Credit costs hindering low-paid, reports study
Government urged to introduce ministerial role by review group
PEOPLE in deprived communities and low-paid people need to have better access to affordable borrowing, according to a new report.
The Carnegie Trust’s affordable credit working group, which contains a wide range of organisations, argues too many are locked out of the credit system.
The group recommends a new government minister for financial inclusion should be appointed and for employers to work with credit unions to help lowpaid staff with loans.
The report, backed by the Scottish Government, estimates that high-interest credit costs about £20 million a year in Glasgow.
Community finance initiatives backed with Government investment, access to bank accounts through credit unions and a mechanism to repay credit union loans though company pay rolls are among the policies recommended by the review.
The group backed initiatives like Glasgow-based Scotcash, supported by Glasgow City Council, GHA Royal Bank of Scotland and Communities Scotland.
Marie Chadwick, 47, from Shettleston, said more people should have access to community-based credit to avoid high-interest high street lenders.
She said: “Scotcash has been a lifeline for me, enabling me to afford simple things like presents for my son’s birthday and replacing my broken tumble dryer. If there were more community finance options, I’m sure fewer people would turn to high-cost or even illegal lenders.”
The group includes representatives from Money Advice Scot- land, Strathclyde University, Church of Scotland, RBS and Virgin Money.
Jeremy Peat, co-chairman of the Affordable Credit Working Group, said: “Access to credit in Scotland is not a level playing field. Credit is, for a mixture of good and bad reasons, most expensive for those who can least afford it.
“While the regulation of payday loans has reduced the supply of expensive credit, it has done little to affect demand for short- term borrowing amongst the poorest members of society.”
The Scottish Government welcomed the report and said it was supportive of community-based finance options.
Alex Neil, the social justice secretary, said: “We recognise financial inclusion and accessibility plays an important role in our efforts to reduce inequalities and create a fairer society.”
He added: “We want to ensure that people are able to borrow affordably and treated fairly.”