Plans for a new UK-wide No Interest Loan Scheme (NILS) pilot have been announced by a group of non-profit organisations.

Fair4All Finance, Toynbee Hall and Fair By Design will deliver the scheme with £3.8m in funding from the Treasury and up to £1m of lending capital from each devolved administration, matched in England by Fair4All Finance.

The loans would provide a financial cushion for people unable to access or afford existing forms of credit, but who can afford to repay small sums, by offering a way to spread essential or emergency costs.

The initial pilot, which will launch with proof of concept loans in Autumn 2021, will be followed by a wider two-year pilot in up to six areas of higher deprivation in the UK starting in Autumn 2022.

Economic Secretary to the Treasury, John Glen, said: “Backed by a £3.8m boost at Budget 2021, our NILS pilot is making good progress and it’s excellent to have Fair4All Finance on board.

“I now want to see lenders and organisations committed to financial inclusion supporting this innovative new scheme, which could make a vital difference for people right across the UK who can’t access or afford existing forms of credit.”

Fair4All Finance, Toynbee Hall and Fair By Design will design and deliver the pilot in collaboration with the Treasury and the governments in Northern Ireland, Scotland and Wales. They are to work with credit unions, community development finance institutions (CDFIs) and other regulated lenders, who will be able to apply to administer the loans through a formal procurement process starting in November.

According to Fair4All Finance, the NILS pilot aims to test the benefits to customers, society and the economy and show whether a permanent nationwide NILS can be delivered in a sustainable way.

“Following the COVID-19 crisis, over 14 million people are in vulnerable financial circumstances,” commented Fair4All Finance CEO, Sacha Romanovitch. “Many of these people struggle to access financial products and services to help them manage their essential needs through the crisis, including credit. New ideas and solutions are needed.

“Using community finance lenders to deliver these loans allows the scheme to benefit from their lending experience, local knowledge and existing infrastructure.”

Toynbee Hall director of policy and innovation, Sian Williams, added: “Too many households still can’t access any affordable credit, which leaves them trapped – unable to spread larger essential costs, and unable to take positive steps forward like putting down a deposit on a safe, secure home or pay for transport so they can apply for work.

“Toynbee Hall are therefore delighted to support this pilot to test whether a similar no-interest loan scheme can bring those transformational benefits to excluded consumers in the UK, and so increase financial inclusion and resilience at a time when so many families have experienced a financial shock from the pandemic.”

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