No Interest Loan Scheme

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By Sheenagh Young, CEO South Manchester Credit Union

South Manchester Credit Union has been running a proof of concept for the proposed No Interest Loan Scheme (NILS) which aims to provide access to affordable credit for people on low income in England.

Our community credit union was started 21 years ago by volunteers and today we have a staff team of 10 and a high street presence on Fog Lane, Burnage. Our membership now numbers 4,500 and our combined savings are totalling nearly £5m. We are building community wealth. We are rooted in this place; our senior leadership and staff all live here and the life chances of the people of South Manchester really matter to us.

We were chosen by Fair4AllFinance to be the organisation to run the proof of concept for the No Interest Loan Scheme (NILS) in England which aims to test initial learnings ahead of a full pilot to be launched later this year. Fair4AllFinance has joined with Toynbee Hall and Fair By Design to scope and deliver the pilot which is funded by HM Treasury (£3.8m) and JP Morgan Chase (£1.2m).

The scheme is the first of its kind in the UK and has drawn inspiration from research conducted by London Economics. NILS aims to benefit individuals and society by providing a safe line of affordable credit to people on a low income to clear financial hurdles such as rent deposit, up front nursery fees and household equipment. Removing the burden of interest can make a difference to the ability to repay.

But isn’t it true that a loan from a credit union doesn’t carry much interest anyway? To give an example, a £300 loan repaid at £10 per week, with interest at 42.6% APR on the reducing balance, results in an interest charge of £34. We know that there are times when this can seem daunting even though we consider it a fair rate. This is why we wanted to take part in an innovative solution that could sit well alongside our current service offering.

So here is what we have found out so far about how NILS works – we have called our product a Stepping Stone Loan.

  • We knew this already but it is really tough out there right now and there is little safe help from organisations that listen and offer appropriate finance in a dignified way.
  • Stepping Stone Loan applicants have a range of unique circumstances including living with disabilities, caring responsibilities, recovering from relationship breakdown and domestic violence, returning to work, homeless, bereaved and longing to fund a decent funeral for a loved one. Our very first applicant, Lisa, has shared her story on our website.
  • 87% of applicants have poor or very poor credit scores which means it is exceptionally challenging for them to access credit they can afford to repay. People can get trapped in this cycle of exclusion.
  • Listening to a person’s needs and coming alongside to coach through financial squeezes is empowering and can kickstart a new confidence with money. Paying no interest is a boost.
  • The scheme works well to widen the gateway to credit union membership and has allowed us to approve a further third of first time loan applicants who might have otherwise been declined. This gives them an opportunity to engage with us, to start a savings habit and to build the financial resilience we know comes from belonging to a credit union.
  • The product has potential for partnership working with social housing providers, employers and other local stakeholders.
Sheenagh Young

Sheenagh Young, CEO SMCU

If you are not already switched on to credit unions this is a great time to get informed and you are lucky that we have a well developed consortium here in GM known as SoundPound

  • On a low income? – join your local credit union, save and borrow if you need to
  • Finances doing ok? – join, save and borrow if you need to – borrowing from us gets you great rates and service and you will get the satisfaction of knowing we will use all of our income to offer the inclusive financial services which are sorely needed
  • Don’t want to join in yet? – find out more about how it works
  • In a position to refer? – consider signposting to us
  • Advocate? – get involved and shout about us.



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