Are interest-free loans the answer to the question of how we help struggling people? That’s not a rhetorical question or silly one: there actually is a scheme being operated in the UK which does just that.
How can that be possible? Who on earth would lend money without expecting a fat profit in return? To find out we need to look to Tenbury Wells, a small market town in the Malvern Hills in Worcestershire.
There, through a no-interest loans scheme, known in short as NILS, hard-up people can apply for interest-free borrowing of up to £400 and just repay what they borrow. There are no charges or fees or interest.
That means there’s no chance of the debt rising to unaffordable levels as happens, for example, with payday lending.
What’s the catch? Borrowers must be facing financial difficulties and the cash must be used to buy essentials such as washing machines, school uniforms or medical equipment.
In fact, cash isn’t actually handed over. Instead those that turn to the scheme get a “credit” that can be used to buy goods through local suppliers. Repayments are made over either a year or two-year period and on a weekly or monthly basis. In other words, to suit the borrower.
The scheme launched in Tenbury Wells last year on the back of an anonymous local contribution of £5,000. It now receives other funding including a small investment from Malvern Hills Council and has spread to neighbouring Ludlow.
It’s based on the charity-backed Good Shepherd Youth & Family Service in Australia and was introduced over here by a worker at Tenbury Citizens Advice. It’s microfinance at a basic level with local people helping locals.
But it is an admirable scheme which could easily be adopted elsewhere with the help of local councils. Some already operate grants for vulnerable people but they would do well to follow Tenbury’s excellent lead.