No Interest Loan Scheme a Success at South Manchester Credit Union

Thursday 25 January 2024

South Manchester Credit Union (SMCU) 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.

The community credit union was started 21 years ago by volunteers and today it has a staff team of 10 and a high street presence on Fog Lane, Burnage. Its membership now numbers 4,500 and have saved almost £5m.

SMCU was chosen by Fair4AllFinance to be the organisation in England to run the proof of concept for NILS 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.

Economic Secretary to the Treasury John Glen said the NILS was designed for consumers “in vulnerable circumstances who would benefit most from affordable credit to meet unexpected costs”. He continued: “This is a fundamental, worthwhile, new initiative, to provide a gateway product for people who at the moment are beyond the lending capacity of some credit unions. The challenge now will be to take that proof-of-concept pilot to a bigger pilot so that we can now validate it.”

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.

Sheenagh Young, CEO of South Manchester Credit Union, , says the feedback so far has been excellent. “Credit Unions are working away on street level but somehow we’re a bit of a best-kept secret, so we need to rocket fuel it and scale it up. This shows that HM Treasury want to invest in us, external investors want to invest and extend that gateway which supports the work we’re doing and amplify it.”