers are able to pay back £10 per week under the scheme, which Iceland Foods’ managing director Richard Walker said was intended to tackle food insecurity.

But in a sign of the level of need across the UK, ethical lender Fair For You has been inundated with 50,000 applications – representing 50 customers for each of Iceland’s 1,000 stores – in its first week after the scheme went nationwide on August 16.

“The scale of applications received is an indication that there is a strong desire for this kind of ethical credit to help smooth out incomes.” said Simon Dukes, Fair for You chief executive.

“As an organisation we had plans in place to deal with the expected high level of demand, but the sheer volume means that we’re currently taking a little longer than usual to process applications, but we expect to return to normal service very soon.”

Fair For You has now issued a warning of “very high levels of demand” on its website, telling customers who applied to Iceland’s Food Club they may have to wait two working days for a response.

The lender also advised customers who have not received loan documents and login details after having their application approved to wait three hours before contacting as it grapples with the surge of demand.

The Iceland Food Club was previously only available in parts of Wales, Yorkshire and north-west England as part of a pilot scheme to support 5,000 customers, with the budget supermarket lending £1 million. As the scheme went national, demand has risen significantly.

An independent report into the pilot, carried out by the Centre for Responsible Credit, found 92 per cent of customers who took out loans either stopped using food banks or reduced food bank use.

The access to credit also saw 71 per cent of customers say they were less likely to fall behind on bills like rent and council tax and the same amount said they were better able to cover essentials. The scheme also saw an 80 per cent fall in the number of customers using loan sharks.

A small amount of interest was paid on the loans initially given to people on the pilot but now Iceland has made the loans interest free as the scheme is rolled out nationally. Loans can be taken out up to six times a year with a total limit of £100 outstanding at any one time.

Richard Walker, Iceland Foods’ managing director, said the loans would only be offered to people who could afford to pay them back.

“The ‘Iceland Food Club’ is also progressing well since its launch – with over 50,000 applications for interest-free, affordable micro loans,” said Walker. “What strikes me most is just how much a scheme like this is clearly needed. With our partner Fair for You CIC we’re working to ensure the roll out is as smooth as possible.”

The supermarket was praised for offering customers a way to keep up with rising food prices.

Labour MP Ian Byrne, who has lobbied for a human right to food in recent years, also called for supermarkets to absorb price rises in corporate profits while food poverty campaigner Sabine Goodwin called for direct cash payments for people facing hunger.

However, Labour MP Stella Creasy criticised the move. She warned the scheme risks “consumers spending more to spread payments”.