A zero interest loan scheme to help thousands of people struggling to put food on the table is being rolled out across the UK.
The initiative, the result of a link between the Iceland supermarket chain and a charity-owned lender, is the latest interest-free loan scheme to be launched in response to growing concern over households who find themselves the peak of the crisis cost and are unable to access or afford existing forms of credit.
The scheme is designed to enable them to cover school holiday grocery bills or bridge income gaps by giving interest-free ‘microloans’ of between £25 and £100 to buy everyday items .
Iceland has partnered with Fair for You under the initiative, which is being rolled out across the UK from August 16 after a pilot phase in which loans were made to over 5,000 clients.
Microloans are made 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 the national rollout’.
It’s unclear how many people could benefit, although it appears to be significantly more than the 5,000 who took part in the pilot.
An independent evaluation of the pilot project found that 92% of customers who had ever used food banks had stopped or reduced their use, while 71% said they were less likely to fall behind on rent, tax, etc. home or other bills.
Anyone can apply for the scheme and, if successful, the credit can be used both in-store – Iceland has nearly 1,000 outlets – and online using the pre-loaded card. Successful applicants receive a credit limit of £100 and, upon joining the scheme, called Iceland Food Club, can load an initial top-up of £25 to £75 onto their card.
Richard Walker, chief executive of Iceland Foods, said “new thinking” was needed from business and government to find workable solutions to the cost of living crisis.
The initiative has been supported by organizations such as Nesta, a UK innovation foundation, and the Esmée Fairbairn Foundation, a grant-making charity.
Zero-interest loans for people in financial vulnerability were piloted earlier this year by South Manchester Credit Union, with a wider pilot set to roll out soon. The government had provided non-profit Fair4All Finance with £3.8million in funding to test loans of between £100 and £2,000 which could be used to pay for much-needed items or cover costs – from the initial nursery costs. school uniforms and essential furniture.