Microfinance shouldn't do the government's job

It is a requirement of civil society that government obviate the need for payday lenders, writes Carl Packman.

There has been a recent interest in microfinance as a means to draw vulnerable people away from the scourge of payday lending – an industry which saw its inevitable growth over the Christmas period, with the number of enquiries about it at the Citizens Advice Bureau doubling from last year. 

The Financial Times recently ran an article headlined Microfinancier gives payday lenders run for money. Reporter Sarah O'Conner discusses to what extent this type of financial product offers a fairer deal for borrowing money, with more manageable prices attached to loans: £162 on a 52-week loan of £600 compares well with the £25-30 per month you can expect to pay for a loan of £100 with the average high cost credit seller. 

Although relatively rare in the UK, the microfinance movement is over 40 years old. It all began in the early 1970s in Bangladesh and Latin America and since then has seen small but effective support around the world. 

I spoke to Saloman Raydan Rivas, a microfinance expert, about Professor Mohammed Yunnus, the don of the microfinance movement. Rivas told me Yunnus wanted to develop a banking model which did not take advantage of the poor, but he was unsure of how to tap into existing local lending mechanisms, such as self-financed communities, to bring about change on a wider scale. 

Today there are many people trying to realise his dream, and Fair Finance, the case studied in the Financial Times' article, is one. In fact Faisal Rahman, the company’s director, is strongly influenced by the microfinance movement, and hopes to bring it to market in the UK.

But there is something rather rocky about relying on private equity funding, as Fair Finance does (a fact not discussed in the Financial Times article) that makes me worry, both in practice and on first principles. 

Fair Finance was declined investment money by Barclays and the Royal Bank of Scotland when it first started out, and they even had problems with Santander, which would not put up investment alone. When I asked Rahman about it, he admitted it was a setback, and one could argue this is hardly a surprise. Rahman wants funding from investors to sell loans ethically to people, charging low interest, and risking low returns, all to realise a dream of creating a banking model that undercuts usurers and rip-off merchants. 

For all the good he wants, many investors clearly see the words “low return” and run a mile. In short, we cannot rely on the good nature of profit-making big banks to finance ethical, non-profit, lending schemes. But should we expect any private business to do this? Since it is in the interest of the public purse to keep individuals' personal debt profiles down, should ethical lending not be a standard expectation of the government? 

It is surely a requirement of a civil society that the government allocate enough money – for instance, through a credit union – to ensure consumers aren't left with going to payday lenders as their only option.

Having said that, I understand Rahman’s motives. Recently it was reported that a loans company who target personnel in the armed forces with high cost credit at 3,300 per cent interest was sold advertising space in Defence Focus, the magazine of the Ministry of Defence. Is this perhaps a sign of how relaxed public bodies have become about payday lending?

High cost loans for the armed forces has become a big issue. A representative of Waterhouse Baker, who offer financial advice to any serving member of the forces, told me that payday loans is often a short-lived solution, “as many default as the monthly expenditure is too high for the income gained”. 

Problems like these need solving fast, because the problem of high personal debt is one which affects the whole economy and the whole society. For me, the buck stops with the government.

Given the enormity of the problem of debt, government should be in charge of reversing it. So while the aims of Fair Finance and other similar organisations are positive, pricing out payday lenders should be chiefly the preserve, not of microfinance, but of the state as part of its commitment to maintaining a civil society.

Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.
 

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Meet Anne Marie Waters - the Ukip politician too extreme for Nigel Farage

In January 2016, Waters launched Pegida UK with former EDL frontman Steven Yaxley-Lennon (aka Tommy Robinson). 

There are few people in British political life who can be attacked from the left by Nigel Farage. Yet that is where Anne Marie Waters has found herself. And by the end of September she could well be the new leader of Ukip, a party almost synonymous with its beer-swilling, chain-smoking former leader.

Waters’s political journey is a curious one. She started out on the political left, but like Oswald Mosley before her, has since veered dramatically to the right. That, however, is where the similarities end. Waters is Irish, agnostic, a lesbian and a self-proclaimed feminist.

But it is her politics – rather than who she is – that have caused a stir among Ukip’s old guard. Former leader Paul Nuttall has said that her views make him “uncomfortable” while Farage has claimed Ukip is “finished” if, under her leadership, it becomes an anti-Islam party.

In her rhetoric, Waters echoes groups such as the English Defence League (EDL) and Britain First. She has called Islam “evil” and her leadership manifesto claims that the religion has turned Britain into a “fearful and censorious society”. Waters wants the banning of the burqa, the closure of all sharia councils and a temporary freeze on all immigration.

She started life in Dublin before moving to Germany in her teens to work as an au pair. Waters also lived in the Netherlands before returning to Britain to study journalism at Nottingham Trent University, graduating in 2003. She subsequently gained a second degree in law. It was then, she says, that she first learnt about Islam, which she claims treats women “like absolute dirt”. Now 39, Waters is a full-time campaigner who lives in Essex with her two dogs and her partner who is an accountant.

Waters’s first spell of serious activism was with the campaign group One Law for All, a secularist organisation fronted by the Iranian feminist and human rights activist Maryam Namazie. Waters resigned in November 2013 after four years with the organisation. According to Namazie, Waters left due to political disagreements over whether the group should collaborate with members of far-right groups.

In April 2014, Waters founded Sharia Watch UK and, in January 2016, she launched Pegida UK with former EDL frontman Steven Yaxley-Lennon (aka Tommy Robinson). The group was established as a British chapter of the German-based organisation and was set up to counter what it called the “Islamisation of our countries”. By the summer of 2016, it had petered out.

Waters twice stood unsuccessfully to become a Labour parliamentary candidate. Today, she says she could not back Labour due to its “betrayal of women” and “betrayal of the country” over Islam. After joining Ukip in 2014, she first ran for political office in the Lambeth council election, where she finished in ninth place. At the 2015 general election, Waters stood as the party’s candidate in Lewisham East, finishing third with 9.1 per cent of the vote. She was chosen to stand again in the 2016 London Assembly elections but was deselected after her role in Pegida UK became public. Waters was also prevented from standing in Lewisham East at the 2017 general election after Ukip’s then-leader Nuttall publicly intervened.

The current favourite of the 11 candidates standing to succeed Nuttall is deputy leader Peter Whittle, with Waters in second. Some had hoped the party’s top brass would ban her from standing but last week its national executive approved her campaign.

Due to an expected low turnout, the leadership contest is unpredictable. Last November, Nuttall was elected with just 9,622 votes. More than 1,000 new members reportedly joined Ukip in a two-week period earlier this year, prompting fears of far-right entryism.

Mike Hookem MEP has resigned as Ukip’s deputy whip over Waters’ candidacy, saying he would not “turn a blind eye” to extremism. By contrast, chief whip, MEP Stuart Agnew, is a supporter and has likened her to Joan of Arc. Waters is also working closely on her campaign with Jack Buckby, a former BNP activist and one of the few candidates to run against Labour in the by-election for Jo Cox’s former seat of Batley and Spen. Robinson is another backer.

Peculiarly for someone running to be the leader of a party, Waters does not appear to relish public attention. “I’m not a limelight person,” she recently told the Times. “I don’t like being phoned all the time.”

The journalist Jamie Bartlett, who was invited to the initial launch of Pegida UK in Luton in 2015, said of Waters: “She failed to remember the date of the demo. Her head lolled, her words were slurred, and she appeared to almost fall asleep while Tommy [Robinson] was speaking. After 10 minutes it all ground to an uneasy halt.”

In an age when authenticity is everything, it would be a mistake to underestimate yet another unconventional politician. But perhaps British Muslims shouldn’t panic about Anne Marie Waters just yet.

James Bloodworth is editor of Left Foot Forward

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear