UK CASE STUDY – Affordable Personal Inclusive Credit

01 September 2013

Position paper

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Enabling low-income and financially-excluded consumers access affordable credit for household electrical goods

This partnership project includes the Nottingham Credit Union Ltd., Nottingham City Council and The Co-operative Electrical.

In the UK, many financially-excluded people in low-income communities, when faced with the need to purchase a washing machine, television or other household electrical item have little option but to borrow money from sub-prime lenders, often at interest rates reaching 300 per cent APR; to use expensive weekly-pay catalogues; or to purchase from weekly repayment high-street rental purchase stores, where an electrical item can often cost more than three times the normal high-street price. Costs in these stores escalate with the addition of expensive additional service and insurance charges, which are made compulsory for customers with no home contents insurance. In the 2007 EU report, “Financial services provision and prevention of financial exclusion”1, the authors highlighted the prevalence of these high-cost options in low income communities and demonstrated poor low-income families end up been grossly overcharged for electrical and other household goods.

In this partnership project in Nottingham, three organisations have come together in order to create an affordable option for people on low incomes who wish or need to purchase household electrical appliances. The project will enable people to purchase high-quality, affordable appliances with the support of a credit union loan. These appliances will be supplied by Co-operative Electrical and the project supported and promoted by the City Council as part of its financial inclusion strategy for the City.

The three partners are:

1 Nottingham Credit Union Ltd – a co-operative, community social enterprise, created and governed by volunteers for the social and economic well-being of people who live or work in Nottingham. It has a focus on serving the financially excluded and those on low incomes. The credit union offers a range of affordable financial services, including current accounts, loans and savings accounts. It is a major delivery agent for the UK Governments Financial Inclusion Fund. This local community organisation has 4,892 adult members, 1,119 junior savers. Total member savings stand at £1,166,568 and loans at £1,170,887. The credit union is the lead body of the project.

2 Nottingham City Council is the municipal authority and has taken a lead role in developing a financial inclusion strategy for the City. This provides a framework to inform and shape the work of all partner agencies concerned with financial inclusion in Nottingham, over the next three years. These partners include the credit union. The 2007 Indices of Deprivation ranked Nottingham as the 13th most deprived local authority out of the 354 districts in England.

3 The Co-operative Electrical is a commercial, online electrical company, which is a constituent part of The Co-operative Group. The company has teamed up with credit unions throughout the UK as part of its ethical and social commitment to tackle financial exclusion. Co-operative Electrical is not looking for this scheme to generate a large revenue income but it does need to ensure sufficient sales to be cost effective. A staff member has been appointed to develop the link with credit unions.

Finance Watch UK CASE STUDY – Affordable Personal Inclusive CreditCAPIC’ actions are supported by the European Community Programme for Employment and Social Solidarity (2007-2013) – PROGRESS. The information contained in this document does not necessarily reflect the position of the European Commission.

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