Affordable credit: The way forward

Description

The poor pay more for many things but, arguably, it is the extra they pay for credit that puts the greatest strain on their budgets. This report looks beyond the rhetoric that has dominated much of the debate on high-cost credit to examine the scope for widening access to more affordable credit. The report explores what people on low incomes want from a credit source. It also analyses the constraints on lending to poor people. It looks at the scope for reducing the costs of lending and widening access to more affordable credit, and estimates the scale of demand for affordable credit. It does not recommend a 'best buy' among the sources of credit available to poor people. Rather, it explores how realistic it is to reduce the costs of lending to people on low incomes who have a high likelihood of default. In doing so, the authors look for ways of reducing the charges made by commercial credit providers and of making the not-for-profit sector more sustainable by reducing the level of subsidy it requires. This report should be read by commercial and not-for-profit lenders, campaigners, policymakers and anyone studying or researching issues around poverty and financial exclusion.

Elaine Kempson is Professor of Personal Finance and Social Policy Research and Director of the Personal Finance Research Centre (PFRC), University of Bristol. Sharon Collard is a Research Fellow at the PFRC.