ng homes Scotcash evaluation
Posted by: Carlene O'Carroll on January 28 2015 | Tagged:
The report evaluates the third year of Scotcash lending from the offices of ng Homes in Springburn. It covers lending from 1st November 2013 to 31st October 2014.
The raw data was supplied by Scotcash. Seven customers were also interviewed about their borrowing experience, and interviews were held with the Scotcash CEO, Sharon Macpherson, the loans officer at ng Homes, Tricia Will, and the Depute CEO of ng Homes, Ann-Marie Devlin.
Scotcash at ng Homes continues to be a valuable asset for social renting tenants across North Glasgow, meeting community needs for affordable credit, and addressing wider issues of financial inclusion. It is highly valued by borrowers who appreciate the proximity of the Springburn location to their homes, and who recognise, and are positive about, the role of ng Homes in bringing Scotcash into the locality.
The main findings were as follows:
- 376 loans were issued in Year 3 loan with a loan value of £161,000. Both loan volumes and values were higher than both previous years. The £161,000 borrowed from Scotcash in Year 3 probably saved borrowers in the region of £50,000 against their likeliest alternatives – commercial home credit companies like Provident Financial and Shopacheck.
- 80% of all borrowers in year 3 were drawn from G21 and G22 postcodes, again significantly higher than both previous evaluations.
- The average loan was £429 borrowed over a typical term of 42 weeks. New borrowers took an average of £294, whilst repeat borrowers had average advances of £525.
- Only 18 loans (or fewer than 5% of all loan volumes) were for amounts higher than £1,000. The responsible lending policies of Scotcash meant borrower were often issued with amounts lower than their original request.
- Low income households in North Glasgow have few realistic borrowing alternatives. Even those high cost alternatives that were available in 2014 will reduce in 2015.
- There is increased scrutiny and legislation from the Financial Conduct Authority (FCA) which took over responsibility for consumer credit in April 2014. The FCA has introduced a number of changes which all lenders – social and commercial- must adhere to. These will have a seismic effect on the short-term, small-sum loans market.
- The new FCA rules and the introduction of the payday loan cap from 2nd January 2015 will alter the profile of people borrowing from commercial lenders. There will also be a substantial reduction in the availability of short term loans. The commercial alternatives will shift their focus from “sub-prime” to “near-prime” meaning those with the lowest income, reliant on benefits will be excluded. Some observers predict a rise in illegal moneylending as a result.
- There will be a rise in demand for Scotcash loans in 2015 as borrowers alternatives are shut off; affordable credit will be required in 2015 for the customer whose income is within the bottom 40% of all UK borrowers. According to the Glasgow Indicators Project 388,007 Glasgow citizens are thought to be within the bottom 40% of incomes. (see chart below)
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