An interest-free loan scheme is being rolled out in the UK to help thousands of people struggling to get food on the table.
The initiative, the result of a partnership between supermarket chain Iceland and a charity-owned lender, is the latest interest-free loan launched in response to growing concerns about households that are at the sharp end of the cost of living crisis and are unable to access or pay for existing forms of credit.
The scheme is designed to allow them to cover school holiday shopping or close income gaps by providing interest-free “micro-loans” between £25 and £100 to buy everyday items.
Iceland has partnered with Fair for You on the initiative, which will be extended to the UK from 16 August after a pilot phase in which loans were extended to more than 5,000 customers.
The micro-loans are made available on pre-loaded cards, with repayments set at £10 per week. During the pilot, customers paid a “minimal” amount in interest on the loans, but Iceland had decided to invest an undisclosed amount “to make all loans completely interest-free before the national rollout”.
It’s not clear how many people could benefit from this, though it’s reportedly significantly more than the 5,000 who took part in the pilot.
An independent review of the pilot found that 92% of customers who had previously used food banks had discontinued or reduced their use, while 71% said they were less likely to fall behind on rent, council taxes or other bills.
Anyone can sign up for the scheme and, if successful, the credit can be used both in-store – Iceland has nearly 1,000 outlets – and online with the preloaded card. Successful applicants will receive a £100 credit limit and will be able to load their cards with an initial top-up of £25 to £75 upon joining the programme, which is called Iceland Food Club.
Richard Walker, chief executive of Iceland Foods, said business and government needed “new thinking” to find workable solutions to the cost of living crisis.
The initiative has been supported by organizations such as Nesta, a British innovation foundation, and the Esmée Fairbairn Foundation, a grant-making charity.
Zero-interest loans for those in financially vulnerable circumstances were piloted earlier this year by South Manchester Credit Union, with a broader pilot set to roll out soon. The government had provided Fair4All Finance, a non-profit organization, with £3.8 million in funding to test loans between £100 and £2,000 that can be used to pay for much-needed items or cover costs – from pre-pay nursery fees to school uniforms and essential furniture.