Green shoots is our regular series on businesses and projects that point us towards a fairer and more sustainable future. You can see more examples here.
One of the drivers of the financial crisis was consumer debt. Money was cheap, and it was easy to get a mortgage, buy on a payment plan, and run up debts on a credit card. When payments got difficult, there was another tier of emergency lending ready to step in – payday loans. User friendly internet platforms or high street shops made it easier than ever to get a quick cash injection to tide people over to the end of the month, though the interest rates were steep.
Ultimately, payday lenders were profiting from the desperation of those who had lost control of their debts. They were using the recession to their advantage, tapping into the squeeze between stagnating wages and the rising cost of living. It was fundamentally exploitative, and to some observers, morally wrong.
One of those observers was Archbishop of Canterbury Justin Welby, a long term advocate of fairer banking. He announced that he wanted to tackle predatory lending in a characteristically Christian way: by subverting the market with good. Rather than arguing for a ban on payday lending, which might just push people to black market lenders, he would offer something better. “I’ve met the head of Wonga,” Welby said in an interview . “I’ve had a very good conversation and I said to him quite bluntly we’re not in the business of trying to legislate you out of existence, we’re trying to compete you out of existence.”
A range of initiatives followed, including pilot projects, the Church Credit Champions Network, and the Just Finance Foundation, all aimed at involving the church in ethical lending and setting up credit unions. Credit unions, or mutuals, are lenders that run for the benefit of their members. With no shareholders to pay, profits do not need to be extracted from the business and so they can offer lower interest rates. They work best when there is a ‘common bond’ in membership, and so they tend to focus on specific industries or towns, and support local borrowers and savers. However, not every area has one, and the sector is fairly small and overlooked.
To demonstrate the kind of healthier financial institution that Justin Welby imagined, the Church of England partnered with other denominations to launch the Churches Mutual in 2015. It is open to ministers and church employees, and offers a variety of savings and loans. Institutions such as churches and affiliated schools and charities can also join.
As it serves the church rather than the general public, Churches Mutual is not the radical answer to the payday lenders that Welby described. Not on its own. It is more of a prophetic statement, the church putting its money where its mouth is and demonstrating a fairer way to lend. Because credit unions are local, there won’t ever be one big answer, and Churches Mutual is part of what must eventually be a wider network of smaller lenders. It will need lots of local iterations, and that’s where the Just Finance Foundation comes in. With their support, a number of other credit unions have formed locally, or are seeing renewed investment.
In the Old Testament, the charging of interest was prohibited. Jesus reserved his most powerful protest action for the moneylenders in the temple. Restraining the greed of moneylenders has been a tradition in the church, and should be considered part of the church’s calling. That carries on today through the work of Churches Mutual and the Just Finance Foundation.