I have lived and worked in Birmingham all my adult life, the last 10 years almost exclusively providing affordable credit as an alternative to high cost credit, firstly running a credit union and then Fair for You.

It’s a generalisation but on the whole our customers are women, in lower income households, with some caring obligation and in part-time work.  ‘Managing mums’ is a term that has been coined in recent months. I would say these women are sassy, switched on, entrepreneurial, hard working, and not really managing very well at all. Or at least they are until something goes wrong when they need access to fair, affordable and well- designed credit.

I have sat in rooms over the last 10 years, hearing my customers talk about the need for financial education, budgeting and debt advice.  I felt strongly throughout those years that they need better alternatives to the credit options that are currently available.

In 2014, a group of us spent hours listening to mums of younger children in Northfield, Birmingham tell us very frankly and openly about their experience with high cost credit. I went in there thinking I knew what Fair for You would look like, and I came out knowing what it had to look like.

Some amazing people and organisations have backed our work over the last three years, but we never lost sight of what we were told, and we delivered what those people needed.

High cost credit isn’t just expensive – all versions of high cost credit have that in common. But the other common trait is that it is designed for the benefit of the lender, and to take maximum extraction from the customers’ financial household.

The term the ‘poverty premium’ is used to describe  the additional costs  low income households – in other words those who have less consumer power – have when purchasing essential goods and services. Whilst the amount of that premium fluctuates in various situations, it is always consistent that the lion’s share is made up of high cost credit i.e. the additional cost of using credit when faced with emergencies.  And the same households need credit when hit by emergencies, as they have less insulation and resilience to what to other people would be relatively minor emergencies.  There seems little point in measures to address poverty in the UK, without removing the poverty premium.

On 22 March we release the third social impact report relating to the work of Fair for You, a national challenger to high cost credit that directly responds to all of the needs we identified in our research. Now I don’t just have the voices of the mums who came to all of the sessions we ran, I have thousands of voices of customers whose financial situation has been changed because they have access to an alternative.  They prove every day, that they don’t need education and advice, they need better alternatives.

Fair for You is on line, available seven days a week, customer focused and a modern solution that uses multi-media communications including social media. Put simply, credit delivered with dignity and respect, designed to meet the lives of mums – and anyone else – who juggles, struggles and are not really managing at all.

And our customers love it – we are so proud to be rated among the highest financial services in the UK according to Trustpilot.

Please check us out and if you can support our work and our drive to change the way we lend to lower income households, then we would love to talk to you.

Angela Clements is the CEO  of Fair for You

Read Centre for Responsible Credit’s Social Impact Report

www.fairforyou.org.uk

www.fairforyou.co.uk

The Access Social Investment Infrastructure Fund is one of three major initiatives funded through Access’ Capacity Building programme, along with the Reach Fund and the Impact Management Programme.

The idea of the new Social Investment Infrastructure Fund is to strengthen social investment infrastructure both in existing social investment intermediary organisations and also in more generic and traditional infrastructure bodies.  This Fund looks like it will have a significant impact on existing infrastructure bodies such as CVSs which have not so far been confident or ‘upskilled’ enough to advise their stakeholders on social investment or give them investment readiness support.  Our hope is that it will also be used to improve tools and data capture mechanisms for use across the social investment field.

As a social justice foundation with an interest in social investment, Barrow Cadbury Trust has long had concerns that the investment products on offer do not always serve large sections of the social sector. Blended finance and better shared tools should have a transforming effect on new entrants and existing investees alike.

What next?

We will be advertising for a fund manager in the New Year so please keep an eye on this website, on our fortnightly enews, and on Twitter, for further information if you are interested.  Materials and relationships will be developed over the next few months and we will put out a call for expressions of interest later in the year.

It operates in branches across the West Midlands, and in April 2016 launched an online lending platform aimed to disrupt the online loans market by offering loans at a much lower rate than that of the established online lenders.

Street UK have launched a new Social Impact Report examining the extent to which Street UK is achieving its goal of creating greater financial inclusion. Key findings show that:

• Financial support is not restricted to having a solely financial impact in the borrower’s life. 79% of surveyed clients agree that getting a loan from Street UK had more than just a financial impact. These include improvements to their level of stress, overall health, self-esteem and relationships with family and/or friends.
•  An individual’s previous credit history will not always be an accurate reflection of their ability to repay future loans. 73.6% of the people Street UK lend to have a past default on their credit file, but over 90% of the loans advanced are repaid.
• Many people are struggling to meet the everyday costs that those on higher incomes can take for granted. Street UK loans are most commonly used for home improvements, Christmas and holiday expenditure.
• Short-term loans do not have to be expensive. They can be provided both online and on the high street for reasonable interest rates that cover the costs and associated risk of lending.
• social sector organisations need to signpost those who are most vulnerable in society and low income households to affordable finance to avoid the risk of them falling into unmanageable volumes of debt.

The platform was developed in partnership with London-based charity St Martin’s Partnership, and is also backed by social investment loans from Barrow Cadbury Trust, Esmée Fairbairn Foundation, and Big Issue Invest.

In 2014, in the world of unsecured personal credit, there were few offering credit to those people on low incomes, and who have to take credit and pay it back each week or fortnight; people who can’t get credit from their banks or building society.

Most of those providers charged what most of us would consider to be high interest rates, high fees and inflated prices for the items, which would keep people from ever being able to escape their clutches.

There had to be a better way. So in August 2014, we got funding to get an independent company to run a series of consumer focus groups. They asked users of this type of credit when they used it, why they used it, what they used it for, and how they felt about it.

From what we heard, Fair for You was born. Two years later, we’ve capital and loan finance from four social funders, are fully authorised as a lender by the FCA, and have been trading since December 2015.

Our second Social Impact report has just being released and makes surprising reading.

For instance, we heard that an average loan of just £300 can directly improve customers’ ability to pay their rent (over half of people surveyed said this was the case, rising to two-thirds of lone parents). And that a loan of this size can directly improve the health and wellbeing of our customer’s children’s (one third felt this was the case – rising to 51% of lone parents).

Isn’t that amazing, given the comparatively small size of the loan?

However, a cursory view of Trustpilot will show you that among the 300 people who have so far posted reviews, pricing is only part of the reason that Fair for You has such an impact. It is the whole design of the solution that works for them.

Why? Because, without being too technical about it, we’ve combined structured credit with some of the key benefits of unstructured credit.

Our loans are for items for the home – we don’t do cash loans – and the customer chooses the item they want from our ‘digital high street’. The loan is then structured to purchase that item.

It’s also structured because the loan is clear to the customer, structured repayments on a schedule. They agree to pay an amount of their choosing, over a period they choose – weekly, monthly, fortnightly or four weekly, over any period from 12 weeks to 24 months.

So, if the customer wants to pay £10 a week over 37 weeks, then that’s the loan that we agree; and they are kept up-to-date on their repayments, via text, posted statements and monthly on-line updates.

The benefits of flexibility are that the customer can overpay at any time, and many customers choose to do so. For some it allows them to clear the credit earlier, and for others it allows themselves to miss a payment when facing a difficult week. All clearly get the fact that they don’t pay so much interest if they overpay.

However, the biggest difference is in the assessment of credit. We recognise that many households have low and fluctuating income, such as zero-hours contracts, so we set low repayments and allowing overpayment for when the money’s there. We’re also understanding of past credit problems, so we look instead at a customer’s management of credit over recent years.

It will be interesting to monitor the impact on the financial wellbeing of the households using Fair for You. Our Social Impact report estimates that within 3 years, the majority of customers having switched from using high cost credit regularly to using Fair for You, will no longer have a Poverty Premium in their household.

In the past few years considerable funding has been spent on financial education. For a fraction of this cost, the long term benefit to the households of having access to good financial products may far outweigh being continually taught how to avoid the most aggressive mutations of high cost credit providers.

Better product design, delivered in a more socially responsible manner, may well provide answers in a post-banking crisis world that has seen our society so polarised by their exposure to poverty.

Why were Barrow Cadbury trustees keen to explore social finance opportunities? Some information about the origins and values of the Trust will shed some light on our interest.

The Trust was founded in 1920 by two Birmingham Quakers, Barrow and Geraldine Cadbury, energetic social reformers and generous philanthropists whose particular concerns were health, education and the criminal justice system.

Influenced by Joseph Rowntree, Barrow established the tax-paying Barrow Cadbury Fund (for those projects that fell outside the legal definition of ‘charitable’) alongside the charitable (and much larger) Barrow Cadbury Trust .

Our Quaker values inform the Trust’s ethical approach to its investments. Our approach is to use all our assets, such as our name, our expertise, our convening power, so not just the money.

We have a history of funding via loan finance. In the 1980s for example, we set up two revolving loan funds enabling unemployed people in the West Midlands to start their own businesses.

So the opportunity in 2009 to invest in the Peterborough SIB was timely. We had a century old interest in reducing reoffending. We also had a current track record of working with St Giles Trust so, in terms of partners as well as potential impact, it was a perfect entry point.

What do we look for when we invest?

Of paramount importance to us is the social impact of an investment. Our investments fall into three main categories:

The majority have been ‘programme related’, i.e interventions that we might under other circumstances consider grant aiding. As with our grantmaking, we actively seek to support pilot projects and ‘upstream’ or early interventions.

One of these is Bristol Together, a Community Interest Company that has developed a 5 year bond to raise working capital for buying and refurbishing properties, providing work and training opportunities for ex-offenders.

The impact of this investment is a 5% reoffending rate over 4 years (compared with the national average of 46%). What are the risks? There’s the possibility of overruns on costs and the Bristol housing market is much more unpredictable than London. There have also been cash flow challenges, but the project is currently on track to repay the bond.

We may seek general ways of supporting voluntary sector infrastructure: for example, we have made an equity investment as well as a loan for the purchase and redevelopment of a shoe-polish factory in Vauxhall, now known as the Foundry, a Social Justice and Human Rights Centre providing office and shared community space for 20 voluntary sector organisations.

And thirdly, the Trust is also interested in developing the social investment market; this motivated our investments in Golden Lane Housing for example.

(to be clear: I am referring to the 2013 bond issued through Triodos. We have also invested in the 2014 bond, but this was a mainstream investment in a corporate bond, made through our investment manager. We are delighted that this bond was successfully issued on the mainstream markets. )

We have an endowment of approaching £80 million, and have set aside 5% (ie £4 million) for social investment. Our pockets are not deep, but we are aware of the ‘kite mark effect’, the leverage that even a comparatively modest investment by Barrow Cadbury can afford an enterprise. Our early investment in the Peterborough SIB is a case in point.

Whether an investment relates closely to one of our programmes, or offers an opportunity to develop the market, above all we are keen to ensure significant social value, above and beyond simply savings to the public purse, valuable though they are.

Risk and return

In terms of risk and return, the potential social impact must justify the financial risk. We take a ‘whole portfolio’ view of financial return, so our appetite for risk varies with each investment. We are prepared to take risks, indeed, we believe we should, and have invested in a couple of ventures where we knew the risks were high. One has folded, and we will have to write off that loan, but the other is still making progress.

Whilst we seek considerable social impact, I would describe us as not financially ambitious. If we preserve the real value of the funds available to us over a 10 year period we will be satisfied. (More might be exciting! But it would cause us to question our risk appetite and whether we had the appropriate balance of social to financial return).

Do we become involved in the projects we support?

I have mentioned a couple of instances where I or a member of staff have joined the board of an organisation. This has merits:

• it certainly aids our learning,
• has been useful in developing informative reporting,
• and can strengthen governance.

It fits our principle of using all our assets for social good, but we do not insist on it: of the 15 investments made to date, we only have this kind of direct involvement in three, all at the invitation of the organisation.

The question of impact on our grant making is interesting.

We believe that grant finance is gold dust and must be protected for things that can’t (or should not) be financed any other way.

We remain keen on blended finance (we have made Ethex a grant as well as a loan, for example).

Our grantmaking is in no way reduced in scale or ambition. It has, I suggest, benefitted from a sharpening up of due diligence and from our increasing expertise. We are better placed to discuss with grant holders the appropriateness (or otherwise) of their pursuing other forms of finance.

To conclude, social investment offers a very welcome alternative source of finance, but it is not the only answer and it’s not for everyone: I do worry about some of the rhetoric: criticising so-called ‘grant dependency’ isn’t helpful, nor is characterising charity trustees as ‘risk averse’ when they decide that such new forms of finance are not for them.

But for the Barrow Cadbury Trust, the beauty of social investment can be summarised in four points. We believe that:

• Trusts and foundations can afford to take the financial risk off the shoulders of the delivery organisations.
• Social investment can move money ‘upstream’ to earlier interventions, which we all know can be more effective in the long run and give better value for money, but which are sometimes not affordable in the short term.
• We can help ‘unlock’ mainstream finance for social purposes (from pension funds, new money etc). For example we have now sold £70,000 of our original investment in Golden Lane Housing, bringing more social investors into the market.

And this touches on my fourth ‘beauty’: that the nature of investments is cyclical: as loans are repaid our capital is released so we can make further social investments.

You can watch Anna Southall’s full presentation, as well as other presentations at the event, on Youtube.

The momentum in the project reflects the significant advantages of the model – that long term funding provides the scope to build a deep understanding of the complex needs of offenders and the flexibility to invest in meeting them.

The Ministry of Justice and the Big Lottery Fund will make payments to investors in 2016 if there is a reduction in reoffending of more than 7.5%; but the project does not qualify for a payment at this early juncture.

The results were compiled by independent assessor Professor Darrick Joliffe and his team from Qinetiq and the University of Leicester, for the Ministry of Justice, using the PSM methodology. The independent assessor calculated that there were 142 reconvictions per 100 prisoners in Peterborough compared to 155 reconvictions per 100 prisoners in the control group.

“We are very encouraged by the evidence of the positive impact of the support the SIB has provided in the first cohort and are encouraged by continuing improvements in our work with offenders on the second cohort. The SIB has given our delivery partners the resources and the freedom to meet the complex needs of our prison leavers very effectively,” said David Hutchison, CEO of Social Finance.

Sara Llewellin, CEO of the Barrow Cadbury Trust and SIB investor said: “We are delighted with the progress made in the first cohort of the Peterborough Social Impact Bond. As investors, we wanted to prove that by doing something differently, and by being more flexible, we could indeed create a different outcome. An outcome which is a ‘WIN, WIN’; a win for the taxpayer as the volume of repeat crime falls and a win for prisoners and their families when they take charge of restabilising their lives.”

“Resettlement of short term prisoners has long been a blind spot of criminal justice and social welfare systems. The independent funders who came together to invest in the first Social Impact Bond saw an opportunity to move beyond temporary gap-filling towards developing and testing a whole sustainable system. There are many lessons that we need to learn from this bold experiment, from its data driven rigour, to its clear value base, to its ability to contend flexibly with complex social issues. The prospect of getting our investment back with a return is an exciting indication that thorough-going resettlement can create enough cashable savings to make a new system affordable when done properly,” said Julian Corner, CEO of the LankellyChase Foundation and investor in the Peterborough SIB.

“The One Service has helped me with a training course, housing needs, food, electricity and someone has always been on the end of the phone even if it’s just someone to talk to. I have rung them so many times even if it is just to rant and vent what I’m thinking. If it hadn’t have been for this I would be back in prison by now.” Mr Flattley, One Service client, with 24 prison sentences and no previous rehabilitative support.

Background to the pilot

Social Finance launched the Peterborough Social Impact Bond in 2010, supported by 17 foundations, who committed to invest £5million. It was designed as a seven year pilot to test the premise that offering comprehensive and individual support to prisoners would help them stay out of prison and build a new life for themselves on the outside. The first cohort of prisoners was released from September 2010 – May 2012. During this period, Social Finance set up a new service, known as the One Service, which included delivery organisations St Giles Trust, Sova, Ormiston Families, YMCA and, MIND to provide housing, family, health, employment and training support. The One Service also works with local drug and alcohol services. John Laing Training joined the project in the second cohort.

Early learnings

As the programme progressed, it was clear that there were three gaps which impacted the lives of prison leavers most profoundly: the provision of accommodation, support for low-level mental health needs and the lack of training and employment opportunities. Flexible funding from investors allowed the One Service partners to create a multi-agency offering to respond to these needs of the offenders.

Improving performance

Repeat offending by short sentenced prisoners has challenged the UK for many years but no statutory support has been on offer for this group of prisoners. As offenders recognised that the Peterborough project was stable and long-term, and would continue to support them even if they ended up back in prison, engagement levels rose from 74% in Cohort 1 to 86% in Cohort 2 while in prison and from 37% (cohort 1) to 71% (cohort 2) after release.

Not only did engagement levels rise over the course of the first four years, but the team’s understanding and ability to meet the needs of offenders improved. This is reflected, for example, in the reoffending rates for the first six months of the Cohort 2 which lie 8% below those for the first six months of Cohort 1.

“Rehabilitating prisoners demands commitment, proper financial resources and patience. The project was deliberately set up to be a long term project so that we can learn, improve and refine the best ways of supporting prisoners on release. Today’s results are very encouraging,” said David Robinson, chair of the Peterborough SIB Advisory Board.

Local relationships

The One Service established an excellent working relationship with Peterborough prison and close links with local statutory and voluntary partners in the area. Many of the One Service’s practices, such as the through the gates model, have been adopted more widely.

A representative from the Peterborough Community Safety Partnership wrote in June 2014: “We have [..] been fortunate enough to bear witness to the journey of the pilot as it has evolved, as well as to experience first hand some of the case studies that really do bring the scheme to life. There have been, and […] sure will continue to be, some truly inspirational stories involving often entrenched offenders transforming their lives as a direct result of the work of the One Service leading to significant public sector direct and enabled savings and a real reduction in re-offending with fewer victims of crime as a result.”

Independent research

Leading research institute RAND Europe published an independent evaluation of the Peterborough SIB in April 2014 which concluded that the innovation lay in the flexibility of the funding, the local management and operations of the project, the frequent review and adaption of the intervention models and the collection and use of management information.

Wider adoption of the Social Impact Bond model

The Peterborough pilot was the first Social Impact Bond – a new model of investing into preventative services to tackle entrenched social problems. It aligns social impact with financial return by linking payments to investors with increased operational success. If the impact is not achieved, investors do not receive payments and risk losing their investment.

Social Impact Bonds provide additional and non-governmental funding to chronic social issues such as youth unemployment, children in care, homelessness and criminal justice. Following the Peterborough launch in 2010, there are now 16 Social Impact Bonds in the UK, 4 in the US, 2 in Australia, 1 in Canada, 1 in the Netherlands, 1 in Belgium, 1 in Germany and more than 100 proposals world-wide. Over $100m has been raised in social investment to fund Social Impact Bonds globally.

Three of the SIBs under Social Finance management have already paid outcome payments to investors.

Transition arrangements agreed for the continuation of the One Service

As a direct consequence of the Government’s decision to restructure the provision of probation services nationally, the Ministry of Justice announced on 24th April 2014 that it would bring the Peterborough pilot to a close early. The Ministry of Justice has been keen to structure transitional arrangements to ensure that the pilot is able to complete its work with the second group of 1000 prisoners using the Social Impact Bond model. In addition the Ministry of Justice has been keen to ensure the continuity of the service to those who would have joined the third and final group until a new contractor takes on responsibility for the East of England. Details of the transitional arrangements have now been agreed and are set out in the announcement included in the notes to editors. They reflect directly the wish of all parties that the service continue in its current form until the new national arrangements are in place and that investors’ interests are properly respected.