Consumers face greater cost pressures than ever , so how can purpose-driven lenders like CDFIs ensure they make an impact while remaining profitable ?
RESPONSIBLE LENDING
WHAT DOES RESPONSIBLE LENDING LOOK LIKE IN TODAY ’ S ECONOMY ?
Consumers face greater cost pressures than ever , so how can purpose-driven lenders like CDFIs ensure they make an impact while remaining profitable ?
WRITTEN BY : ALEX CLERE
As the cost-of-living crisis deepens and inflationary pressures affect household budgets , lenders are seeing the market change considerably in front of their eyes . The most vulnerable consumers in society are at greater risk from the rising cost of living , and , if refused credit by mainstream lenders , they could turn to high-cost , predatory alternatives .
“ The cost-of-living crisis is pushing millions of people whose circumstances mean they can ’ t borrow from mainstream lenders towards loan sharks and very high-interest lenders ,” says Theodora Hadjimichael , CEO of industry body Responsible Finance , which represents community development finance institutions ( CDFIs ) in the UK .
“ Affordable , fair credit has never been more needed , and Responsible Finance providers improve their customers ’ financial resilience – not just with credit , but by helping them strengthen their finances even if they cannot offer them a loan . Credit is not the answer to the cost-of-living crisis or to low pay , which are issues for politicians and employers to address , but credit is a fundamental part of how we live our lives .”
“ Demand for us has never been as large ,” explains Tim Rooney , CEO of responsible lender Salad Money . “ The people that we ' re serving are in the lower four or five deciles of income . They are people who , typically , would have used high-cost credit to deal with the bumps in the road that they have . Many would automatically be rejected by lenders that use credit scoring , but our applicants have adopted the use of open banking ."
What does it mean to lend ' responsibly '? In a world where companies are constantly trying to get one up over their competitors , the question of what it means to be a ' responsible lender ' in these times is a very pertinent one . A low-interest loan can save
120 June 2023