Fairer finance from Bangladesh to Barking Road
12:00 19 January 2013
A former resident of Barking Road returned to the busy street on Monday to do battle with loan sharks and money-lenders who take advantage of financially vulnerable people.
Faisal Rahman came back to his old street to take the next step in a seven-year journey to open an East Ham branch of Fair Finance, a financial service offering low-interest microloans, that he built up from scratch from a council estate in Stepney.
The idea came to him while visiting villages in his family’s native Bangladesh where he saw small lending in action.
He found that, instead of undergoing credit checks, small lenders - or ‘microfinanciers’ - collect testimonies from people in the local community who would vouch for people they thought were trustworthy.
Faisal found this approach to be far more humane and understanding than any he had come across previously in the banking sector so he took the simple idea of money-lending based on human interaction, not credit, back with him to London.
UK personal debt statistics
New UK personal debt statistics were released this month by Credit Action, a finanical capability charity, to paint a national picture of the problem.
*£53,867 was the average household debt (including mortgages) in November
*£165million was the daily amount of interest paid on personal debt in November
*8,308 new debt problems were dealt with by the CAB each working day over the year to September
*1,607 people were made redundant every day between August and October
*904,000 people had been unemployed for more than a year between August and October
*£11.38million of loans are written-off daily by UK Banks and Building Societies
*Every 16 minutes four seconds a property is repossessed
*Every four minutes 42 seconds someone will be declared insolvent or bankrupt
*£1.424billion was the daily value of all plastic card purchases made in October
Managing director Faisal said: “A guy I met out there said something really very simple but poignant to me - ‘In Bangladesh, banks only lend to people with money which is a really stupid thing to do because they already have money.
Wouldn’t it be more helpful to lend to people who had nothing?’”
Armed with little more than a credit card and support from Shadwell-based charity The Environment Trust, Faisal set about providing financial advice and management to women refugees on east London estates.
He managed to lure a number of banks, charitable trusts, and housing associations to invest by offering them a profit on repayment - while operating as a non-profit social enterprise.
Seven years later, Faisal now employs 25 people with offices in Leyton, Dalston, Limehouse, and Thamesmead, claiming to have loaned money to 15,000 people.
Along the way, he picked up an admirer in East Ham MP Stephen Timms who first met Faisal while working as a minister in the Treasury who asked Faisal to bring Fair Finance to the people of Newham.
Finding that a fair amount of his clients came from the borough, Faisal started to do some saving of his own until he could afford to open an office in East Ham, opened by long-time supporter Mr Timms.
Opening the branch, the MP said: “A lot of people are finding it hard to make ends meet at the moment and many are being forced to pay eye-watering interest rates so I welcome this much more affordable service opening its doors in East Ham.”
Fair Finance broke even for the first time this year and, although Faisal admits his interest rates are not as low as a credit union’s, he says that is what he intended as the social enterprise was not meant to compete with them but provide a responsible alternative to doorstep lenders, high-interest payday lenders, and loan sharks.
Faisal said: “We’re trying to do what banks in Britain used to do 30 or 40 years ago but have stopped doing now because everything’s automated.
“It’s this culture of distance created by advances in technology that allow high interest loans companies to give people quick money without checking whether they are capable of returning it with no debt advice attached.
“I wanted to prove that you don’t have to be a rapacious capitalist or a charity at the other end of the line to be a sustainable business. What we need is more alternatives in between.”
Faisal believes that only by meeting every potential client face-to-face to discuss their background before offering them either a loan or advice is the only way to determine how they came to be in debt in the first place and how they are likely to behave in the future.
Faisal said: “Lots of people we talk to in east London come to us with complex issues.
“Sometimes, we can’t give these people money but then that’s about talking to them about their problems and giving them advice and that’s really what we’re about.
“It sounds cheesy but our motto is to think with a hard head and listen with a soft heart.”