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Iceland’s £100 emergency loan sees 50,000 sign up in its first week

sarahdavidson
Written By:
sarahdavidson
Posted:
Updated:
26/08/2022

More than 50,000 hard-up shoppers have applied for Iceland’s £100 interest-free microloan in the first week since the scheme launched. 

The supermarket announced the scheme late last week confirming that, together with charity-owned lender Fair for You, Iceland Food Club would offer financially-vulnerable customers small loans to cover school holiday grocery bills or smooth out gaps in their income.

Inflation has already surpassed 10% and is expected to reach at least 13% this autumn, driven largely by huge energy bill rises.

October’s energy cap was announced this morning, with Ofgem confirming that the energy price cap will rise 80% to £3,549 on 1 October 2022.

Food prices and the cost of fuel and other household necessities are also steadily rising as businesses are forced to pass on their own higher costs.

Richard Walker, managing director of Iceland Foods, said: “More than ever, people are struggling to purchase much-needed everyday items during this relentless cost of living crisis, and fresh thinking is required by business and government to find workable solutions. At Iceland, we’re constantly exploring new ways to help our customers.”

Heating or eating

This year, 8.4 million people in the UK are already going hungry, according to the supermarket.

Meanwhile, nine million families who receive benefits will be on average £500 worse off due to inflation this year, analysis published recently by Joseph Rowntree Foundation has suggested.

How does Iceland’s loan work?

Iceland’s microloans are made available on a pre-loaded card, with repayments set at £10 per week. Customers have flexibility to choose which day of the week they make the repayments and may overpay if convenient for them.

Customers are limited to one loan at a time, during six windows through the year which coincide with school holidays. Limiting loans to these periods ensures customers only use them to smooth out incomes, rather than relying on them year-round, Walker said.

Fair for You runs affordability checks on all customers and uses open banking technology to enable it to lend better and collect better from those who may get rejected for loans elsewhere, due to poor credit ratings or thin credit files.

By providing micro loans of between £25 and £100 with a minimal amount of interest to more than 5,000 customers during the Food Club’s pilot phase, findings from the Centre for Responsible Credit showed:

  • 92% of customers using food banks previously had stopped or reduced their food bank use
  • 71% of customers said they were less likely to fall behind on rent, council tax or other bills
  • 71% of customers said they were better able to pay for food and other essentials
  • A reduction of more than 80% in the number of customers using loan sharks
  • 65% of customers said their diet had improved
  • 57% of customers felt less ‘stressed, anxious or depressed’ about their finances

Simon Dukes, chief executive of Fair for You, said: “Nobody should have to go hungry in order to feed their kids, or be forced into making impossible decisions between putting food on the table or having hot water.

“This scheme gives plenty more families the opportunity to get the groceries they want, improve their diet and enjoy family meals together, while also getting a better handle on their finances.”