1. Niall Alexander
niall9a@hotmail.com
Who’s holding the umbrella?
Challenging Times;
Positive solutions.
Saturday 10th March 2012
Voluntary Action
North Lanarkshire

2. Niall Alexander
niall9a@hotmail.com
Yes or No?
Is a year’s loan
of £300 at an APR of 70%+
affordable credit?

3. Niall Alexander
niall9a@hotmail.com
A man walks into a bar….
• It must be a common scene across the country.
Someone lends £30 to a friend in a pub and says
“If you pay me back next week and buy me a
pint we’re straight”. So the friend returns back to
the pub the following week, pays back the £30
and buys a pint which costs £3.00. Most people
would think this is reasonable enough. But the
equivalent APR of this transaction would be over
14,100% . If the pint costs £3.75, the equivalent
APR of the transaction would be over 45,600%
Source: PFG CR report 2010

4. Niall Alexander
niall9a@hotmail.com
…you may find yourself living in a shotgun shack
Source: FT, letters 6/6/2008

5. Niall Alexander
niall9a@hotmail.com
Alliance & Leicester, Bradford & Bingley, Dunfermline BS…
“You only find out who has been swimming naked when the tide goes
out…and what we see at our financial institutions is an ugly sight”
Warren Buffet, February 2008

6. Niall Alexander
niall9a@hotmail.com
Banking crisis becomes sovereign debt crisis
Flat-lining economy;
8.4% unemployment – highest for 16 years;
1.04m unemployed amongst 16 to 24 year olds;
36,200 repossessions in 2011;
159,400 in arrears equivalent to 2.5% of mortgage;
£1,000,000,000,000 UK debt;
Plan A or Plan B?

7. Niall Alexander
niall9a@hotmail.com
From too big to fail; now too big to bail!
“Today’s crisis has stretched some state’s sinews to the limit. Both
literally and metaphorically, global finance cannot afford another.”
Andrew Haldane, Bank of England, “The $100bn question” March 2010

8. Niall Alexander
niall9a@hotmail.com
Civil unrest, austerity, demonstrations, lurch to the right
“I think this is different: a) because it’s big; b) because it’s widespread;
and c) because it is about solvencies, not just about liquidity. And
solvency requires a totally different policy approach than just a
liquidity problem”. George Magnus, Chief Economist, UBS, Feb. 2008

9. Niall Alexander
niall9a@hotmail.com
The dirty end of the stick
Disproportionately:
Not on voters roll;
Thin files & poor credit history;
“Cuts being proposed are Lowest income;
draconian... People who had
the least to do with the recession Poorest neighbourhoods;
will pay the most”
Pay most for food & fuel;
Prof. David “Danny” Blanchflower, Lacking insurance;
Speaking at David Hume Institute, Edinburgh, Oct. 2010
Pay the most for their cash.

10. Niall Alexander
niall9a@hotmail.com
More pain for the poor
50.00%
Absolute child poverty rate by housing tenure 2010-2015
45.00% Source: IFS & FPI (Jan. 2012)
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
Social Rented Private rented Mortgaged Own Outright
2010 36.30% 25.30% 11.20% 24.20%
2011 39.10% 29.00% 11.90% 25.10%
2012 39.90% 34.20% 12.40% 24.60%
2013 43.10% 35.30% 12.50% 24.60%
2014 41.80% 34.40% 12.70% 23.30%
2015 42.60% 33.60% 12.60% 24.20%

11. Niall Alexander
niall9a@hotmail.com
Insolvencies (individuals) 2001 - 2010
25000
Highest concentration of personal insolvencies (2010) by town: (UK):
20000
1: Glenrothes
2: Kirkcaldy
3: Livingston
15000 4: Washington
5: Dunfermline
6: Weston-Super-Mare
7: Hamilton
10000 8: Torquay
9: Boston
10: Paisley
5000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 p 2010
Total 6,827 8,389 8,780 9,321 11,89 13,78 13,92 19,99 23,54 20,32

12. Niall Alexander
niall9a@hotmail.com
Still an enormous demand for unsecured credit
“Our customers are scared of banks”. They
just want cash,” says Ruth Walker, manager
of Albermarle & Bond’s Barking branch.
Shares in the £164m company have risen by
27% in the past year, tallying with a 32%
increase in its pledge book & increasing
demand for unsecured loans.
Datamonitor estimates there are 12m “non-
standard credit consumers” denied access
to conventional loans due to bad debt
history or reliance on benefits for income.” Source: Financial Times 2 May 2011
“Pawnbrokers see influx of clients who fear banks”

13. Niall Alexander
niall9a@hotmail.com
secured and unsecured monthly lending from Aug. 2007
35000
30000
25000
20000
15000
10000
5000
0
01-Oct-07
01-Oct-10
01-Oct-08
01-Oct-09
01-Oct-11
01-Dec-08
01-Dec-09
01-Dec-11
01-Dec-07
01-Jun-08
01-Apr-09
01-Jun-10
01-Dec-10
01-Jun-11
01-Apr-08
01-Jun-09
01-Apr-10
01-Apr-11
01-Feb-08
01-Feb-11
01-Feb-09
01-Feb-10
01-Aug-09
01-Aug-07
01-Aug-08
01-Aug-10
01-Aug-11
Monthly value of total sterling approvals for secured lending to individuals in £million (not seasonally adjusted)
Monthly amount of total sterling unsecured gross lending to individuals in £million (not seasonally adjusted)

14. Niall Alexander
niall9a@hotmail.com
Payday lenders – the clue is in the name!
1.587m applications to the social fund rejected in 2010/2011. (source DWP)
4m payday loans borrowing £1.7bn. (FT)
3m users of home credit borrow £1.5bn, (PFG reject 80% of “new”) (PFG)
24m “renters” apply for bank consumer credit 12m “accepts” (Big Issue Invest)

15. Niall Alexander
niall9a@hotmail.com
The non standard borrower
• 10m UK adults in the non-standard credit market.
• 3m using home collected credit .
• About £30m issued by home credit every week.
• young, low-income, women, w/children, social renters.
• Around £80+ interest & fees on every £100 borrowed.
• Collected weekly, on the doorstep; flexible & personal.
• Customer likely to have thin credit files or poor history.
• Ignored and unwanted by banks and standard lenders.

16. Niall Alexander
niall9a@hotmail.com
Provident: a logical choice
PFG 90% + £500
272%
satisfaction. It 52 wks
APR
works for the £910 2010
customer 2009
1.86m
2011
2008 1.84m
1.82m
1.75m
2007
1.65m
2006
1.56m
2005
1.49m
“The UK non standard market, we believe, will increasingly be the
domain of specialist lenders like ourselves, and in particular, we
believe the small sum unsecured part of the market is the sweet spot”

17. Niall Alexander
niall9a@hotmail.com
PFG share price tracked against FTSE 100 last 5 years
RBS

18. Niall Alexander
niall9a@hotmail.com
Unfurnished home, no credit, head to BrightHouse
• Female;
• aged 25 to 45; with children;
• a household income of less than £18,000;
and there is a good chance she is
• wholly or partly dependent on benefits; &
• she may be a lone parent;
• she probably lives within 3 miles of a store;
• has no access to a car.
• The average shopper pays £23 a week and has
an average of three and a half items out on loan
through BrightHouse.

19. Bury Burnley
Pontypridd
Cwymbran
Grimsby
Birkenhead Hanley Blackburn

20. Niall Alexander
niall9a@hotmail.com
Moneyline “Responsible Lender of the Year” 2011/12
Moneyline (Jan. 2008 - Dec. 2011)
loan book, gross lending & number of loans issued
£8,000,000 16000
£7,000,000 14000
£6,000,000 12000
£5,000,000 10000
£4,000,000 8000
£3,000,000 6000
£2,000,000 4000
£1,000,000 2000
£- 0
2008 2009 2010 2011
Outstanding loan book (£) Gross Lending (£) No. of loans issued

21. Niall Alexander
niall9a@hotmail.com
Organisation & operations
Supported by the Social Business Trust partner
Credit Suisse, Moneyline has:
• revolutionised its back office systems; to
• improve efficiency productivity & capacity;
• Already raised social bond in Wales, &
• Now seeking investment to fund growth

22. Niall Alexander
niall9a@hotmail.com
Organisation & operations
• face-to-face lending;
• 45 minute loan interviews;
• Under 50% approved;
• Flexibility (wanted, needed & appreciated) in loan repayments;
• weekly or fortnightly Direct Debit preferred by borrower;
• If 2 x DD’s missed, DD cancelled to prevent additional charges;
• rounded-up payments, balance swept to (Bank of Scotland) savings;
• Basic (Nat. West) bank account opened, in house, if needed;
• Debt recovered through Eligible Credit Deduction Scheme (ECDS).

23. Niall Alexander
niall9a@hotmail.com
Viability Sustainability

24. Niall Alexander
niall9a@hotmail.com
The only lender of its type in Scotland
Scotcash:
Meeting the needs of
Glasgow’s most excluded.

25. Niall Alexander
niall9a@hotmail.com
Scotcash : since 2007
• 6000 loans written worth almost £3.2m;
• 1500 basic bank accounts opened;
• 350 savings accounts opened; £81,000 saved;
• 3250 clients within in-house CAB service;
• £7.6m client debt seen & £2.9m client financial gain;
• 200 evictions prevented;
• £1.7m saved in interest and fees.

26. Niall Alexander
niall9a@hotmail.com
filling the space between for the non standard borrower
• £2 of every £3 that repays is from welfare benefits;
• Significant by-products of debt & money advice, bank &
savings accounts, improved mental health & social capital.
• Each loan is at least £60 per £100 less when set against
the most-likely higher cost home collected alternative;
• 57% of customers below poverty line;
• Award-winning, a trusted brand, a value proposition.

27. Niall Alexander
niall9a@hotmail.com
Know your customer
Women (73%)
Lone parent (38%)
Dependent children (62%)
Under 34yrs (48%)
Income under £200/wk (58%)
Social renting (73%) & home owning (2%)
Unemployed (63%)
They are familiar with home credit,
rent-to-own stores, & the social fund.
They want small sums, repayable weekly;
They like personal, flexible, service.

28. Niall Alexander
niall9a@hotmail.com
Not-for-profit but not above criticism
• Be clear about the purpose;
• Be right about the business;
• Be open to scrutiny;
• Be willing to change;
• Be aware of the challenge.

29. Niall Alexander
niall9a@hotmail.com
Credit unions: need a balanced loan book
“the Chief Executive of the UK’s
biggest credit union trade
association suggests that even a
UK Wide: 60% APR would not be enough to
16% Unemployed or unable to work; cover all the costs of lending to
71% over 40 years old; Growth Fund customers, within a
10% default target”
14% lone parent families; Mainstreaming Financial Inclusion
36% renting from LA or HA; (3/2010) Financial Inclusion Taskforce
48% owning home outright or with a mortgage;
32% with a net household income under £199 per week;
74% members for over three years.
Source: Membership Counts: Who uses credit Unions, PFRC, 2006, ABCUL

30. Niall Alexander
niall9a@hotmail.com
The non standard borrower
PFG, Scotcash & Credit Union customers compared
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Renting LA/HA or Owns home Female Dependent Young (under 40) Unemployed
private outright or with children
mortgage
PFG (Investor analysts Nov.2010) Scotcash (all loans to 2011) Credit Unions (ABCUL, 2006)

31. Niall Alexander
niall9a@hotmail.com
APRs : like looking at a thermometer to see if it’s raining
Higher interest rates would be needed
to put Growth Fund lending on a more
stable commercial platform.
Assuming operational costs, risks
associated with lenders, and average
loan sizes remain constant, it is
estimated that an APR of 71.2 per cent
would be required to cover operational
costs and financial risks associated
with lending.
An APR of 108.2 per cent would be
required to reach a commercial rate of
profit of 12.7 percent on loan capital

32. Niall Alexander
niall9a@hotmail.com
Social & financial return on investment
• Money : retained (in households & communities)
• Families & tenancies : stabilised
• Children : nurtured
• Social capital : developed
• Physical & mental health : lifted
• Over indebtedness : decreased
• Saving : encouraged
• Anxiety : reduced
• Standard of living : increased
• Quality of life : enhanced

33. Niall Alexander
niall9a@hotmail.com
Yes or No?
Is a year’s loan
of £300 at an APR of 70%+
affordable credit?