Ross Ahlfeld says the third sector is best places to fill the void left by the collapse of Wonga
It has been suggested that the third sector organisations and charities who successfully campaigned for more robust regulations and a cap on payday lending interest rates, are (in part) responsible for the recent collapse of Wonga.
Even so, debt still remains a huge problem in our communities, according to ‘Community Money Advice Scotland’; personal debt is affecting one-in-six adults in Renfrewshire, Inverclyde & East Renfrewshire.
Sure, we may well be glad to see the long overdue decline in payday lending and the end of lenders such as Wonga. Yet, we also remain fully aware of the ongoing misery for families who find themselves in desperate need of cash.
On this issue, I can speak with some understanding, having experienced for myself the desperation which often forces individuals to take out instant loans at exorbitant rates of interest. It’s certainly no fun being down to your last tenner, contemplating a pay day loan in the full knowledge of the implications. In all honesty, it was only the access to microcredit via my credit union membership which got me through those times.
As such, it is my sincerest hope that charities, voluntary orgs and community development trusts will continue to help fill the void left by the collapse of the likes of Wonga. Not through simply providing advice and signposting but by supporting communities to take control of their own assets and finances as to allow neighbourhoods to manage and negotiate their own access to credit and financial services.
One example of such initiatives would be the economic development projects pioneered by the likes of Arnie Graf’s ‘Industrial Areas Foundation’ in Baltimore; another would be community banking models. Community banks are normally more targeted at the demands of smaller businesses and the local community who essentially own the bank. Meanwhile, lending agreements are decided by local people with knowledge of the financial issues facing the community which they serve.
Community Banks are better placed to support low-income households
This system normally equips Community Banks to be better placed as to support low-income households with the fair and affordable financial services which are required to help them out of financial difficulty.
Such a bank would certainly be welcome here in Inverclyde where we have a high percentage of residents in employment, not earning nearly enough to cover their living costs. In these circumstances, budgets become impossible to manage and many folks simply cannot make ends meet.
This situation is not helped by the stagnation of wages, zero hour contracts and delays in Universal Credits. Indeed, if there was a real living wage and everyday bills were manageable, we’d have no need for payday lending.
As such, it would also be helpful if the recommendations contained within the Poverty Alliance’s “Give Me Five” campaign to top-up child benefit by £5 per week, were eventually adopted and implemented. As increasing child benefit would also boost family incomes and improve children’s life chances.
Until then, from the ashes of Wonga, let us build something new and good in our towns and villages, it is clear that doing nothing is simply not an option. Cooperatives’, Mutual Associations and the early Saving Bank Movement began our communities almost 200 years ago. Let’s explore how modern models of banking and finance can best serve the needs of people today.
Ross Ahlfeld works for Inverclyde Community Development Trust as centre coordinator at Port Glasgow Business and Training Centre
