Interest-free loan scheme expanded to reach up to 20,000 Britons

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A government-supported scheme that provides interest-free loans to the financially vulnerable will be expanded to reach up to 20,000 people.

The no-interest loan scheme (Nils), which is backed by the Treasury but is run by credit unions and other lending organisations, successfully underwent a trial in Manchester and from September will be rolled out on a trial basis in some other parts of the UK.

It aims to offer emergency loans to those who would otherwise be turned down because of not being able to afford interest payments.

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Customers are allowed to have only one loan with the programme, which they can have for between six and 18 months, although the average length of time is 12 months. Borrowers can access between £100 and £2,000, with the average amount borrowed £500.

The pilot process is being funded with £3.8m committed from the Treasury, £1.2m from JP Morgan Chase and up to £1m of lending capital from each of the devolved administrations, matched in England by Fair4All Finance.

Fair4All Finance, which partly runs the scheme, was founded by the Treasury and the Department for Digital, Culture, Media and Sport three years ago to “support the financial wellbeing of people in vulnerable circumstances”.

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According to a Fair4All spokesperson, James Corke, September’s expansion of the scheme beyond Manchester will be for two years, after which there will be a decision on whether to expand more.

“A key principle of the scheme is to offer a no interest loan only where there is a benefit to wider society and the need can’t be covered by a grant or other support,” Corke said. Some examples of loans so far have have been to pay for driving lessons and upfront nursery fees so people can get back in to work, he said, or for housing deposits, essential furniture and white goods.

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The economic secretary to the Treasury, John Glen, last month expressed hope that a full-scale programme might eventually be rolled out.

He told the Association of British Credit Unions that Nils “is a fundamental, worthwhile new initiative, to provide a gateway product for people who at the moment are beyond the lending capacity of some credit unions”.

He said: “The challenge now will be to take that proof-of-concept pilot to a bigger pilot so that we can now validate it.”

This article was amended on 23 and 28 June 2022 to remove quotes referring to a current Nils pilot scheme in Herefordshire, Shropshire and Worcestershire; the quotes were not from Fair4All Finance but from the website of the Worcestershire-based Tenbury Nils Scheme. The Fair4All scheme, by contrast, was piloted in Manchester and is accessible mainly through credit unions and community development finance institutions (CDFIs), not through a consumer website. On 28 June, James Corke’s name was corrected, having been given as Cooke.

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