An interest-free loan scheme is being rolled out across the UK to help thousands of people struggling to put food on the table.
The initiative, the result of a link between the Icelandic supermarket chain and a charitable property lender, is the latest interest-free loan scheme launched in response to growing concern for households on the sharp end of the cost of living. a crisis and cannot access or repay existing forms of credit.
The scheme is designed to enable them to cover school holiday grocery bills or bridge gaps in their income by providing interest-free ‘micro-loans’ of between £25 and £100 to buy everyday items.
Iceland has partnered with Fair for You on the initiative, which will roll out across the UK from August 16 after a pilot phase during which more than 5,000 customers were given loans.
Microloans are available on preloaded cards, with repayments set at £10 per week. During the pilot, customers paid a “minimal” amount of interest on the loans, but Iceland had decided to invest an undisclosed amount “to make all loans completely interest-free for national rollout.”
It is unclear how many people could benefit, although it is understood to be significantly more than the 5,000 who participated in the pilot program.
An independent evaluation of the pilot program found that 92% of customers who had previously used food banks had stopped or reduced their use, while 71% said they were less likely to fall behind on rent, the municipal tax or other bills.
Anyone can apply for the plan and, if successful, the credit can be used both in-store (Iceland has nearly 1,000 outlets) and online using the preloaded card. Selected applicants receive a credit limit of £100 and by joining the programme, called the Iceland Food Club, they can load an initial top-up of £25 to £75 onto their cards.
Richard Walker, managing director of Iceland Foods, said “fresh thinking” was required from business and government to find workable solutions to the cost of living crisis.
The initiative has been supported by organizations including Nesta, a UK innovation foundation, and the Esmée Fairbairn Foundation, a grant-making charity.
Interest-free loans for people in financially vulnerable circumstances were trialled earlier this year by the South Manchester Credit Union, with a larger pilot due to roll out shortly. The government had provided Fair4All Finance, a non-profit organization, with £3.8m of funding to trial loans of between £100 and £2,000 that could be used to pay for much-needed items or cover costs, from start-up fees. from nursery to school uniforms and essential furniture.