A zero-interest loan scheme designed to help thousands of people struggling to make ends meet is being rolled out across the UK.
The initiative, the result of a partnership between the Icelandic supermarket chain and a charity, is the latest interest-free loan scheme to be launched in response to growing concerns about families who find themselves on the cutting edge of the cost of living. living crisis, unable to access or afford available forms of credit.
The scheme aims to enable them to pay their school holiday grocery bills or bridge the income gap by providing interest-free ‘micro-loans’ of between £25 and £100 to buy everyday items.
Iceland has partnered with Fair for You on the scheme, which will be extended across the UK from 16 August after a pilot phase of providing loans to more than 5,000 customers.
The small loans are offered through a pre-deposit card with weekly repayments of £10. During the pilot, customers paid “minimal” interest on the loans, but Iceland has decided to invest an undisclosed amount “to make all loans completely interest-free when they are rolled out nationwide”.
It is not clear how many people will benefit, but it is understood that well over 5,000 people will participate in the pilot.
An independent evaluation of the pilot found that 92% of clients who had previously used food banks had stopped or reduced their use, while 71% said they were less likely to be in arrears on their rent, council tax or other bills.
Anyone can apply for the program and, if successful, can use the credit in-store – there are nearly 1,000 locations in Iceland – as well as online with a pre-charged card. Successful applicants will receive a £100 credit and will be able to top up their card with an initial amount of £25 to £75 after joining the scheme, called Iceland Food Club.
Richard Walker, managing director of Iceland Foods, says businesses and governments need “new thinking” to find workable solutions to the cost of living crisis.
The initiative is supported by organisations such as social enterprise Challenge Works and donor charity Esmée Fairbairn Foundation.
South Manchester Credit Union piloted zero-interest loans for people in poor financial circumstances earlier this year and will soon launch a wider pilot. The government has provided £3.8 million in funding to the not-for-profit Fair4All Finance to test loans of between £100 and £2,000 that can be used to pay for much-needed items or cover costs – from upfront childcare fees to school uniforms and basic furniture.
This article was revised on August 17, 2022. According to information provided to The Guardian, an earlier version mentioned that one of the project’s backers was Innovate UK’s Nesta. To clarify: The project is supported by Challenge Works, a social enterprise founded by and affiliated with Nesta.
