News

Access to credit for those on low incomes needs to be more clearly on the government agenda, according to a report from Liverpool John Moores University.

Although the government has developed a range of different strategies for regenerating inner cities and deprived neighbourhoods, the very people they are aimed at still regularly turn to alternative credit providers "with often harmful and damaging social and personal consequences".

The report criticises government for a lack of recent policy development in the area, and concludes that "access to credit needs to be recognised as a major issue in the lives of people on low incomes".

The report shows how families on low incomes gain extra money to finance basic needs, such as furniture or children's clothing, from a "flourishing alternative lending market encompassing everything from mail-order catalogues, home credit, tontines (savings clubs) and as a last resort unlicensed money lenders".

"Finding the ready cash for a new washing machine when the old one breaks down, or for new beds for the children, is rarely an option," says the report. "But neither is getting a bank loan, using a credit card, opening a high street store card account or running up an overdraft."

It also recommends reform of consumer credit legislation to bring about "greater truth, transparency and honesty in the way money is lent to low income consumers", as well as increased access to the social fund - the government's cash safety net for welfare benefit claimants - and "strategic centralised financial and technical assistance" to help strengthen credit unions.

"This report provides further evidence that credit unions need to be encouraged and invested in, as only sustainable, accessible credit unions can tackle the problems of high-interest debt and people's lack of access to properly regulated financial services," said Shaun Spiers, chief executive of the Association of British Credit Unions.

- Paul Jones, Liverpool John Moores University, Access to Credit on a Low Income, available from the Furniture Resource Centre, Liverpool, tel 0151 702 0550 or www.furnitureresourcecentre.com