Richard Walker

Helping to fight food poverty through flexible, ethical credit

We know that many of the families in the communities we serve are living on a budget: many struggle to make ends meet and their access to credit or additional financial support is limited.  Being rooted in these communities, with the overwhelming majority of our store colleagues living locally, we have a better understanding than most of these challenges and, from speaking to our customers, we know just how hard it can be to feed a family on a spend of as little as £25 a week.

When one of our store’s sales fall off, in the absence of new local competition, we know that we are more than likely losing customers to food banks or, worse still, to hunger. According to the Food Foundation, nearly one in ten adults were going hungry in some parts of the country in January last year. It is shaming that this can be a reality in a rich G7 country in 2022.

Despite recent positive steps to raise awareness, and the good work done by Marcus Rashford’s Child Food Poverty Taskforce, food insecurity remains a real issue across the UK and is causing stress and misery to far too many families. It is also a problem that escalates during every school holiday, including Christmas. The continuing challenges presented by Covid-19 are adding to the already huge pressures on the most vulnerable members of our society.

Supporting our customers and their communities is a key pillar of Iceland’s Doing It Right strategy, so we challenged ourselves to think of creative and strategic ways we could offer even more of a helping hand in the face of these challenges. And we concluded that, alongside the measures already in place such as Healthy Start Vouchers, affordable and flexible credit – delivered with dignity, compassion and respect – could be a huge help to families struggling to find their way out of the poverty trap, especially to help them deal with unexpected costs or even the additional pressure of providing school holiday food, when they have no safety net to fall back on.

Because the reality for many families is that  mainstream lenders almost certainly won’t be willing to help, driving them into the arms of ultra-high-interest lenders, or even illegal loan sharks. Research shows that more than 10 million people in the UK are unable to access mainstream credit.

To meet this challenge, we are trialling an ethical and affordable alternative: the Iceland Food Club, operated by the well-respected, charity-owned lender Fair for You. This offers short-term microloans of £25 to £75, uploaded to a dedicated Food Club card, and repaid at the rate of £10 per week. On a £75 loan, repaid over eight weeks, a Club member will pay interest of £2.89. On a £25 loan they pay 40p interest.

Starting in 2020 with a pilot in two communities in Yorkshire and North Wales, we have now rolled the Iceland Food Club out across North West England and South Wales, and have so far extended more than £1 million in microloans, with the support of HM Treasury and philanthropic funders.

And the results, as seen in an early social impact report, are encouraging. Before we launched the Food Club, 84% of participants went without because they could not afford to buy food, and half were referred to food banks – though even among those who meet the tight eligibility criteria for food banks, there are many who are simply too embarrassed to use them.

Since joining the Food Club, however, 83% of participants tell us that they no longer need to access food banks, 80% report an improvement in their mental health, 85% say that they are less worried about meeting their monthly expenses, and 75% report that they are feeding their children more healthily. These are outstanding improvements, but based on a small number of people over a short time period – a more detailed, independent social impact report will be produced this year will tell us more.

For families facing food insecurity this is all about – to use a well-known phrase – taking back control. Giving people the power and the freedom to spread the cost of food, particularly over tricky periods like the summer and Christmas holidays, and also enabling them to do a better value weekly shop.

The success of our Food Club trial underlines for me how much more could be done if only mainstream lenders and others were prepared to come forward with improved support for more vulnerable consumers. That is why Iceland, Fair For You and our funding partners are calling for banks and other mainstream lenders to reconsider their approach to serving this customer group, and greatly increase their investment in the affordable credit sector. Given their expertise and economies of scale, no one is better placed to serve the non-mainstream credit market either directly, or by supporting other providers who are willing to take on these customers.

We will share our next set of results with other retailers so they can consider whether they too might be able to offer affordable credit to their customers. They would be meeting a very real need in an ethical and responsible way.

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