A new partnership between Fife, West Lothian and Falkirk Councils will complement existing money management services, including anti-poverty and social inclusion partners, and wider support services.
Council Leaders Cllr David Ross (Fife), Cllr John McGinty (West Lothian), and Cllr Craig Martin (Falkirk) have signed a partnership agreement which will see a new Community Development Financial Institution (CDFI) established for the three areas.
A CDFI offers affordable loans and budgeting advice and helps people access other financial services, such as savings, income maximisation and debt management. CDFIs provide an affordable alternative to high cost short term lenders and mainstream financial service providers whom financially excluded persons cannot access.
The aim is to offer a competitive, socially responsible alternative to non-standard lenders such as payday loans, for some of Scotland’s most vulnerable residents.
The proposed customer groups for the CDFI tend to be people on lower incomes with no record of savings and who have an extremely poor or no credit rating. This group is often hard-to-reach, vulnerable and not readily willing to seek advice and support.
Following a successful tendering exercise which was led by Fife Council with representatives from West Lothian and Falkirk councils, Five Lamps was appointed to progress the project.
Five Lamps is an experienced CDFI lender with wider social, economic and financial inclusion roles. The company was established as a social enterprise in 1985 and became a CDFI in 2004.
Key features of the CDFI operation in Fife, West Lothian and Falkirk would be: Four shops covering Fife, Falkirk, and Bathgate for face-to-face service. The shops will operate from 10am to 4pm Monday to Friday, and 9am to 12pm on Saturday. The shops will have capacity for partners to ‘hot desk’.
It is expected that 15 new staff will be recruited for the service – in addition each shop will create an apprenticeship opportunity.
There will also be a pop up presence in each local area to raise awareness of the service and support will be provided to make arrangements with local banks and credit unions to support the establishment of savings accounts.
There will be full participation in local anti-poverty and financial inclusion partnership work across the three areas and Five Lamps will actively refer anyone who has not been successful in their loan application to other local advice and support services but will not itself deliver those services.
It is estimated there is a potential social saving to the local economy of £2.5 million, this reflects the amount of money saved in interest by customers who would have potentially borrowed from a more expensive source.
David Ross, leader of Fife Council, said: “It’s unacceptable that in 2017 there are so many Fifers living in poverty. We are working hard to change that situation and are committed to creating a Fairer Fife for all our residents by 2030.
“One of the key recommendations from the Fairer Fife Commission was to help people on low incomes who might be tempted into debt by taking out high cost pay day loans. We’re prioritising support and early intervention to help break the cycle of poverty and a greater reliance on public services for some people throughout their lives.
“Now by working in partnership with colleagues in Falkirk and West Lothian Councils this CDFI initiative will help provide local money advice as well as a socially responsible lending service – it’s a great move for the people of Fife.”