A zero-interest loan scheme aimed at helping thousands of people struggling to put food on the table is being rolled out across the UK.
The initiative, the result of a link-up between supermarket chain Iceland and a charity-owned lender, is the latest interest-free loan scheme to be launched in response to growing concern for households at the sharp end of the cost of living crisis and unable to access or afford existing forms of credit.
The scheme is designed to enable them to cover grocery bills during school holidays or plug gaps in income by providing interest-free ‘microloans’ of between £25 and £100 to buy everyday items.
Iceland has partnered with Fair for You on the initiative, which is being rolled out across the UK from 16 August following a pilot phase where loans were provided to more than 5,000 customers.
The microloans are made available on pre-loaded cards, with repayments set at £10 a week. During the pilot, customers paid a “minimal” amount of interest on the loans, but Iceland had decided to invest an undisclosed amount “in making all loans completely interest-free for the national rollout.”
It is not clear how many people could benefit, although it is believed to be significantly more than the 5,000 who took part in the pilot.
An independent evaluation of the pilot found that 92% of customers who had previously used food banks had stopped or reduced their use, while 71% said they were less likely to fall behind on rent, council tax or other bills.
Anyone can apply for the scheme and, if successful, credit can be used both in-store – Iceland has almost 1,000 outlets – and online using the pre-loaded card. Successful applicants receive a £100 credit limit and when they join the scheme, which is called Iceland Food Club, they can load an initial top-up of £25 to £75 onto their cards.
Richard Walker, chief executive of Iceland Foods, said “new thinking” is required from business and government to find workable solutions to the cost of living crisis.
The initiative has been supported by organizations including Nesta, a UK innovation foundation, and the Esmée Fairbairn Foundation, a charity.
Zero interest loans for people in financially vulnerable circumstances were trialled earlier this year by the South Manchester credit union, with a wider pilot due to launch shortly. The Government had given Fair4All Finance, a not-for-profit organisation, £3.8m to trial loans of between £100 and £2,000 which could be used to pay for badly needed items or cover costs – from nursery upfront fees. to school uniforms and essential furniture.