Iceland expands interest-free loan scheme as food prices soar and parents struggle to feed kids

It’s been a year since budget supermarket Iceland went nationwide with its ethical lending scheme to save customers from relying on loan sharks to put food on the table.

As the cost of living crisis started to bite, Iceland cashiers noticed customers were not coming in store for their regular food shop and were increasingly relying on food banks and struggling to feed their families.

A taskforce of Iceland employees started looking at ways to support children at risk of hunger, particularly during school holidays.

They came up with the Iceland Food Club. Working with ethical lender Fair For You, the credit scheme allows financially vulnerable customers to borrow interest-free micro-loans between £25 and £100 on pre-loaded cards. Families pay back what they borrowed at around £10 a week and can take out cash up to six times a year with the scheme meant to work around the holidays when kids are not receiving meals at school.

Food prices have skyrocketed by almost 15%, according to the Office for National Statistics since the scheme launched nationwide last August. In that time, Iceland Food Club has helped more than 23,000 families, feeding around 44,000 children. Overall, 27,000 families have been supported since the initiative started as a local pilot in Yorkshire and North Wales

Now Iceland is hoping to reach more people. Fair For You, which has been supported by the Big Issue’s social investment arm Big Issue Invest, will receive up to £2m from financial inclusion not-for-profit organisation Fair4All Finance to expand the scheme.

Iceland Food Club has helped father-of-two Chris Dawkins put food on the table since January 2022.

He first started using the scheme after losing his full-time job working in administration during the pandemic and ending up working part-time in a waste management and recycling service instead.

With his falling income and rising bills, the scheme has proven useful, especially as he has now split with his partner who looks after his two sons Carter, four, and Harvey, 12.

“It’s quite a helpful thing to have. There were circumstances where it was nearly like the saying: it’s either heat or eat. That’s one thing I didn’t want to deal with for my family. I wanted to make sure we had heating in the house and we were able to have food,” said Dawkins, 44, from Bridgend, South Wales.

“I still use it because even though my partner and I are not together, it’s still a little bit extra for them because she’s living there with my two sons.  

“I still top it up and that gives you that security there because I know any time that she’s low on money my kids are getting fed.”

Dawkins said he had previously got into financial difficulties and had turned to high-cost credit.

But he “jumped at the chance” to access interest-free credit when mainstream lenders might be put off by his credit rating. And he’s “shocked” more supermarkets haven’t followed Iceland’s example.

“Without it, we probably would have struggled through on what we had basically and maybe would have looked at doorstep lenders to help us out a bit. But obviously you’re just put under more pressure then with the payments,” said Dawkins.

“So having this scheme available, especially when you go out and have to pay nothing extra back, it is great for people. It’s a brilliant idea and it’s good that Iceland is offering it.”

The scheme has had a big impact. A survey of 5,000 Iceland Food Club members found nine in 10 customers who previously used food banks had stopped or reduced their food bank use.

Around 70% of customers said they were less likely to fall behind on rent, council tax or other bills while 80% fewer customers said they had resorted to using loan sharks and two-thirds said their diet had improved.

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Richard Walker, executive chairman of Iceland Foods, said: “We have seen the remarkable impact that the Iceland Food Club has had in supporting struggling customers through the cost of living crisis.

“Setting up the Food Club alongside Fair for You has been one of the most transformational decisions we have made as a business, and we know it has been a lifeline for so many families who now have a workable solution for affording essential goods.”

Esmée Fairbairn Foundation (EFF) – a charity funding organisations which aim to improve people’s quality of life – provided grant funding to Fair For You to kick off the pilot.

Gillian Dickson, social investment manager at the EFF, said the scheme has stood up for people in the cost of living crisis. “There is a huge demand for ethical credit and by coming together with this unique scheme, Fair for You and Iceland are creating significant social impact at what is a very tricky time for many,” said Dickson. 

Iceland Food Club has lent out more than £6 million in its first 12 months and now the scheme is expanding as the cost of living crisis continues to hit families hard.

Sacha Romanovitch, Fair4All Finance chief executive, said the not-for-profit moved to provide extra funding after being “impressed with the strong social impact of the scheme”. 

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Now, Simon Dukes, the chief executive of Fair For You, hopes the new £2m in investment will mean the scheme can have a greater impact in the months ahead.

“The additional investment from Fair4All Finance will enable us to reach even more people who will truly benefit from the Food Club,” said Dukes.

The Iceland Food Club in numbers

• 23,000 families, including 44,000 children, have been supported by Iceland Food Club since it went national. 27,000 families have been supported overall.
• £6 million has been lent out through Iceland Food Club
• There have been at least 2,700 applications every month to join Iceland Food Club
• The average age of new customers is 40 years of age in 2023, up from 39 years old in 2022
• The two largest regions are the north-west and north-east of England: 1 in 5 new customers in 2023 were from the North West. 1 in 7 new customers were from the North East
• 4 out of 5 new customers are women

For more information about the Iceland Food Club please visit: https://www.fairforyou.co.uk/food-club-card

For more information on how to find a credit union or ethical lender head to FindYourCreditUnion.co.uk orFindingFinance.org.uk

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