Finding Alternatives to Subprime
By MetLife Foundation
People sometimes assume that financial exclusion is only an issue in the developing world. But even in the advanced economies, important disparities exist, usually along racial or socioeconomic class lines, between who is and who is not included in the financial mainstream.
Fair Finance is a key MetLife Foundation partner in the United Kingdom. The recipient of a Credit Today Award as Alternative Lender of the Year (2014), Fair Finance provides personal and business loans to low-income individuals who have been excluded from mainstream finance and targeted by the subprime industry. Fair Finance’s clientele are self-employed, part-time and low-wage workers; recent immigrants; single mothers; and people of color. Along with more affordable credit, Fair Finance also offers counseling and mediation for overindebted tenants facing eviction.
Although growing fast, Fair Finance is still meeting only a fraction of the local need—their goal is to increase the number of individuals served from 10,000 to 100,000 over five years. MetLife Foundation support is funding Fair Finance’s operational upgrades, including a new enterprise-wide customer database, to strengthen the back-office infrastructure necessary to manage this growth.
Fair Finance first opened its doors in April 2005, inspired by the vision of alternative finance provided by Muhammad Yunus’ Grameen Bank in Bangladesh. Fair Finance’s founder, Faisal Rahman OBE, has written and lectured extensively on the need for community development financial institutions even in a city like London, which is among the richest and most important financial centers in the world.
Especially since the global financial crisis of 2007-2008, when real wages in the U.K. actually began shrinking, people’s incomes have become more erratic and unpredictable (as well as declining) and their finances much harder to manage. Payday lenders and other subprime players quickly expanded to fill the need, with serious consequences for people who were already financially vulnerable. Fair Finance, and other ethical alternative financial services providers, aim to meet the needs of the populations overlooked by mainstream financial services and exploited by subprime—and to grow to a scale commensurate with the increasing demand.